Note 15 – Subsequent Events

8% Convertible Promissory Notes

Subsequent to March 31, 2014, we issued and sold to a certain investor, pursuant to a Note Purchase Agreement we entered into during the year ended December 31, 2012, an aggregate principal amount of $850,000 of our 8.0% convertible promissory notes (the “8% Notes”) which are initially convertible into shares of our common stock, at a conversion price equal to $0.40 per share of common stock, subject to adjustment as provided on the terms of the 8% Notes, and associated warrants (the “8% Note Warrants”) to purchase, in the aggregate, 2,125,000 shares of common stock, subject to adjustment as provided on the terms of the 8% Note Warrants. See Note 7 for a complete description of our 8% Notes.

10% Convertible Redeemable Preferred Stock

During the year ended December 31, 2011, we designated 880,000 shares of preferred stock as 10% convertible redeemable preferred stock (the “Preferred Stock”) and we sold 759,773 shares of Preferred Stock at a price per share of $10, for gross proceeds of $7,597,730. As of March 31, 2014, 694,623 shares of Preferred Stock remain outstanding. The Preferred Stock is redeemable for cash by the holder any time after the three-year anniversary from the initial purchase. The first purchases of the Preferred Stock were during March 2011 with the balance purchased in April 2011. Therefore, certain holders of the Preferred Stock have the right to redeem their Preferred Stock beginning during the three months ended March 31, 2014 and the remainder may redeem beginning in April 2014.

Subsequent to March 31, 2014, in exchange for extending the redemption date to after December 31, 2016, we’ve offered to reduce the conversion price to $0.80 for any conversion in 2014, $0.70 for any conversions in 2015 and $0.60 for any conversions in 2016. We also offered to extend the expiration date of the Preferred Stock Warrants an additional two years.