Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. o

Common Stock, par value $.001 per share	03,634,177
(Class)	(Outstanding as of June 10, 2008)

 

 

 

 

 

On April 28, 1999, we acquired Diva Entertainment, Inc., a Florida corporation which was engaged in the business of operating and managing two wholly-owned talent management companies: Prima Eastwest Model Management, Inc., a California corporation, and Que Management, Inc., a New York corporation. At that time, we changed our name to “Diva Entertainment, Inc.” From April 28, 1999 through June 10, 2004, we were in the business of talent management, representing professional fashion models, commercial actors and theatrical actors.

 

On June 11, 2004, we entered into the Securities Purchase Agreement described herein under the heading "Recent Developments," pursuant to which we acquired our wholly-owned subsidiary, Tactica International, Inc. and sold our former subsidiary, Diva Entertainment, Inc.

 

Since June 11, 2004, we have been in the business of the direct marketing and distribution of proprietary and branded personal care and home care products. We are no longer in the business of talent management.

 

General Background

 

We, through our wholly-owned operating subsidiaries, Tactica International, Inc. ("Tactica"), Kleenfast, Inc. and Shopflash, Inc., are a direct marketer and distributor of proprietary and branded personal care and home care products. We established a niche within the direct marketing industry, a market which the "Direct Marketing Association" expects to grow from $2 to $3 trillion in annual sales within the next five years. We sell through major retail chains and mail order catalogs as well as on our websites.

 

All of our operations are conducted through Tactica, which we acquired as of June 11, 2004, Shopflash, Inc., which we established in April 2005, and Kleenfast, Inc., which we established in January 2006. We do not currently have any operations at the parent level.

 

In March 2000, a 55% interest in Tactica was purchased by Helen of Troy Limited or HoT, a developer and marketer of personal care products. The transaction gave Tactica access to capital to expand marketing and distribution. Tactica expanded its focus on distribution and more than doubled the number of retail outlets carrying Tactica's products to more than 45,000 worldwide. On April 29, 2004, Tactica's management purchased back the 55% interest in Tactica held by HoT. In exchange for HoT's 55% interest and approximately $17 million of secured Tactica debt and accrued interest payable, HoT received marketable securities, intellectual properties, including the Epil-Stop® brand, and the right to certain Tactica tax refunds. On June 11, 2004, we acquired all of the outstanding securities of Tactica and Tactica's stockholders acquired the majority of our outstanding securities.

 

Products

 

We design, develop and sell proprietary and branded personal care and other products directly to consumers and to retailers. We continue to develop new products and enhance existing products in order to maintain and improve consumer acceptance of our products.

 

Sales and Marketing

 

Since its inception in 1992, Tactica has established a worldwide market for its family of personal and skin care products, and the Epil-Stop® hair removal products the latter of which was sold to HoT in April 2004. We use a comprehensive and focused marketing and distribution program that includes widespread print and television advertising combined with global product placement in well known retail outlets worldwide, as well as through popular mail order catalogs, and directly through our websites, primarily www.igia.com.

 

We use direct response marketing to sell these products directly to consumers primarily under our own brands and licensed trademarks. The acquisition of licensing rights represents a component of our growth strategy. We previously marketed a line of floor care products under our Milinex and Wind Storm brands and under the Singer® brand that we licensed in fiscal 2004. Tactica has also sold its products through major pharmacy and general merchandise retail chains and globally recognized mail order catalogs. Tactica’s products also periodically were featured on home shopping channels such as QVC and our infomercials are shown on national cable and broadcast television channels such as the TV Guide Channel, CNBC and The Game Show Channel. Tactica markets its products internationally through distributors covering more than 100 countries worldwide. No customer accounted for 10% or more of net sales during fiscal 2008 or 2007. Tactica’s U.S. sales comprised nearly 100% of total net sales in fiscal 2008 and 2007, respectively.

