The initial registration statement must be filed within 90 days of the Closing Date and declared effective within 180 days following the Closing Date. Any subsequent registration statements that are required to be filed on the earliest practical date on which the Company is permitted by the Securities and Exchange Commission’s guidance to file such additional registration statement. Such additional registration statements must be effective 90 days following the date on which it is required to be filed.

    In the event that the registration statement is not timely filed or declared effective, the Company will be required to pay liquidated damages. Such liquidated damages shall be, at the investor’s option, either $1,643.83 or 6,575 shares of Common Stock per day that the registration statement is not timely filed or declared effective as required pursuant to the Registration Rights Agreement, subject to an amount of liquidated damages not exceeding either $600,000, 2,400,000 shares of Common Stock, or a combination thereof based upon 12% liquidated damages in the aggregate.

    The sale of the Debenture and Warrants and the issuance of the 20,000,000 shares to be held in escrow are exempt from the registration requirements of the Act for the private placement of these securities pursuant to Section 4(2) of the Act and/or Rule 506 promulgated thereunder since, among other things, the transaction did not involve a public offering, the investors were accredited investors and acquired the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

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    Copies of the Securities Purchase Agreement, Convertible Subordinated Debenture, Common Stock Purchase Warrant, and the Registration Rights Agreement are filed as exhibits to this Current Report on Form 8-K. The summary of these agreements as set forth above is qualified by reference to such exhibits.