grph_10q.htm

0001477932-15-007050.txt : 20151116 0001477932-15-007050.hdr.sgml : 20151116 20151116125723 ACCESSION NUMBER: 0001477932-15-007050 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20150930 FILED AS OF DATE: 20151116 DATE AS OF CHANGE: 20151116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GRAPHITE CORP CENTRAL INDEX KEY: 0001420239 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-COMPUTER & COMPUTER SOFTWARE STORES [5734] IRS NUMBER: 260641585 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54336 FILM NUMBER: 151233036 BUSINESS ADDRESS: STREET 1: 1031 RAILROAD STREET, SUITE 102A CITY: ELKO STATE: NV ZIP: 89801 BUSINESS PHONE: (775) 473-1355 MAIL ADDRESS: STREET 1: 1031 RAILROAD STREET, SUITE 102A CITY: ELKO STATE: NV ZIP: 89801 FORMER COMPANY: FORMER CONFORMED NAME: FIRST RESOURCES CORP DATE OF NAME CHANGE: 20100913 FORMER COMPANY: FORMER CONFORMED NAME: MEDZED INC. DATE OF NAME CHANGE: 20071205 10-Q 1 grph_10q.htm FORM 10-Q grph_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File No. 000-54336

GRAPHITE CORP.
(Exact name of registrant as specified in its charter)

Nevada
26-0641585
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

616 Corporate Way, Suite 2-9011 Valley Cottage, NY 10989
(Address of principal executive offices, zip code)

(844) 804-5599

(Registrant's telephone number, including area code)

_______________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act): Yes o No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 14, 2015, there were 199,859,352 shares of common stock, $0.0001 par value per share, outstanding.

GRAPHITE CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE PERIOD ENDED SEPTEMBER 30, 2015

INDEX

Index
Page
PART I. FINANCIAL INFORMATION
Item 1.
Financial Statements
4
Balance Sheet as of September 30, 2015 and December 31, 2014 (unaudited).
4
Statements of Operations for the three month periods ended September 30, 2015 (unaudited) and September 30, 2014 (unaudited) and the nine months ended September 30, 2015 and from Inception (May 22, 2014) through September 30, 2014.
5
Statements of Cash Flows for the nine months ended September 30, 2015 and from Inception (May 22, 2014) through September 30, 2014 (unaudited).
7
Notes to Condensed Financial Statements (Unaudited).
8
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
17
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
25
Item 4.
Controls and Procedures.
25
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings.
26
Item 1A.
Risk Factors.
26
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
26
Item 3.
Defaults Upon Senior Securities.
26
Item 4.
Mine Safety Disclosures.
26
Item 5.
Other Information.
26
Item 6.
Exhibits.
28
Signatures
29

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Graphite Corp., a Nevada corporation (the "Company"), contains "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "could", "expects", "plans", "intends", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of minerals prices, the possibility that exploration efforts will not yield economically recoverable quantities of minerals, accidents and other risks associated with mineral exploration and development operations, the risk that the Company will encounter unanticipated geological factors, the Company's need for and ability to obtain additional financing, the possibility that the Company may not be able to secure permitting and other governmental clearances necessary to carry out the Company's exploration and development plans, other factors over which we have little or no control; and other factors discussed in the Company's filings with the Securities and Exchange Commission ("SEC").

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management's experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

PART I. FINANCIAL INFORMATION

Graphite Corp.
Consolidated Balance Sheets
(unaudited)

September 30,

December 31,

2015

2014

ASSETS
CURRENT ASSETS

Cash

$ 8,292

$ 129,152

NON-CURRENT ASSETS

License, net of amortization of $5,984 and $0, respectively

34,016

40,000

TOTAL ASSETS

$ 42,308

$ 169,152

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

Accounts payable

$ 68,569

$ 61,501

Accounts payable - related party

274,203

59,517

Accrued interest

10,276

4,472

Related party payable

15,776

14,776

Loan payable, net of discount of $23,063 and $0 respectively

47,437

10,000

Loan payable - default

35,000

35,000

Total Current Liabilities

451,261

185,266

Total Liabilities

451,261

185,266

STOCKHOLDERS' EQUITY (DEFICIT)

Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding as of September 30, 2015 and December 31, 2014

-

-

Common stock: $0.0001 par value, 300,000,000 shares authorized, 199,026,019 as of September 30, 2015 and 195,601,362 as of December 31, 2014

19,902

19,560

Stock payable

961,209

716,305

Additional paid-in capital

2,808,660

2,732,747

Other comprehense income

337

310

Accumulated deficit

(4,199,061 )

(3,485,036 )

Total Stockholders' Equity (Deficit)

(408,953 )

(16,114 )

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$
42,308

$
169,152

The accompanying notes are an integral part of these financial statements.

