Note 9 - S	12 Months Ended
Dec. 31, 2011
Notes to Financial Statements
Note 9 - S	NOTE 9 – SUBSEQUENT EVENTS Agreement and Plan of Merger On March 21, 2012, we entered into an Agreement and Plan of Merger (the “SGT Merger Agreement”) with SGT Merger Corporation, a Nevada corporation and our wholly-owned subsidiary (“SGT MergerCo”), SG Technologies Corp (“SGT”), Sterling C. Scott (the “SGT Representative”), and W-Net Fund I, L.P., a Delaware limited partnership and holder of more than 5% of our common stock (the “Investor Representative”). Under the SGT Merger Agreement, if all conditions are satisfied or waived: (i) SGT MergerCo will be merged with and into SGT (the “Surviving Corporation”); (ii) SGT will become our wholly-owned subsidiary; (iii) all SGT shares of common stock will be exchanged for shares of our common stock and shares of a new series of our preferred stock, which will be designated Series A Preferred Stock (the “Series A Preferred Stock”), and have the rights, preferences, privileges and restrictions set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock (the “Certificate of Designation”) which will be filed with the Delaware Secretary of State prior to the consummation of the merger; and (iv) 157,000,000 shares of our common stock, and, subject to the terms of the SGT Merger Agreement, 3,000,000 shares of Series A Preferred Stock will be owned by SGT’s stockholders (the “SGT Merger”). Pursuant to the Certificate of Designation, each share of Series A Preferred Stock will convert into twenty-three shares of our common stock on the earlier of (i) the date agreed to by the holders of a majority of the shares of Series A Preferred Stock and the Investor Representative and (b) the eighteen-month anniversary of the closing of the SGT Merger (the “SGT Closing”). Pursuant to the SGT Merger, approximately 785,000 shares of our common stock and 15,000 shares of Series A Preferred Stock will be issued for each outstanding share of SGT common stock. Pursuant to the SGT Merger Agreement, at the SGT Closing, the shares of Series A Preferred Stock will be held in escrow, pursuant to an escrow agreement which will be entered into prior to the SGT Closing, pending the achievement by the Surviving Corporation of the financial milestones described in the SGT Merger Agreement. If the Surviving Corporation achieves such financial milestones, the Series A Preferred Stock will be released from escrow and delivered to the SGT stockholders. If the Surviving Corporation fails to achieve such financial milestones, the Series A Preferred Stock will be released from escrow, delivered to us, and cancelled. In connection with the SGT Merger Agreement, we will enter into a voting agreement, pursuant to which, among other things, the SGT stockholders, the Investor Representative and Europa International Inc., a Delaware corporation and current holder of our common stock (“Europa”), will agree to vote the shares of our capital stock held by such stockholders to elect the following persons to our board of directors (the “Board”): · three persons designated by the SGT Representative (the “SGT Directors”), one of which must be an independent director, which persons shall initially be Sterling C. Scott, with two seats remaining vacant, for so long as the SGT stockholders or any of their affiliates continue to own beneficially shares of our common stock; and · two persons designated by the Investor Representative, one of which must be an independent director, which persons shall initially be Craig Ellins, with one seat remaining vacant, for so long as the Investor Representative, Europa or any of their affiliates continue to own beneficially shares of our common stock. Pursuant to the SGT Merger Agreement, effective as of the SGT Closing, (a) the authorized number of directors on the Board will be increased to five, (b) Todd Denkin will resign from the Board and (c) Sterling C. Scott will be elected to the Board to fill one of the vacancies thereon. After the SGT Closing, the two remaining SGT Directors will be appointed to the Board (the “Remaining SGT Directors”). The appointment of the Remaining SGT Directors will be subject to applicable regulatory requirements, including the preparation, filing and distribution to our stockholders of a Schedule 14(f)-1 information statement, and the completion of the requisite waiting period following such filing and distribution. Pursuant to the SGT Merger Agreement, at the SGT Closing, Sterling C. Scott will become the Executive Chairman of the Board and our Chief Executive Officer, President, Chief Financial Officer and Secretary, and Craig Ellins will become the Vice Chairman of the Board. In the SGT Merger Agreement, SGT and our company have each made standard and customary representations and warranties to each other, and standard covenants regarding the conduct of our respective operations pending the SGT Closing. Our obligations to consummate the SGT Merger are subject to certain conditions, any of which may be waived. Conditions to either side closing include, without limitation: · No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the SGT Merger shall be in effect; and · Since the date of the SGT Merger Agreement, there shall have been no event(s) that could reasonably be expected to have a material adverse effect on the other party. Our obligation to close the SGT Merger will be subject to the further conditions that, without limitation: · The SGT Merger shall have been approved by the holders of a majority of SGT’s outstanding shares of common stock; and · No SGT stockholder shall have demanded or be entitled to exercise statutory dissenters’ rights with respect to the SGT Merger. · Our company and SGT have each agreed to continue to operate our respective businesses in the ordinary course prior to the SGT Merger. We can provide no assurance