 

Manufacturing and Distribution

 

We contract with unaffiliated manufacturers both within and outside the U.S. to manufacture our products. We arrange for our products to be shipped to our customers by third party warehouse facilities in Los Angeles, California and Lebanon, Tennessee, and a related party warehouse facility that we no longer use. We also sometimes ship products from manufacturers directly to retailers. Our retail customers often seek to minimize their inventory levels and often demand that we fulfill their orders within relatively short time frames. Consequently, these inventory management practices would often require us to carry substantial levels of inventory in order to meet our customers’ needs, which given the required level of working capital has limited our ability to satisfy retail customer orders.

Most of our products manufactured outside the countries in which they are sold are subject to import duties, which have the effect of increasing the amount we pay to obtain such products.

 

License Agreements, Trademarks and Patents

 

Most of our products we sell are branded with our own trademarks, including IGIA®.. We previously marketed our line of floor care products under our Milinex and Wind Storm brands and under the Singer® brand pursuant to our April 2003 license agreement with The Singer Company B.V., for use of the Singer® brand name on floor care products sold exclusively through Tactica within the United States and Canada. We mutually agreed to terminate the agreement on September 29, 2005 and no longer market Singer® branded products. Pursuant to a stock purchase agreement, dated as of April 29, 2004, Tactica transferred ownership of the Epil-Stop® brand to HoT in exchange for HoT’s equity interest in Tactica, and Tactica provided HoT a non-exclusive royalty-free perpetual license to use to its U.S. patent, as well as corresponding patent applications. Tactica has filed or obtained licenses for design and utility patents in the U.S. and several foreign countries. We do not believe that the loss of any particular patent or patent license would have a materially adverse effect on our business.

 

Backlog

 

We ship some of our products to direct response customers and provide these customers with estimated delivery dates at the time that we receive their respective orders. There was no significant backlog of orders in any of our distribution channels at February 29, 2008.

 

Competition

 

We sell products in the “As Seen on TV” market, the personal care and home care products market. These markets are very competitive. Maintaining and gaining market share depends heavily on product development and enhancement, pricing, quality, performance, packaging and availability, brand name recognition, patents, and marketing and distribution approaches. Our primary competitors in these markets include Thane International, Home Medics and Helen of Troy Limited or HoT. Most of our competitors have significantly greater financial and other resources than we do.

 

Regulation

 

Our products are generally not regulated by the U.S. Food and Drug Administration (FDA), however its products could be and have been subject to FDA regulations. National Advertising Council (NAC) has, from time to time, reviewed our advertising and communicated recommended modifications to us and the U.S. Federal Trade Commission (FTC). In addition, the FTC, and state and local consumer affairs bodies oversee aspects of our sales and marketing activities and customer handling processes. Our ability to sell products can be and has been adversely affected by actions taken by the FDA, FTC, NAC, and state and local authorities and by future changes in regulations.

 

Our electrical products must meet the safety standards imposed in various national, state, local, and provincial jurisdictions. Our electrical products sold in the U.S. are designed, manufactured, and tested to meet the safety standards of Underwriters Laboratories, Inc. or Electronic Testing Laboratories.

Employees

As of June 12, 2008, IGIA has two employees, Mr. Avi Sivan, Chief Executive Officer, and Mr. Prem Ramchandani, President and Interim Chief Financial Officer. We have never experienced a work stoppage and we believe that we have satisfactory working relations with our employees.

RISK FACTORS

You should carefully consider the following risk factors and all other information contained herein as well as the information included in this Annual Report in evaluating our business and prospects. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties, other than those we describe below, that are not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks occur, our business and financial results could be harmed. You should refer to the other information contained in this Annual Report, including our consolidated financial statements and the related notes.

 

Risks Relating to Our Business:

We Have Ceased Our Primary Operations and May Never be Able to Resume Them.

Due to our lack of working capital, we have ceased our direct response television advertising, which has essentially resulted in our ceasing our primary operations. Historically, we have used direct response television advertising to promote sales. In addition, our lack of cash has resulted in our inability to purchase and ship product to customers in a timely and consistent manner. During our fiscal year ended February 28, 2007, we also suffered disruptions to operations caused by changes in providers of services for customer order fulfillment and credit card processing. Unless we obtain additional financing, we will probably not be able to resume substantial revenue generating operations in our current line of business. It is possible that we may never procure the necessary additional financing to resume operations. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations again, attempt to further restructure financial obligations and/or seek a strategic merger, acquisition or a sale of assets.