Graphite Corp.
Consolidated Statement of Operations
(unuadited)

Three Months
Ended

Three Months
Ended

Nine Months
Ended

Inception
(May 22, 2014) to

September 30,

September 30,

September 30,

September 30,

2015

2014

2015

2014

REVENUES

$ -

$ -

$ -

$ -

EXPENSES

Accounting and legal

56,444

8,349

72,444

8,349

Consulting

106,354

12,800

456,410

12,800

Interest expense

16,734

-

23,052

-

Investor relations

2,750

-

15,439

-

Research and development

-

-

101,617

-

Website costs

-

-

3,976

-

General and administrative

4,418

16,016

21,475

16,016

Travel

-

-

19,612

-

TOTAL EXPENSES

186,700

37,165

714,025

37,165

NET LOSS

$ (186,700 )

$ (37,165 )

$ (714,025 )

$ (37,165 )

BASIC AND DILUTED LOSS PER SHARE

$ (0.00 )

$ (0.00 )

$ (0.00 )

$ (0.00 )

WEIGHTED AVERAGE SHARES OUTSTANDING,

BASIC AND DILUTED

196,122,505

83,289,339

195,776,985

66,957,716

The accompanying notes are an integral part of these financial statements.

Graphite Corp.
Consolidated Statement of Comprehensive Income
(unaudited)

Three Months

Three Months

Nine Months

Inception

Ended

Ended

Ended

to

September 30,

September 30,

September 30,

September 30,

2015

2014

2015

2014

Net Loss

$ (186,700 )

$ (37,165 )

$ (714,025 )

$ (37,165 )

Foreign Currency Translation Gain

(137 )

226

(27 )

226

Other Comprehensive Income

(137 )

226

(27 )

226

TOTAL COMPREHENSIVE (LOSS)

$ (186,837 )

$ (36,939 )

$ (714,052 )

$ (36,939 )

The accompanying notes are an integral part of these financial statements.

Graphite Corp.
Consolidated Statement of Cash Flows
(unaudited)

Nine Months Ended

Inception

(May 22, 2014) to

September 30

September 30

2015

2014

OPERATING ACTIVITIES

Net loss

(714,025 )

(37,165 )
Changes in non-cash items:

Consulting fees in stock payable

232,904

-

Amortization of license

5,984

-

Amortization of debt discount

17,248

-

Shares issued for services

47,945

-

Changes in operating assets and liabilities

Increase (Decrease) in accounts payable

7,067

(1,632 )
Increase in accounts payable - related party

214,686

4,257

Increase in accrued interest

5,804

-

Net Cash Used in Operating Activities

(182,387 )

(34,540 )

INVESTING ACTIVITY

Effect of reverse merger

-

15,782

Cash paid for license

-

(100,000 )
Net Cash provided by

Investing Activity

-

(84,218 )

FINANCING ACTIVITY

Common stock issued for cash

-

160,000

Increase in loans payable

60,500

-

Increase in due to related party

1,000

-

Net Cash provided by

Financing Activity

61,500

160,000

Foreign currency adjustment

27

226

NET INCREASE (DECREASE) IN CASH

(120,860 )

41,468

CASH AT BEGINNING OF PERIOD

129,152

-

CASH AT END OF PERIOD

$ 8,292

$ 41,468

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

CASH PAID FOR:

Interest

$ -

$ -

Income Taxes

$ -

$ -

NON CASH ITEMS:

Debt discount from inducement

$ 10,000

$ -

Debt discount from beneficial conversion feature

$ 28,311

$ -

Stock issued for reverse merger

$ -

$ 12,000

The accompanying notes are an integral part of these financial statements.

GRAPHITE CORP.
Notes to Consolidated Financial Statements
September 30, 2015
(unaudited)

NOTE 1 – NATURE OF OPERATIONS AND REVERSE MERGER

Nature of Operations

Graphite Corp. (formerly First Resources Corp.) (the "Company") was organized on August 3, 2007, under the laws of the State of Nevada to engage in any lawful activity. The Company intends engage in the exploration of certain mineral interests in the states of Alabama and Montana.

On August 19, 2010, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State. As a result of the Amendment the Registrant, among other things, has: (i) changed its name to "First Resources Corp.;" and, (ii) increased the aggregate number of authorized shares to 310,000,000 shares, consisting of 300,000,000 shares of Common Stock, par value $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share.

On June 22, 2012, the Company filed Amended and Restated Articles of Incorporation with the Nevada Secretary of State. As a result of the Amendment the Registrant has changed its name to "Graphite Corp."

The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year-end.

Reverse Merger

On August 11, 2014, the Company entered into a share exchange agreement with Advance Graphene Ltd. ("AGL"). Pursuant to the agreement, the Company acquired all of the outstanding shares of common stock of AGL by issuing 120,000,000 common shares. As a result of the share exchange, the former shareholders of the AGL controlled approximately 80.85% of the issued and outstanding common shares of the Company resulting in a change in control. The transaction was accounted for as a reverse recapitalization transaction, as the Company qualifies as a non-operating public shell company given the fact that the Company held nominal net monetary assets, consisting of only cash at the time of merger transaction. As AGL is deemed to be the purchaser for accounting purposes under recapitalization accounting, the equity of the Company is presented as the equity of the combined company and the capital stock account of the Company is adjusted to reflect the part value of the outstanding and issued common stock of the legal acquirer (AGL) after giving effect to the number of shares issued in the share exchange agreement.

NOTE 2 – GOING CONCERN

The Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company's fiscal year-end is December 31.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As of September 30, 2015 and December 31, 2014, the Company had no cash equivalents.

Stock-based Compensation

The Company accounts for stock-based compensation issued to employees based on ASC Topic "Share Based Payment" which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.

The Topic does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans".

It requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period). It further requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. The scope of the Topic includes a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans.