that the conditions to the SGT Merger will be satisfied or that the SGT Merger will be consummated. In the event that all conditions to the SGT Merger are satisfied, we anticipate that the SGT Merger will close within the second quarter of 2012. The SGT Merger Agreement may be terminated as follows: (i) by mutual written consent, (ii) by either party if any governmental entity shall have issued an order or taken any other action permanently enjoining or prohibiting the SGT Merger, and such order shall have become final and nonappealable, (iii) by either party if the SGT Merger is not consummated by April 30, 2012 (other than as a result of the failure of the party seeking to terminate to perform its obligations), (iv) by either party if an event having a material adverse effect on the other party shall have occurred, or (v) by either party if the other is in material breach of any representation, warranty, covenant or agreement. In the event of termination, both parties are responsible for their expenses. Our Board has approved the SGT Merger Agreement and the transactions contemplated thereunder. The board of directors of SGT and the holders of a majority of the outstanding shares of SGT’s common stock have approved the SGT Merger Agreement and the transactions contemplated thereunder. SGT is the leading North American manufacturer of hi-powered LED (Light Emitting Diode) grow light products for indoor horticulture, sold under the brand name “Stealth Grow LED”. SGT provides United States engineered, energy efficient and “green” technology for healthy and abundant indoor gardening. SGT’s LED products are available through more than 2,500 hydroponic retailers, and on-line resellers in the United States and Canada. SGT believes that its LED products will be available in European Community retailers in late Spring 2012. Securities Purchase and Exchange Agreement Subsequant to December 31, 2011, we borrowed an additional $150,000 under our existing note agreements. On March 16, 2012, we entered into a Securities Purchase and Exchange Agreement (the “Securities Purchase and Exchange Agreement”) with the Investor Representative and Europa, pursuant to which, we issued to the W-Net Fund and Europa 6% Senior Secured Convertible Notes (the “Notes”) with an aggregate principal amount of $670,128.77 in exchange for a cash purchase price of $100,000 and the cancellation and exchange of (i) that certain Senior Secured Promissory Note, dated October 8, 2011, issued to Europa in the original principal amount of $100,000 and (ii) that certain Senior Secured Promissory Note, dated October 12, 2011, to the Investor Representative in the original principal amount of $349,790.68, and (iii) the revolving promissory note payable to W-Net Fund. Pursuant to the Securities Purchase and Exchange Agreement, we may sell and issue up to an additional $1,329,871.23 in principal amount of the Notes in exchange for a cash purchase price and/or the cancellation and exchange of any promissory note issued by us, or evidencing debt assumed by us. The Notes pay 6% interest per annum with a maturity date of April 15, 2015 and are secured by substantially all of our assets and three trademarks. No cash interest payments are required, except that accrued and unconverted interest shall be due on the maturity date and on each conversion date with respect to the principal amount being converted, provided that such interest may be added to and included with the principal amount being converted. If there is an uncured event of default under the Notes, the holder of each Note may declare the entire principal and accrued interest amount immediately due and payable. Default interest will accrue after an event of default at an annual rate of 12%. The Notes may be prepaid by us at any time upon ten days’ prior written notice to the holders of the Notes, and the Notes may not be forced by us to be converted. Each Note is convertible at any time into common stock at a specified conversion price, which will initially be $0.035 per share. The Note conversion price will be subject to specified adjustments for certain changes in the number of outstanding shares of our common stock, including conversions or exchanges of such. If additional shares of our capital stock are issued, except in specified exempt issuances, for consideration which is less than the then existing Note conversion price (a “Dilutive Issuance”), then such conversion price would be subject to a “full ratchet” adjustment that generally reduces the conversion price to equal the price in the Dilutive Issuance, regardless of the size of the Dilutive Issuance. The Notes will greatly restrict the ability of our company or our subsidiaries to grant liens on our or their respective assets without the Note holders’ consent. Issuances of Common Stock On December 15, 2011, we entered into a Domain Name License Agreement for the exclusive rights to various domain names in connection with our internet business for a period of 3 years. We shall pay a license fee equal to 333,333 shares of common stock per year. On January 10, 2012, we issued the shares relating to the first year of the license fee and valued those shares at $11,667, the stock price on the date of issuance. Subsequent to year-end, we entered into an offering for the private placement of up to 50,000,000 shares of common stock at $0.035 per share. We issued 3,571,571 shares of common stock at gross proceeds of $125,000 subsequent to year-end. Subsequent to year-end, we issued 200,000 restricted shares of common stock for marketing services valued at $7,000. On March 30, 2012, we issued 1,000,000 shares of our common stock to Stubbs Alderton & Markiles LLP, our corporate counsel (“SAM”), in exchange for the cancellation of $35,000 of indebtedness owed by us to SAM for legal services that were previously rendered to us.