Our Chapter 11 Proceeding Has Had a Material Negative Effect on Our Business, Financial Condition and Results of Operations.

Tactica, our operating subsidiary, filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code in October 2004 and its Plan of Reorganization was declared effective in March 2006. The bankruptcy has had a material negative effect on our business, financial condition and results of operations. Certain post-petition creditors, including firms that provided professional services to Tactica, have submitted a total of approximately $583,000 in claims to the Bankruptcy Court for post-petition administrative expenses. In addition, as described herein under the heading, “Liquidity and Capital Resources,” we have a significant working capital deficit and are seeking additional working capital for operations and to satisfy our obligations.

If we are unable to resolve post-petition administrative expense claims and service other financial obligations as they become due, we will be required to adopt alternative strategies, which may include, but are not limited to, actions such as further reducing management and employee headcount and compensation, attempting to further restructure financial obligations and/or seeking a strategic merger, acquisition or a sale of assets. There can be no assurance that any of these strategies could be effected on satisfactory terms; however, if during that period or thereafter we are not successful in raising sufficient capital resources on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition.

Our Auditors Have Expressed Substantial Doubt About Our Ability to Continue as a Going Concern.

In their report dated July 3, 2007, Russell Bedford Stefanou Mirchandani LLP stated that the financial statements of IGIA for the year ended February 28, 2007 were prepared assuming that IGIA would continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of Tactica having filed for bankruptcy protection on October 21, 2004, its recurring losses from operations and our net capital deficiency. We continue to experience net operating losses. Our ability to continue as a going concern is subject to our ability to generate a profit. Our continued net operating losses and stockholders’ deficit increases the difficulty in meeting such goals and there can be no assurances that such methods will prove successful.

 

Pending and Threatened Litigation Could Result in Our Losing Our Primary Operating Assets. 

We are currently a party to various pending lawsuits and judgments. Any of our judgment creditors, as well as our secured lenders, may seek to foreclose on our assets in the future or may seek to force us into an involuntary liquidation under the United States Bankruptcy Code. It is possible that, in connection with such a foreclosure action or involuntary bankruptcy proceeding, our assets could be sold to such third party creditor, another creditor, or a third party. In the event that the assets are put up for sale, we intend to bid on them, but it is possible that we may not be able to purchase the assets, either because we do not have the assets with which to make a competitive bid or because we are simply outbid by one of our creditors or a third party. In the event that our assets are sold in a foreclosure action or in a bankruptcy proceeding, we would no longer have any operating business.

Our Future Operations are Contingent on Our Ability to Recruit Employees.

In the event we are able to further expand our business, we expect to experience growth in the number of employees and the scope of our operations. In particular, we may hire additional sales, marketing and administrative personnel. Additionally, acquisitions could result in an increase in employee head count and business activity. Such activities could result in increased responsibilities for management. We believe that our ability to increase our customer support capability and to attract, train, and retain qualified technical, sales, marketing, and management personnel, will be a critical factor to our future success.

We May Not be Able to Manage Our Growth Effectively.

Our future success will be highly dependent upon our ability to successfully manage the expansion of our operations. Our ability to manage and support our growth effectively will be substantially dependent on our ability to: 1) implement adequate improvements to financial and management controls, reporting and order entry systems, and other procedures and 2) hire sufficient numbers of financial, accounting, administrative, and management personnel. Our expansion and the resulting growth in the number of our employees would result in increased responsibility for both existing and new management personnel. We are in the process of establishing and upgrading our financial accounting and procedures. We may not be able to identify, attract, and retain experienced accounting and financial personnel. Our future operating results will depend on the ability of our management and other key employees to implement and improve our systems for operations, financial control, and information management, and to recruit, train, and manage its employee base. We may not be able to achieve or manage any such growth successfully or to implement and maintain adequate financial and management controls and procedures, and any inability to do so would have a material adverse effect on our business, results of operations, and financial condition.

 

 Our Success is Dependent on Our Ability to Address Market Opportunities.