As at September 30, 2015, the Company had not adopted a stock option plan.

Basic and Diluted Net Loss Per Share

The Company computes net loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.

Income Taxes

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Income Taxes, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

Comprehensive Income

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive incomeand its components in the financial statements. During the three months ended September 30, 2015, the Company had comprehensive loss of $137 as a result of foreign currency transactions.

Financial Instruments

The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fairvalues, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.

-
Level 1. Observable inputs such as quoted prices in active markets;

-
Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

-
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company's financial instruments are cash, accounts receivable, and accounts payable. The recorded values of cash, accounts receivable, and accounts payable approximate their fair values based on their short-term nature.

The following table presents assets and liabilities within the fair value hierarchy utilized to measure fair value on a recurring basis as of September 30, 2015 and December 31, 2014:

Description

Level 1

Level 2

Level 3

Total Realized Loss

September 30, 2015

None

$ -

$ -

$ -

$ -

December 31, 2014

None

$ -

$ -

$ -

$ -

Recently issued accounting pronouncements

On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-16—Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update do not change the current criteria in GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. That is, an entity will continue to evaluate whether the economic characteristics and risks of the embedded derivative feature are clearly and closely related to those of the host contract, among other relevant criteria. The amendments clarify how current GAAP should be interpreted in evaluating the economic characteristics and risks of a host contract in a hybrid financial instrument that is issued in the form of a share. The effects of initially adopting the amendments in this Update should be applied on a modified retrospective basis to existing hybrid financial instruments issued in the form of a share as of the beginning of the fiscal year for which the amendments are effective. Retrospective application is permitted to all relevant prior periods.

On November 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-17—Business Combinations (Topic 805): Pushdown Accounting (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update provide an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. The amendments in this Update are effective on November 18, 2014. After the effective date, an acquired entity can make an election to apply the guidance to future change-in-control events or to its most recent change-in-control event. However, if the financial statements for the period in which the most recent change-in-control event occurred already have been issued or made available to be issued, the application of this guidance would be a change in accounting principle.

On August 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial Statements – Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern. The amendments require management to assess an entity's ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management's plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management's plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

In June 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations.

In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation , to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.

NOTE 4 – RELATED PARTY PAYABLES

As of September 30, 2015, the Company has a payable balance owing of $14,776 (December 31, 2014: $14,776), to a company affiliated with a former officer of the Company.

As of September 30, 2015, the Company had a payable balance owing of $216,048 (December 31, 2014: $55,502) to two officers.

As of September 30, 2015, the Company had a payable balance owing of $54,167 (December 31, 2014: $4,015) to a company 50% owned by a major shareholder.

As of September 30, 2015 and December 31, 2014, the Company owed an officer of the Company 9% of the issued and outstanding common shares as at the agreement date of December 12, 2014. This amounted to 17,641,234 common shares payable with a fair market value of $511,596.

As of September 30, 2015 and December 31, 2014, the Company owed an officer of the Company 8% of issued and outstanding common shares as at the agreement date of July 15, 2014. This amounted to 2,274,547 common shares payable with a fair market value of $204,709.

As of September 30, 2015, the Company owed a director of the Company 1% of issued and outstanding common shares as at the agreement date of January 9, 2015. This amounted to 519,129 common shares payable with a fair market value of $16,622.

As of September 30, 2015, the Company owed a director of the Company 6% of issued and outstanding common shares as at the agreement date of January 9, 2015. This amounted to 3,102,975 common shares payable with a fair market value of $99,732.

As of September 30, 2015, the Company owed a director of the Company 1,500,000 bonus common shares payable with a fair market value of $48,150.

During the period ended December 31, 2014, the Company issued 40,000,000 common shares as a finder's fee related to the introduction of the Rice University license agreement.

As of September 30, 2015, the Company owed a shareholder of the Company $1,000. The amount does not have specific repayment terms, is non-interest bearing and unsecured.

As of September 30, 2015, the Company owed $3,988 to Graphene Materials, a company controlled by a shareholder.

NOTE 5 – LICENSE

The Company purchased a royalty-bearing license to develop, exploit, utilize and commercialize licensed intellectual property and products.

Consideration for the license is an annual license fee of $7,500 for the first three years and $20,000 for each year thereafter and $350,000 of research and development expenses until October 1, 2015 and royalties ranging between 3% and 5% subject to a $50,000 minimum. These expenditures were expensed as incurred.

The Company entered into a license agreement to license Rice University's grapheme carbon nanotube hybrid material technology in exchange for $40,000. The term of the agreement is from signing until the final licenses patent expires in approximately 17 years. Upon the fifth anniversary of the agreement, should the Company become insolvent, as defined within the agreement, shall result in any amounts owing from sub-licensees to the Company shall be payable directly to Rice University.

During the nine month period ended September 30, 2015, the Company has recorded $5,984 in amortization expense related to this license.

NOTE 6 – LOANS PAYABLE

The Company received a loan of $15,000 on June 27, 2013 that bears interest at 8% per annum and is due on June 27, 2014.

The Company received a loan of $15,000 on August 22, 2013 that bears interest at 8% per annum and is due on August 22, 2014.

The Company received a loan of $5,000 on January 16, 2014 that bears interest at 8% per annum and is due on January 16, 2015.