Note 9 - S

12 Months Ended

Dec. 31, 2011

NOTE 9 – SUBSEQUENT EVENTS

Agreement and Plan of Merger

On March 21, 2012, we entered into an Agreement and Plan of Merger (the “SGT Merger Agreement”) with SGT Merger Corporation, a Nevada corporation and our wholly-owned subsidiary (“SGT MergerCo”), SG Technologies Corp (“SGT”), Sterling C. Scott (the “SGT Representative”), and W-Net Fund I, L.P., a Delaware limited partnership and holder of more than 5% of our common stock (the “Investor Representative”).

Under the SGT Merger Agreement, if all conditions are satisfied or waived: (i) SGT MergerCo will be merged with and into SGT (the “Surviving Corporation”); (ii) SGT will become our wholly-owned subsidiary; (iii) all SGT shares of common stock will be exchanged for shares of our common stock and shares of a new series of our preferred stock, which will be designated Series A Preferred Stock (the “Series A Preferred Stock”), and have the rights, preferences, privileges and restrictions set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock (the “Certificate of Designation”) which will be filed with the Delaware Secretary of State prior to the consummation of the merger; and (iv) 157,000,000 shares of our common stock, and, subject to the terms of the SGT Merger Agreement, 3,000,000 shares of Series A Preferred Stock will be owned by SGT’s stockholders (the “SGT Merger”).

Pursuant to the Certificate of Designation, each share of Series A Preferred Stock will convert into twenty-three shares of our common stock on the earlier of (i) the date agreed to by the holders of a majority of the shares of Series A Preferred Stock and the Investor Representative and (b) the eighteen-month anniversary of the closing of the SGT Merger (the “SGT Closing”).