Our future success depends upon our ability to address potential market opportunities while managing our expenses to match our ability to finance our operations. This need to manage our expenses places a significant strain on our management and operational resources. If we are unable to manage our expenses effectively, we may be unable to finance our operations. If we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition and would prevent us from being able to utilize potential market opportunities.

We are Seeking Additional Financing.

We are seeking additional capital to continue our operations and will endeavor to raise funds through the sale of equity shares and revenues from operations. We have been financing our operations since the June 2004 merger with Tactica through funds loaned to us directly and indirectly by certain officers and directors, the sale of callable secured convertible notes and through operations. We have used the financing to increase our direct response sales business and fund Tactica’s emergence from bankruptcy. We need additional capital to continue our operations and will endeavor to raise funds through the sale of equity shares and revenues from operations.

 

There can be no assurance that we will generate adequate revenues from our operations. Failure to generate adequate operating revenues would have an adverse impact on our financial position and results of operations and ability to continue as a going concern. Our operating and capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including the level of sales and marketing activities for our products. Accordingly, we may be required to obtain additional private or public financing including debt or equity financing and there can be no assurance that such financing will be available as needed or, if available, on terms favorable to us. Any additional equity financing may be dilutive to stockholders and such additional equity securities may have rights, preferences or privileges that are senior to those of our existing common stock.

We are currently in default of interest payment obligations and we are accruing interest at the annual default rate of interest of 15%. The note holders have the right to deliver to us a written notice of default. In the event that the default is not cured within 10 days following such notice, the Callable Secured Convertible Notes shall become immediately due and payable at an amount equal to 130% of the outstanding principal plus amounts due for accrued interest and penalty provisions. This default could prevent or hinder are ability to raise any additional capital. As of February 28, 2007, we recorded the default payment of 130% of the outstanding principal.

Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.

If we raise additional funds by issuing equity securities, existing stockholders may experience a dilution in their ownership. In addition, as a condition to giving additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders.

The Sales of Our Products Have Been Very Volatile and Our Results of Operations Could Fluctuate Materially.

 

Sales of our products rely on television advertising and direct response marketing campaigns. In addition, within direct response marketing products often have short life cycles. This leads to volatility in our revenues and results of operations. For example, our net sales for the fiscal year ended February 28, 2007 decreased 76.4% as compared with the fiscal year ended February 28, 2006. This was primarily caused by substantially reduced working capital availability.

Changes in Foreign Policy, International Law or the Internal Laws of the Countries Where Our Manufacturers are Located Could Have a Material Negative Effect on Our Business, Financial Condition and Results of Operations.

 

All of our products are manufactured by unaffiliated companies, some of which are located in the Far East. Risks associated with such foreign manufacturing include: changing international political relations; changes in laws, including tax laws, regulations and treaties; changes in labor laws, regulations, and policies; changes in customs duties and other trade barriers; changes in shipping costs; interruptions and delays at port facilities; currency exchange fluctuations; local political unrest; and the availability and cost of raw materials and merchandise. To date, these factors have not significantly affected our production capability; however, any change that impairs our ability to obtain products from such manufacturers, or to obtain products at marketable rates, would have a material negative effect on our business, financial condition and results of operations.

 

Our Business Will Suffer if We Do Not Develop and Competitively Market Products that Appeal to Consumers.

We sell products in the “As Seen on TV” markets. These markets are very competitive. Maintaining and gaining market share depends heavily upon price, quality, brand name recognition, patents, innovative designs of new products and replacement models and marketing and distribution approaches. We compete with domestic and international companies, some of which have substantially greater financial and other resources than we have. We believe that our ability to produce reliable products that incorporate developments in technology and to satisfy consumer tastes with respect to style and design, as well as our ability to market a broad offering of products in each applicable category at competitive prices, are keys to our future success.

Our Business, Financial Condition and Results of Operations Could Be Materially Adversely Affected if We are Unable to Sell Products Under Our Licensed Trademarks.

A significant portion of our sales revenue is derived from sales of products under our own brands and licensed trademarks. As the percentage of our sales of such products increases, we will become increasingly dependent upon the continued use of such brands and trademarks. Actions we take and those taken by licensors and other third parties, with respect to products we license from them, could greatly diminish the value of any of our brands and licensed trademarks. If we are unable to develop and sell products under existing or newly acquired brands and licensed trademarks or the value of the trademarks were diminished by the licensor or third parties, our business, financial condition and results of operations could be materially adversely affected.