The Company received a loan of $10,000 on March 12, 2014 that bears interest at 8% per annum and is due on March 12, 2016.

The Company received a loan of $10,000 on June 28, 2015 that bears interest at 20% per annum and is due on February 1, 2016. In addition, the Company is to grant 1,000,000 as consideration for this loan, which has a fair market value of $12,000 and will be included in interest expense over the vesting term. Included on the balance sheet is a $5,688 debt discount from inducement with $6,312 expensed during the period ended September 30, 2015.

The Company received a loan of $33,000 on June 15, 2015 that bears interest at 8% per annum and is due on March 18, 2016. The loan included an original debt discount of $28,311 and, at September 30, 2014, included on the balance sheet is a $17,375 debt discount from beneficial conversion feature with $10,936 expensed during the period ended September 30, 2015.

As of September 30, 2015, there is accrued interest on the above loans in the amount of $10,276 (December 31, 2014: $4,472).

NOTE 7 – STOCKHOLDERS' EQUITY

On August 11, 2014, the Company entered into a share exchange agreement with AGL. Under the terms of the agreement, the Company issued 120,000,000 common shares for 100% of the issued and outstanding shares of AGL. The agreement results in management and shareholders of AGL to hold 81% of the issued and outstanding common shares of the Company, resulting in a reverse capitalization transaction (see Note 1). Following the above events, there were 148,431,837 shares outstanding including:

Shares

Held by:
120,000,000

AGL Shareholders
28,431,837

Graphite Corp. Shareholders

During the year ended December 31, 2014, the Company issued 7,169,525 common shares for $385,000.

During the period ended December 31, 2014, the Company issued 40,000,000 common shares as a finder's fee related to the introduction of the Rice University license agreement (see Note 4).

As of September 30, 2015, the Company owed a director of the Company 1,500,000 bonus common shares payable with a fair market value of $48,150.

As of September 30, 2015, the Company owed two consultants an aggregate of 4,000,000 shares for services provided, valued at $68,400 using a closing price on the grant date February 23, 2015.

As of September 30, 2015, the Company owed a lender 1,000,000 shares as inducement to provide debt to the Company, valued at $12,000 and included in stock payable as September 30, 2015. The debt discount will be included in interest expense over the vesting term. Included on the balance sheet is a $5,688 debt discount from inducement with $6,312 expensed during the period ended September 30, 2015.

During the period ended September 30, 2015, the Company issued 3,424,657 common shares in lieu of paying legal and professional fees in relation to their Equity Purchase Agreement dated September 16, 2015. Shares were valued at the closing price of the stock on the date of the agreement for a total of $47,945.

NOTE 8 – SUBSEQUENT EVENTS

On October 14, 2015, the Company replaced a promissory note owing to Vis Vires Group, Inc. in the amount of $33,000 with a promissory note owing to Coventry Enterprises, LLC in the amount of $33,890. The new note includes a conversion feature at a 58% discount to market on the average of the lowest 3 trading days of the previous 10 days prior to the conversion request. The note bears interest at 8% per annum and is payable on October 14, 2016.

On October 29, 2015, the board approved a Securities Purchase Agreement with Auctus Fund, LLC dated October 7, 2015. The agreement includes a principal loan amount of $42,250 bearing interest at 10%, is due on July 29, 2016 and convertible into common shares of the Company at a 40% discount to the lowest trading price in the previous 25 trading days prior to the conversion or 50% discount to the market price, whichever is lower. The Company issued 833,333 to Auctus Fund, LLC as inducement for the loan.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following information should be read in conjunction with (i) the financial statements of Graphite Corp., a Nevada corporation and exploration-stage company, and the notes thereto appearing elsewhere in this Form 10-Q together with (ii) the more detailed business information and the December 31, 2014 audited financial statements and related notes included in the Company's Annual Report on Form 10-K (File No. 000-54336), as filed with the Securities and Exchange Commission on April 14, 2015. Statements in this section and elsewhere in this Form 10-Q that are not statements of historical or current fact constitute "forward-looking" statements

OVERVIEW

Graphite Corp. (the "Company") was incorporated in the State of Nevada on August 3, 2007 and established a fiscal year end of December 31.

Going Concern

To date the Company has no revenues and consequently has incurred recurring losses from operations. No revenues are anticipated until we implement our new business plan, as described in our current report on Form 8-K filed with the SEC on August 13, 2014. The ability of the Company to continue as a going concern is dependent on raising capital to fund our business plan and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company's ability to continue as a going concern.

The Company plans to raise additional funds through debt or equity offerings. There is no guarantee that the Company will be able to raise any capital through this or any other offerings.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and to the understanding of our financial results:

Basis of Presentation

Use of Estimates

Cash and Cash Equivalents

Mineral Properties

Costs of exploration, carrying and retaining unproven mineral lease properties are expensed as incurred. Mineral property acquisition costs are capitalized including licenses and lease payments. Although the Company has taken steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects. Impairment losses are recorded on mineral properties used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.

Stock-based Compensation

The Topic does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, "Employers' Accounting for Employee Stock Ownership Plans".

As at September 30, 2015, the Company had not adopted a stock option plan.

Basic and Diluted Net Loss Per Share

Income Taxes

Comprehensive Income

ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive income and its components in the financial statements. During the nine months ended September 30, 2015, the Company had comprehensive loss of $27 as a result of foreign currency transactions.The balance at September 30, 2015 and December 31, 2014 was $337 and $310, respectively.