Pursuant to the SGT Merger, approximately 785,000 shares of our common stock and 15,000 shares of Series A Preferred Stock will be issued for each outstanding share of SGT common stock. Pursuant to the SGT Merger Agreement, at the SGT Closing, the shares of Series A Preferred Stock will be held in escrow, pursuant to an escrow agreement which will be entered into prior to the SGT Closing, pending the achievement by the Surviving Corporation of the financial milestones described in the SGT Merger Agreement. If the Surviving Corporation achieves such financial milestones, the Series A Preferred Stock will be released from escrow and delivered to the SGT stockholders. If the Surviving Corporation fails to achieve such financial milestones, the Series A Preferred Stock will be released from escrow, delivered to us, and cancelled.

In connection with the SGT Merger Agreement, we will enter into a voting agreement, pursuant to which, among other things, the SGT stockholders, the Investor Representative and Europa International Inc., a Delaware corporation and current holder of our common stock (“Europa”), will agree to vote the shares of our capital stock held by such stockholders to elect the following persons to our board of directors (the “Board”):

· three persons designated by the SGT Representative (the “SGT Directors”), one of which must be an independent director, which persons shall initially be Sterling C. Scott, with two seats remaining vacant, for so long as the SGT stockholders or any of their affiliates continue to own beneficially shares of our common stock; and

· two persons designated by the Investor Representative, one of which must be an independent director, which persons shall initially be Craig Ellins, with one seat remaining vacant, for so long as the Investor Representative, Europa or any of their affiliates continue to own beneficially shares of our common stock.

Pursuant to the SGT Merger Agreement, effective as of the SGT Closing, (a) the authorized number of directors on the Board will be increased to five, (b) Todd Denkin will resign from the Board and (c) Sterling C. Scott will be elected to the Board to fill one of the vacancies thereon.

After the SGT Closing, the two remaining SGT Directors will be appointed to the Board (the “Remaining SGT Directors”). The appointment of the Remaining SGT Directors will be subject to applicable regulatory requirements, including the preparation, filing and distribution to our stockholders of a Schedule 14(f)-1 information statement, and the completion of the requisite waiting period following such filing and distribution.

Pursuant to the SGT Merger Agreement, at the SGT Closing, Sterling C. Scott will become the Executive Chairman of the Board and our Chief Executive Officer, President, Chief Financial Officer and Secretary, and Craig Ellins will become the Vice Chairman of the Board.

In the SGT Merger Agreement, SGT and our company have each made standard and customary representations and warranties to each other, and standard covenants regarding the conduct of our respective operations pending the SGT Closing. Our obligations to consummate the SGT Merger are subject to certain conditions, any of which may be waived.

Conditions to either side closing include, without limitation:

· No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the SGT Merger shall be in effect; and

· Since the date of the SGT Merger Agreement, there shall have been no event(s) that could reasonably be expected to have a material adverse effect on the other party.

Our obligation to close the SGT Merger will be subject to the further conditions that, without limitation:

· The SGT Merger shall have been approved by the holders of a majority of SGT’s outstanding shares of common stock; and

· No SGT stockholder shall have demanded or be entitled to exercise statutory dissenters’ rights with respect to the SGT Merger.

· Our company and SGT have each agreed to continue to operate our respective businesses in the ordinary course prior to the SGT Merger. We can provide no assurance that the conditions to the SGT Merger will be satisfied or that the SGT Merger will be consummated. In the event that all conditions to the SGT Merger are satisfied, we anticipate that the SGT Merger will close within the second quarter of 2012.

The SGT Merger Agreement may be terminated as follows: (i) by mutual written consent, (ii) by either party if any governmental entity shall have issued an order or taken any other action permanently enjoining or prohibiting the SGT Merger, and such order shall have become final and nonappealable, (iii) by either party if the SGT Merger is not consummated by April 30, 2012 (other than as a result of the failure of the party seeking to terminate to perform its obligations), (iv) by either party if an event having a material adverse effect on the other party shall have occurred, or (v) by either party if the other is in material breach of any representation, warranty, covenant or agreement. In the event of termination, both parties are responsible for their expenses.