Many of Our Competitors are Larger and Have Greater Financial and Other Resources than We Do and Those Advantages Could Make It Difficult for Us to Compete with Them.

Many of our current and potential competitors may have substantial competitive advantages relative to us, including: longer operating histories; significantly greater financial, technical and marketing resources; greater brand name recognition; larger existing customer bases; and more popular products. These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements and devote greater resources to develop, promote and sell their products or services than we can.

We are Dependent on Our Management Team and the Loss of Any Key Member of This Team May Prevent Us from Implementing Our Business Plan in a Timely Manner.

Our success depends largely upon the continued services of our executive officers and other key personnel, particularly Avi Sivan, our Chief Executive Officer, and Prem Ramchandani, our President. We have entered into employment agreements with Mr. Sivan and Mr. Ramchandani. We do not currently maintain key person life insurance policies on Mr. Sivan or Mr. Ramchandani. In addition, we have not paid Mr. Sivan or Mr. Ramchandani any of their salaries that have been accruing during the fiscal years ended February 29, 2008 and February 28, 2007 and may not be able to make substantial payments for the foreseeable future. The loss of Mr. Sivan or Mr. Ramchandani would be expected to have a material adverse effect on our operations.

Our Business, Financial Condition and Results of Operations Will Suffer if We Do Not Accurately Forecast Customers’ Demands.

Because of our reliance on manufacturers in the Far East, our production lead times are relatively long. Therefore, we must commit to production well in advance of customer orders. If we fail to forecast consumer demand accurately, we may encounter difficulties in filling customer orders or in liquidating excess inventories or may find that customers are canceling orders or returning products. Our relatively long production lead time may increase the amount of inventory and the cost of storing inventory. Additionally, changes in retailer inventory management strategies could make inventory management more difficult. Any of these results could have a material adverse effect on our business, financial condition and results of operations.

Our Products and Business Practices May be Subject to Review by Third Party Regulators and Consumer Affairs Monitors and Actions Resulting from Such Reviews, Including but Not Limited to Cease and Desist Orders, Fines and Recalls.

Although our products are generally not regulated by the U.S. Food and Drug Administration (FDA), we have in the past and on occasion may in the future sell products that are subject to FDA regulations. Our advertising is subject to review by the National Advertising Council (NAC) and our advertisements could be and have been subject to NAC recommendations for modification. The U.S. Federal Trade Commission (FTC) and state and local consumer affairs bodies oversee various aspects of our sales and marketing activities and customer handling processes.

 

In 2004 we entered into a consent degree with the FTC, in connection with a claim filed against Tactica International, Inc, our wholly owned subsidiary, pursuant to which we agreed to cease soliciting the sale of goods which we did not have a reasonable expectation of shipping within the advertised time, provide buyers with a revised shipping date and offer buyers the opportunity to agree to a delay or cancel an order and receive a prompt refund, cancel orders as requested and receive a prompt refund and maintain and preserve records for a specified period.

If the FTC, or any other agency that has a right to regulate our products, engage in reviews of our products or marketing procedures we may be subject to additional enforcement actions from such agencies. If such reviews take place, as they have in the past, our executives may be forced to spend time on the regulatory proceedings as opposed to running our business. In addition to fines, adverse actions from an agency could result in our being unable to market certain products the way we would like or at all, or prevent us from selling certain products entirely.

We Purchase Essential Services and Products from Third Parties Interruptions is Such Services Could Have a Material Adverse Impact on Our Ability to Operate.

We currently outsource significant portions of our business functions, including, but not limited to, warehousing, customer service, inbound call center functions and payment processing for all direct response sales, customer order fulfillment, and product returns processing and shipping. From time to time we have experienced interruptions in these essential services for varying periods of time and future interruptions can and will occur. If such interruptions occur for extended periods of time, our operations may be materially adversely affected. Many of our products are produced in South China. Should we experience any interruption or interference with the operations of the third party suppliers of goods and services, we might experience a shortage of inventory. This type of shortage could have a material adverse effect on our financial position, results of operations, and cash flow.