Financial Instruments

The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.

Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The following table presents assets and liabilities within the fair value hierarchy utilized to measure fair value on a recurring basis as of September 30, 2015 and December 31, 2014:

Description

Level 1

Level 2

Level 3

Total Realized Loss

September 30, 2015

None

$ -

$ -

$ -

$ -

December 31, 2014

None

$ -

$ -

$ -

$ -

Recently issued accounting pronouncements

In June 2014, the FASB issued ASU No. 2014-10: Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements of development stage entities. The amendments in this update remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, thereby improving financial reporting by eliminating the cost and complexity associated with providing that information. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify U.S. GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public companies, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. The adoption of ASU 2014-10 is not expected to have a material impact on our financial position or results of operations.

PLAN OF OPERATION

Our plan of operation for the next twelve months is to continue to execute on the following business plan, which was started in August of 2014.

Overview

We switched our business model in fiscal 2014 and are now engaged in the commercialization of nanomaterials through the use of proprietary manufacturing techniques to create scalable processes for the production and sale of graphene flakes ("GF") for use in composite materials and other applications and graphene carbon nanotube hybrid material ("GCNT") for use as an electrode.

On August 11, 2014, the Company entered into a share exchange agreement with Advance Graphene Ltd., an Israeli company holding a license from Graphene Materials Ltd., an Israeli company ("AGL"), that, in turn, holds a license from Ben Gurion University for the production of high-quality, low-defect GF at a cost that is expected to be substantially lower than current production costs for graphene of similar quality. Pursuant to the share exchange agreement, AGL became a wholly-owned subsidiary of the Company.

Graphene is:

-
derivative of Graphite
-
a thin layer of carbon atoms bonded in a honeycomb lattice
-
thinnest compound known
-
lightest material known (1 sq.mt. weighs 0.77 mg)
-
strongest compound discovered (200x > steel), but very flexible
-
best conductor of heat
-
better electric conductor than copper

GF is utilized as an additive and can considerably improve the barrier, mechanical, physical and electrical properties of composites. GF offers potential applications for industries that manufacture microelectronics, coatings and composites. GF demonstrates high stiffness and thermal conductivity. Owing to these superior properties, graphene is now one of the most promising materials in nanomaterial research.

The commercialization of GF is expected to require an investment of up to $1,000,000 and up to one year to scale-up and optimize GF production.

GCNT

On December 19, 2014, the Company's subsidiary, Tubz, LLC, a Delaware limited liability company ("Tubz"), and William Marsh Rice University ("Rice University") entered into and signed a license agreement in respect of Rice University's patented graphene carbon nanotube electrode technology (the "License"), which is expected to provide dramatic performance improvement over electrodes made from conventional material today at a comparable cost. The commercialization of this technology will require raising sufficient funds for the development of a prototype product (currently intended to be a smartphone battery) to demonstrate proof of concept and then production on an industrial scale.

Carbon Nanotubes ("CNT") are allotropes of carbon with a cylindrical nanostructure. Nanotubes have been constructed with length-to-diameter ratio of up to 132,000,000:1, significantly larger than for any other material. CNTs have unusual properties, including, but not limited to 200x better energy charge, storage and discharge performance than any other technology on the market today, which are valuable for nanotechnology, electronics, optics and other fields of materials science and technology.

Strategy

Our primary focus is to identify promising nanomaterials and nanomaterial applications, secure binding rights to exploit and commercialize such materials and applications, finance their development and market and distribute such materials and applications to a wide range of industries and end-users. We are currently focused on two nanomaterials – GF and GCNT. Our plan is to produce samples of GF and GCNT, in each case, based on their respective methods of fabrication and then offer them for sale to relevant customers. Once we are able to consistently produce samples of GF and GCNT to the specifications we desire, we intend identify and try to form an alliance with strategic partners with the facilities and know-how to fabricate GG and/or GCNT in industrial quantities and at competitive prices. With such fabrication secured, we will approach the respective markets and commence marketing and sale activities.

With significant breakthroughs in GF production we will seek to capture a share of the high-end (few-layer) graphene market. Current production worldwide is boutique or lab production only, the primary reason being that the cost of production is too high to warrant large-scale adoption into commercial processes. Our primary advantage over other graphene flakes is that our production cost is expected to be 333x – 1,000x less expensive than the current market price of and our GF will be of a higher quality (i.e., fewer layers and defects) than the graphene flakes available on the market today.

GCNT

We intend to develop a battery based on GCNT. Developed by the Tour group (www.jmtour.com) at Rice University and licensed to the Company, the GCNT electrode is expected to provide a 200%+ increase in the overall specific energy of lithium ion batteries. This patented innovation requires no process changes for battery manufacturers other than use of GCNT in lieu of conventional electrode materials such as graphite. Proof of concept in the form of a cellphone battery will enable us to offer a compelling competitive advantage to original equipment manufacturers that purchase pre-fabricated electrode stock and incorporate it into their processes for making batteries for use in both defense and commercial applications.

Results of Operations

The three months ended September 30, 2015 compared to the three months ended September 30, 2014 (unaudited)

We recorded no revenues for the three-month periods ended September 30, 2015 and September 30, 2014, respectively.

