4.

Short-term notes payable

On September 2, 2011 the Company borrowed an aggregate of $100 from SG Phoenix, LLC and an employee of the Company and issued unsecured demand notes to each. These notes are due on demand and bear interest at the rate of 10% per annum.

On September 20, 2011, the Company entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) with Phoenix Banner Holdings, LLC (the “Investor”), an entity affiliated with the Company’s largest stockholder, Phoenix Venture Fund LLC (“Phoenix”). Under the terms of the Purchase Agreement, the Company issued an unsecured convertible promissory note in the amount of $500,000 (the “Note”) to the Investor. The Note bears interest at the rate of 10% per annum, and has a maturity date of September 20, 2012. The Note is also convertible at the option of the Investor into securities sold in the Company’s next equity financing with gross proceeds to the Company in excess of $100,000. In connection with the issuance of the Note, the Company also issued to the Investor a warrant to purchase 5,555,555 shares of the Company’s Common Stock at an exercise price of $0.0225 per share. The company ascribed a value of $7 to the warrants using a modified Black Scholes pricing model with the following assumptions; risk free interest rate of 0.42, expected life of three years, expected volatility of 204%, and a dividend yield of 0 The warrant value was recorded as a discount to notes payable and as a derivative liability. The warrant is exercisable for a period of three years. As of September 30, 2011, the fair value of the warrant was $6.

The Company intends to use the net proceeds from the transaction for working capital and general corporate purposes.