Our Direct Response Sales Operation is Dependent on Having Adequate Credit Card Activity Processing Capacity with the Major Credit Card Companies and a Credit Card Processor.

A third party credit card processor regulates our daily credit card sales order volume and sets limits as to the maximum sales volume it will process. In addition, credit card companies, such as Visa and MasterCard, and credit card processors typically maintain a record of the level of customer requests to have charges for our products reversed (chargebacks). The credit card companies and processors may fine us for “high chargeback levels”, modify our sales volume limit, make a demand for additional reserves or even discontinue doing business with us. The direct response business is known for relatively high chargeback levels and we have experienced periods of higher than accepted levels of chargeback activity that has led to fines and disruptions in credit card processing of customer orders. We endeavor to maintain reasonable business practices and customer satisfaction, which in part, contribute to lower levels of chargeback activity; nevertheless, excess chargeback activity could result in our being unable to have customers pay us using credit cards.

Our Future Acquisitions, if any, and New Products May Not be Successful, Which Could Have a Material Adverse Effect on Our Financial Condition and Results of Operations.

We have in the past, and may in the future, decide to acquire new product lines and businesses. The acquisition of a business or of the rights to market specific products or use specific product names involves a significant financial commitment. In the case of an acquisition, such commitments are usually in the form of either cash or stock consideration. In the case of a new license, such commitments could take the form of license fees, prepaid royalties, and future minimum royalty and advertising payments. While our strategy is to acquire businesses and to develop products that will contribute positively to earnings, there is no guarantee that all or any of our acquisitions will be successful. Anticipated synergies may not materialize, cost savings may be less than expected, sales of products may not meet expectations and acquired businesses may carry unexpected liabilities. Each of these factors could result in a newly acquired business or product line having a material negative impact on our financial condition and results of operations.

Risks Relating to Our Current Financing Arrangement :

There Are a Large Number of Shares Underlying Our Callable Secured Convertible Notes and Warrants That may be Available for Future Sale and the Sale of These Shares May Depress the Market Price of Our Common Stock.

As of June 10, 2008, we had 403,634,177 shares of common stock issued and outstanding and Callable Secured convertible notes outstanding or an obligation to issue callable secured convertible notes that may be converted into an estimated 43,258,293,000 shares of common stock at current market prices, and outstanding warrants or an obligation to issue warrants to purchase 221,000,000 shares of common stock. In addition, the number of shares of common stock issuable upon conversion of the outstanding callable secured convertible notes may increase if the market price of our stock declines. All of the shares, including all of the shares issuable upon conversion of the notes and upon exercise of our warrants, may be sold without restriction. The sale of these shares may adversely affect the market price of our common stock.

 

 

The Continuously Adjustable Conversion Price Feature of Our Callable Secured Convertible Notes Could Require Us to Issue a Substantially Greater Number of Shares, Which Will Cause Dilution to Our Existing Stockholders.  

Our obligation to issue shares upon conversion of our callable secured convertible notes is essentially limitless. The following is an example of the amount of shares of our common stock that are issuable, upon conversion of the callable secured convertible notes (excluding accrued interest), based on market prices 25%, 50% and 75% below the average market price, as of January 17, 2008 of $0.0003.

The following relates to outstanding callable secured convertible notes in the aggregate principal amount of $2,496,284, which are convertible at a 50% discount:

											Number						% of
% Below		Price Per			With Discount						of Shares						Outstanding
Market		Share			at 50%						Issuable						Stock
25%		$	.00023					$	.00012						20,802,366,000						98.1	%
50%		$	.00015					$	.00008						31,203,550,000						98.7	%
75%		$	.00008					$	.00004						62,407,100,000						99.4	%

The following relates to outstanding callable secured convertible notes in the aggregate principal amount of $2,128,672, which are convertible at a 75% discount:

 

											Number						% of
% Below		Price Per			With Discount						of Shares						Outstanding
Market		Share			at 75%						Issuable						Stock
25%		$	.00023					$	.00006						35,477,866,000						98.9	%
50%		$	.00015					$	.000038						56,017,684,000						99.3	%