For the three months ended September 30, 2015, total operating expenses were $186,700, of which professional fees were $56,444, consulting fees were $106,354, investor relations were $2,750 and general and administrative expenses were $4,418, as compared to operating expenses of $37,165, of which professional fees of $8,349, consulting fees of $12,800 and general and administrative expenses of $16,016 for the same period in 2014. The reason for the increase is attributable to professional fees related our attempts to increase financing activities and consulting fees resulting from contracts not in effect during the comparable period.

Interest expense recorded for the three months ended September 30, 2015 was $16,734, as opposed to $0 for the same period in 2014.

The nine months ended September 30, compared to the period from inception (May 22, 2014) to September 30, 2014 (unaudited)

We recorded no revenues for the nine-month periods ended September 30, 2015 and September 30, 2014, respectively.

For the nine months ended September 30, 2015, total operating expenses were $714,025, of which professional fees were $72,444, consulting fees were $456,410, investor relations were $15,439, research and development were $101,617, website costs were $3,976, travel costs were $19,612 and general and administrative expenses were $21,475, as compared to operating expenses of $37,165, of which professional fees of $8,349, consulting fees of $12,800 and general and administrative expenses of $16,016 for the same period in 2014. The reason for the increase is attributable to an overall increase in activity in the Company when compared to the prior period.

Interest expense recorded for the nine months ended September 30, 2015 was $23,052, as opposed to $0 for the same period in 2014.

Liquidity and Capital Resources

At September 30, 2015, we had a cash balance of $8,292. We do not have sufficient cash on hand to fund our ongoing operational expenses. We will need to raise funds to commence our exploration program and fund our ongoing operational expenses. Additional funding will likely come from equity financing from the sale of our common stock or sale of part of our interest in our mineral claims. If we are successful in completing an equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our exploration activities and ongoing operational expenses. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our exploration of our minerals claims and our business will fail.

Cash flow from Operating Activities

During the period ended September 30, 2015, the Company used $182,387 of cash for operating activities resulting from a loss of $714,025 offset by non cash items of $304,081 and changes in operating assets and liabilities of $227,557. This represents a $147,847 increase from the same period in 2014 resulting from 9 months of activity in current period compared to approximately 4 months of startup activity in the comparable period.

Cash flow from Investing Activities

During the period ended September 30, 2015, the Company used $0 of cash for investing activities. During the period ended September 30, 2014, the Company used $84,218 of cash for investing activities for the purchase of a license offset by the effect of the reverse merger transaction.

Cash flow from Financing Activities

During the nine months ended September 30, 2015 and 2014, the Company received $61,500 and $160,000, respectively, of cash from financing activities.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 3.

ITEM 4. CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, our principal executive officer and our principal financial officer are responsible for conducting an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the fiscal year covered by this report. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective as of September 30, 2015.

There were no changes in the Company's internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company is not currently subject to any legal proceedings. From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant. There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company's business, financial condition or results of operations.

ITEM 1A.RISK FACTORS

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINING SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

On July 21, 2015, the Company signed a term sheet with two individuals representing an unnamed, but newly-formed company (the "Representatives"), for the purpose of arranging $5,000,000 in financing for Tubz. Under the terms of the term sheet, the Representatives committed to invest $200,000 in the Company by September 30, 2015 on terms to be agreed in good faith, including weighted-average anti-dilution protection, a security interest in the Company's interest in Tubz and guaranteed by Tubz and a security interest in the License with Rice University. To the extent that any investment by the Representatives would take the form of a convertible note, the conversion price was fixed at $0.014 per share. To-date, pursuant to the term sheet, the Representatives transferred $17,500 to the Company. However, no definitive documentation was signed in connection with such transfer.

On September 16, 2015, Graphite Corp. (the "Company") entered into an equity purchase agreement (the "Purchase Agreement") with Premier Venture Partners, LLC ("Premier"). Under the terms of the Purchase Agreement, Premier has agreed to invest up to $2,000,000 to purchase shares of the Company's common stock ("Shares"). The Company also entered into a registration rights agreement (the "Registration Agreement") with Premier, which governs the filing of a registration statement intended to cover the Shares acquired under the Purchase Agreement.

The Purchase Agreement allows, but does not require, the Company to issue and sell up to the number of Shares having an aggregate purchase price of $2,000,000 to Premier. Subject to the terms and conditions of the Purchase Agreement and the Registration Agreement, the Company may, in its sole discretion, deliver notice to Premier which states the dollar amount which it intends to sell to Premier on a certain date. The amount that the Company shall be entitled to sell to Premier shall not exceed 200% of the average daily trading volume of the Company's common stock for the five trading days prior to the applicable notice date. Provided that all other applicable conditions are met, the minimum dollar amount, which Premier has an obligation to purchase from the Company in any transaction is $4,000. The minimum price at which Premier has an obligation to purchase Shares is $0.001. The amount of Shares to be held at any given time by Premier cannot exceed 4.99% of the Company's outstanding Shares. The purchase price for the Shares issued to Premier will be the amount multiplied by 75% of the lowest individual daily VWAP (i.e., the volume weighted average price (the aggregate sales price of all trades of Shares during a trading day divided by the total number of Shares traded during such trading day) of the Shares during a trading day) of the common stock during the pricing period. The Shares sold by the Company to Premier must be registered stock pursuant to the Registration Agreement.