Our Board has approved the SGT Merger Agreement and the transactions contemplated thereunder. The board of directors of SGT and the holders of a majority of the outstanding shares of SGT’s common stock have approved the SGT Merger Agreement and the transactions contemplated thereunder.

SGT is the leading North American manufacturer of hi-powered LED (Light Emitting Diode) grow light products for indoor horticulture, sold under the brand name “Stealth Grow LED”. SGT provides United States engineered, energy efficient and “green” technology for healthy and abundant indoor gardening. SGT’s LED products are available through more than 2,500 hydroponic retailers, and on-line resellers in the United States and Canada. SGT believes that its LED products will be available in European Community retailers in late Spring 2012.

Securities Purchase and Exchange Agreement

Subsequant to December 31, 2011, we borrowed an additional $150,000 under our existing note agreements.

On March 16, 2012, we entered into a Securities Purchase and Exchange Agreement (the “Securities Purchase and Exchange Agreement”) with the Investor Representative and Europa, pursuant to which, we issued to the W-Net Fund and Europa 6% Senior Secured Convertible Notes (the “Notes”) with an aggregate principal amount of $670,128.77 in exchange for a cash purchase price of $100,000 and the cancellation and exchange of (i) that certain Senior Secured Promissory Note, dated October 8, 2011, issued to Europa in the original principal amount of $100,000 and (ii) that certain Senior Secured Promissory Note, dated October 12, 2011, to the Investor Representative in the original principal amount of $349,790.68, and (iii) the revolving promissory note payable to W-Net Fund.

Pursuant to the Securities Purchase and Exchange Agreement, we may sell and issue up to an additional $1,329,871.23 in principal amount of the Notes in exchange for a cash purchase price and/or the cancellation and exchange of any promissory note issued by us, or evidencing debt assumed by us.

The Notes pay 6% interest per annum with a maturity date of April 15, 2015 and are secured by substantially all of our assets and three trademarks. No cash interest payments are required, except that accrued and unconverted interest shall be due on the maturity date and on each conversion date with respect to the principal amount being converted, provided that such interest may be added to and included with the principal amount being converted. If there is an uncured event of default under the Notes, the holder of each Note may declare the entire principal and accrued interest amount immediately due and payable. Default interest will accrue after an event of default at an annual rate of 12%. The Notes may be prepaid by us at any time upon ten days’ prior written notice to the holders of the Notes, and the Notes may not be forced by us to be converted.

Each Note is convertible at any time into common stock at a specified conversion price, which will initially be $0.035 per share. The Note conversion price will be subject to specified adjustments for certain changes in the number of outstanding shares of our common stock, including conversions or exchanges of such. If additional shares of our capital stock are issued, except in specified exempt issuances, for consideration which is less than the then existing Note conversion price (a “Dilutive Issuance”), then such conversion price would be subject to a “full ratchet” adjustment that generally reduces the conversion price to equal the price in the Dilutive Issuance, regardless of the size of the Dilutive Issuance.

The Notes will greatly restrict the ability of our company or our subsidiaries to grant liens on our or their respective assets without the Note holders’ consent.

Issuances of Common Stock

On December 15, 2011, we entered into a Domain Name License Agreement for the exclusive rights to various domain names in connection with our internet business for a period of 3 years. We shall pay a license fee equal to 333,333 shares of common stock per year. On January 10, 2012, we issued the shares relating to the first year of the license fee and valued those shares at $11,667, the stock price on the date of issuance.

Subsequent to year-end, we entered into an offering for the private placement of up to 50,000,000 shares of common stock at $0.035 per share. We issued 3,571,571 shares of common stock at gross proceeds of $125,000 subsequent to year-end.

Subsequent to year-end, we issued 200,000 restricted shares of common stock for marketing services valued at $7,000.

On March 30, 2012, we issued 1,000,000 shares of our common stock to Stubbs Alderton & Markiles LLP, our corporate counsel (“SAM”), in exchange for the cancellation of $35,000 of indebtedness owed by us to SAM for legal services that were previously rendered to us.