As a condition for entering into the Purchase Agreement, the Company issued 3,424,657 Shares (the "Initial Commitment Shares") to Premier. The Initial Commitment Shares will not be included in the Registration Statement.

On the date that Premier has purchased in the aggregate $500,000 in Shares from the Company, the Company has agreed to issue another $25,000 in restricted Shares priced at the average VWAP of the Shares for the three trading days prior to the date. The Additional Commitment Shares shall not constitute registrable securities and shall not be included in the Registration Statement.

On October 15, 2015, the Company issued a convertible promissory note to an accredited investor in an aggregate principal amount of $33,889.64 for an aggregate purchase price of $33,889.64 (the "Restatement Note"). The Restatement Note matures on October 14, 2016 and accrues interest at a rate of 8% per annum. In an event of default, the Restatement Note will bear interest at a rate of 24% per annum. The Restatement Note may generally be converted into shares of our common stock at a conversion price of 42% discount to the average of our lowest trade or closing prices during periods in proximity to the time of conversion subject to further discounts in the case of certain events of default. We issued the Restatement Note to Coventry Enterprises, LLC as compensation for its purchase from Vis Vires Group Inc. ("Vis Vires") of the $33,000 note we issued to Vis Vires on June 15, 2015 (the "Vis Vires Note").

The Restatement Note includes customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment. In addition, it shall constitute an event of default under the note if we are delinquent in our filings with the Securities and Exchange Commission, cease to be quoted on the OTCQB, or our common stock is not DWAC or DTC eligible. In the event of an event of default the Restatement Note may become immediately due and payable at a premium to the outstanding principal. The Restatement Note also provides that if shares issuable upon conversion of the note are not timely delivered in accordance with the terms of the note then we shall be subject to certain cash penalties that increase proportionally to the duration of the delinquency.

On October 15, 2015, the Company also issued a second convertible promissory note to the same accredited investor in the Restatement Note transaction in an aggregate principal amount of $40,400 for an aggregate purchase price of $40,400 (the "New Note"). The New Note matures on October 14, 2016 and accrues interest at a rate of 8% per annum. In an event of default, the New Note will bear interest at a rate of 24% per annum. The New Note may generally be converted into shares of our common stock at a conversion price of 42% discount to the average of our lowest trade or closing prices during periods in proximity to the time of conversion subject to further discounts in the case of certain events of default. We paid $11,861.37 from the proceeds of the New Note to Vis Vires pursuant to the terms of the Vis Vires Note. The balance of $25,038.63 was retained by the Company for general corporate purposes.

The note includes customary default provisions related to payment of principal and interest and bankruptcy or creditor assignment. In addition, it shall constitute an event of default under the note if we are delinquent in our filings with the Securities and Exchange Commission, cease to be quoted on the OTCQB, or our common stock is not DWAC or DTC eligible. In the event of an event of default the notes may become immediately due and payable at a premium to the outstanding principal. The note also provides that if shares issuable upon conversion of the note are not timely delivered in accordance with the terms of the note then we shall be subject to certain cash penalties that increase proportionally to the duration of the delinquency.

On October 29, 2015, the Company issued a convertible promissory note to an accredited investor in an aggregate principal amount of $42,250 (the "Auctus Note"). The Auctus Note matures on July 29, 2016 and accrues interest at a rate of 10% per annum. The Auctus Note may generally be converted into shares of our common stock at a 40% discount to the lowest trading price in the previous 25 trading days prior to conversion or 50% discount to the market price, whichever is lower, subject to further discounts in the case of certain events of default.

27

ITEM 6. EXHIBITS.

(a) Exhibits required by Item 601 of Regulation SK.

(a) The following Exhibits, as required by Item 601 of Regulation SK, are attached or incorporated by reference, as stated below.

Number
Description
3.1
Articles of Incorporation*
3.2
Bylaws*
10.1

Equity Purchase Agreement**

10.2

Registration Rights Agreement**

10.3

$33,889.64 Coventry Replacement Convertible Note dated October 15, 2015

10.4

$40,400 Coventry Convertible Note dated October 15, 2015

10.5

Coventry Securities Purchase Agreement dated October 15, 2015

10.6

Coventry Debt Purchase Agreement dated October 15, 2015

10.7

Auctus $42,250 Convertible Note dated October 19, 2015

10.8

Auctus Securities Purchase Agreement dated October 29, 2015

31.1
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS ***
XBRL Instance Document
101.SCH ***
XBRL Taxonomy Extension Schema Document
101.CAL ***
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF ***
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB ***
XBRL Taxonomy Extension Label Linkbase Document
101.PRE ***
XBRL Taxonomy Extension Presentation Linkbase Document

_________________

*
Incorporated by reference to the Registrant's Form SB-2 (File No. 333-148719) filed with the Commission on January 17, 2008.

**
Incorporated by reference to the Registrant's current report on Form 8-K filed with the Commission on September 20, 2015.

***
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GRAPHITE CORP.
(Name of Registrant)
Date: November 14, 2015
By:
/s/ Mark Radom
Name:
Mark Radom
Title:
Chief Executive Officer

EX-10.3 2 grph_ex103.htm REPLACEMENT CONVERTIBLE NOTE grph_ex103.htm

EXHIBIT 10.3

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT)

US $33,889.64

RESTATED NOTE- ORIGINALLY ISSUED JUNE 15, 2015 IN THE AMOUNT OF $33,000.00

GRAPHITE CORP, INC

8% CONVERTIBLE REDEEMABLE NOTE

DUE OCTOBER 14, 2016

FOR VALUE RECEIVED, Graphite Corp, Inc. (the "Company") promises to pay to the order of the COVENTRY ENTERPRISES, LLC and its authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of Thirty Three Thousand Eight Hundred Eighty Nine dollars 64/100 cents exactly (U.S. $33,889.64) on October 14, 2016 ("Maturity Date") and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on October 14, 2015. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 80 S.W. 8^th Street, Suite 2000, Miami, FL 33130, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

This Note is subject to the following additional provisions:

1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act") and applicable state securities laws. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.

4. (a) The Holder of this Note is entitled, at its option, and after full cash payment for the shares convertible hereunder,to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 58% of the average of the three lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC "Chill" on its shares, the conversion price shall be decreased to 48% instead of 58% while that "Chill" is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company.

(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in Common Stock ("Interest Shares"). The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange of outstanding shares of the Common Stock, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

(e) In case of any Sale Event in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.

8. If one or more of the following described "Events of Default" shall occur:

(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or

(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or

(d) The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within thirty (30) days after such appointment; or

(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or

(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or

(h) defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or

(i) The Company shall have its Common Stock delisted from an exchange (including the OTCBB exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days;

(j) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;

(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or

(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.

(m) The Company shall not be "current" in its filings with the Securities and Exchange Commission; or

(n) The Company shall lose the "bid" price for its stock in a market (including the OTCQB marketplace or other exchange).

Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4^th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10^th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%.

If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys' fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

Make-Whole for Failure to Deliver Loss. At the Holder's election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:

Failure to Deliver Loss = [(High trade price at any time on or after the day of exercise) x (Number of conversion shares)]

The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder's written notice to the Company.

9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.

11. The Company represents that it is not a "shell" issuer and has never been a "shell" issuer or that if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported form 10 type information indicating it is no longer a "shell issuer. Further. The Company will instruct its counsel to either (i) write a 144 opinion to allow for salability of the conversion shares or (ii) accept such opinion from Holder's counsel.

12. The Company shall issue irrevocable transfer agent instructions reserving 88,596,000 shares of its Common Stock for conversions under this Note and another note of $40,400 of even date herewith (the "Share Reserve"). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all costs associated with issuing and delivering the shares. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. Conversion Notices may be sent to the Company or its transfer agent via electric mail. The company should at all times reserve a minimum of four times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts.

13. The Company will give the Holder direct notice of any corporate actions including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.

14. This Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

GRAPHITE CORP, INC

Dated: ____________
By:

Title:

EXHIBIT A

NOTICE OF CONVERSION

(To be Executed by the Registered Holder in order to Convert the Note)

The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Graphite Corp, Inc. ("Shares") according to the conditions set forth in such Note, as of the date written below.

If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.

Date of Conversion: ___________________________________________________

Applicable Conversion Price: ____________________________________________

Signature: ___________________________________________________________

[Print Name of Holder and Title of Signer]

Address: ____________________________________________________________

____________________________________________________________

SSN or EIN: __________________________

Shares are to be registered in the following name: _____________________________________________

Name: _____________________________________________________________

Address: ___________________________________________________________

Tel: _______________________________________________________________

Fax: _______________________________________________________________

SSN or EIN: _________________________________________________________

Shares are to be sent or delivered to the following account:

Account Name: _______________________________________________________

Address: _____________________________________________________________

EX-10.4 3 grph_ex104.htm CONVERTIBLE NOTE grph_ex104.htm

EXHIBIT 10.4

US $40,400.00

GRAPHITE CORP, INC

8% CONVERTIBLE REDEEMABLE NOTE

DUE OCTOBER 14, 2016

FOR VALUE RECEIVED, Graphite Corp, Inc. (the "Company") promises to pay to the order of the COVENTRY ENTERPRISES, LLC and its authorized successors and permitted assigns ("Holder"), the aggregate principal face amount of Forty Thousand Four Hundred dollars exactly (U.S. $40,400.00) on October 14, 2016 ("Maturity Date") and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on October 14, 2015. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 80 S.W. 8^th Street, Suite 2000, Miami, FL 33130, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.

This Note is subject to the following additional provisions:

2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

4. (a) The Holder of this Note is entitled, at its option, after 90 days and full cash payment for the shares convertible hereunder,to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 58% of the average of the three lowest trading prices of the Common Stock as reported on the National Quotations Bureau OTCQB exchange which the Company's shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. To the extent the Conversion Price of the Company's Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC "Chill" on its shares, the conversion price shall be decreased to 48% instead of 58% while that "Chill" is in effect. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 9.9% of the outstanding shares of the Common Stock of the Company.

(c) During the first 90 days this Note is in effect, the Company may redeem this Note by paying to the Holder an amount equal to 150% of the unpaid principal amount of this Note along with any accrued interest This Note may not be redeemed after 90 days. The redemption must be closed and paid for within 3 business days of the Company sending the redemption demand or the redemption will be invalid and the Company may not redeem this Note.