UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
| [X] |
Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| |
|
| |
For
the quarterly period ended June 30, 2014 |
| |
|
| [ ] |
Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
| |
|
| |
For
the transition period from __________ to__________ |
| |
|
| |
Commission
File Number: 333-137160 |
NYXIO
TECHNOLOGIES CORPORATION
(Exact
name of registrant as specified in its charter)
| Nevada |
98-0501477 |
| (State
or other jurisdiction of incorporation or organization) |
(IRS
Employer Identification No.) |
| 1330
S.W. 3rd Ave., Portland, Oregon 97201 |
| (Address
of principal executive offices) |
| 800-398-4132 |
| (Registrant’s
telephone number) |
_____________________________________________________________ |
| (Former
name, former address and former fiscal year, if changed since last report) |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days [X] Yes [] No
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
| [
] Large accelerated filer |
[
] Accelerated filer |
| [
] Non-accelerated filer |
[X]
Smaller reporting company |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 3,483,721,002
as of August 19, 2014.
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
These
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2014 are not necessarily
indicative of the results that can be expected for the full year.
Nyxio Technologies Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
| |
June 30, | |
December 31, |
| | |
2014 | |
2013 |
| Assets | |
| |
|
| Current assets: | |
| | | |
| | |
| Cash | |
$ | 15,906 | | |
$ | 27,082 | |
| Accounts receivable | |
| 223 | | |
| 223 | |
| Deposits
on Inventory | |
| 18,833 | | |
| | |
| Total
current assets | |
| 34,962 | | |
| 27,305 | |
| Fixed
assets, net of accumulated depreciation of $36,013 and $30,785, respectively | |
| 10,093 | | |
| 15,321 | |
| Total
assets | |
$ | 45,055 | | |
$ | 42,626 | |
| Liabilities and
shareholders' (deficit) | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable and
accrued expenses | |
$ | 678,997 | | |
$ | 567,598 | |
| Accrued interest | |
| 133,706 | | |
| 131,741 | |
| Deferred revenue | |
| 25,000 | | |
| 25,000 | |
| Notes payable | |
| 171,630 | | |
| 171,630 | |
| Notes payable - related
party | |
| 7,458 | | |
| 8,458 | |
| Convertible notes
payable, net of discounts of $157,441
and $61,842, respectively | |
| 50,280 | | |
| 328,361 | |
| Derivative
liability | |
| 358,584 | | |
| 505,647 | |
| Total
current liabilities | |
| 1,425,655 | | |
| 1,738,435 | |
| Shareholders'
(deficit) | |
| | | |
| | |
| Series A preferred
stock; $0.01 par value; 1,100 shares authorized; no shares issued and outstanding at June 30, 2014 and December
31, 2013, respectively | |
| — | | |
| — | |
| Series B preferred stock; $0.01 par
value; 100 shares authorized; shares 100 shares issued and outstanding as of June 30, 2014 and December 31, 2013,
respectively | |
| 1 | | |
| 1 | |
| Common stock; $0.001 par value; 5,000,000,000
shares authorized; 2,782,188,583 and 335,994,983 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | |
| 2,782,189 | | |
| 335,995 | |
| Common shares sold and unissued, 1,666
at June 30, 2014 and December 31, 2013, respectively | |
| 2 | | |
| 2 | |
| Additional paid-in
capital | |
| 17,709,917 | | |
| 19,322,140 | |
| Common stock payable | |
| 50,000 | | |
| 50,000 | |
| Deferred compensation | |
| (4,270,833 | ) | |
| (6,770,833 | ) |
| Other comprehensive
(loss) | |
| 903,256 | | |
| (85,502 | ) |
| Accumulated
(deficit) | |
| (18,555,132 | ) | |
| (14,547,612 | ) |
| Total
shareholders' (deficit) | |
| (1,380,600 | ) | |
| (1,695,809 | ) |
| Total
liabilities and shareholders' (deficit) | |
$ | 45,055 | | |
$ | 42,626 | |
Nyxio
Technologies Corporation
Condensed
Consolidated Statements of Operations
(Unaudited)
| |
Three Months Ended | |
Six Months Ended |
| |
June 30, | |
June 30, |
| | |
2014 | |
2013 | |
2014 | |
2013 |
| Revenue | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | 6,065 | |
| Cost of goods
sold | |
| — | | |
| — | | |
| — | | |
| 1,445 | |
| Gross profit (loss) | |
| — | | |
| — | | |
| — | | |
| 4,620 | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | |
| Consulting services | |
| 68,050 | | |
| 71,000 | | |
| 107,843 | | |
| 71,000 | |
| Depreciation | |
| 2,610 | | |
| 2,893 | | |
| 5,228 | | |
| 5,844 | |
| General and administrative | |
| 8,954 | | |
| 2,525 | | |
| 14,739 | | |
| 7,954 | |
| Professional fees | |
| 76,819 | | |
| 25,019 | | |
| 104,515 | | |
| 27,519 | |
| Promotional and marketing | |
| 2,631 | | |
| — | | |
| 2,631 | | |
| 45 | |
| Research and development | |
| 2,508 | | |
| — | | |
| — | | |
| — | |
| Rent expense | |
| — | | |
| 3,042 | | |
| 4,230 | | |
| 4,654 | |
| Salaries and wages | |
| 62,500 | | |
| 12,000 | | |
| 126,996 | | |
| 32,487 | |
| Officer compensation | |
| 1,250,000 | | |
| 2,729,167 | | |
| 2,500,000 | | |
| 2,729,167 | |
| Travel and entertainment | |
| 3,160 | | |
| 3,445 | | |
| 5,375 | | |
| 3,594 | |
| Impairment | |
| — | | |
| — | | |
| — | | |
| — | |
| Total
operating expenses | |
| 1,477,232 | | |
| 2,849,091 | | |
| 2,871,557 | | |
| 2,882,264 | |
| Net loss from
operations | |
| (1,477,232 | ) | |
| (2,849,091 | ) | |
| (2,871,557 | ) | |
| (2,877,644 | ) |
| Other income (expense) | |
| | | |
| | | |
| | | |
| | |
| Amortization
of debt discounts | |
| (188,047 | ) | |
| (306,518 | ) | |
| (259,526 | ) | |
| (309,768 | ) |
| Financing costs | |
| (3,240 | ) | |
| (51,852 | ) | |
| (6,040 | ) | |
| (175,046 | ) |
| Interest expense | |
| (11,042 | ) | |
| (11,275 | ) | |
| (42,742 | ) | |
| (21,632 | ) |
| Interest expense
- related party | |
| (214 | ) | |
| — | | |
| (423 | ) | |
| (210 | ) |
| Other income | |
| 1 | | |
| — | | |
| 2 | | |
| — | |
| Gain (loss)
on derivatives | |
| (270,500 | ) | |
| (34,846 | ) | |
| (841,695 | ) | |
| (83,685 | ) |
| Gain
(loss) on debt settlement | |
| 1,128 | | |
| — | | |
| 14,461 | | |
| — | |
| Total
other income (expense) | |
| (471,914 | ) | |
| (404,491 | ) | |
| (1,135,963 | ) | |
| (590,341 | ) |
| Net loss | |
$ | (1,949,146 | ) | |
$ | (3,253,582 | ) | |
$ | (4,007,520 | ) | |
$ | (3,467,985 | ) |
| Basic and
fully diluted loss per common share | |
$ | (0.00 | ) | |
$ | (0.10 | ) | |
$ | (0.00 | ) | |
$ | (0.21 | ) |
| Basic
and fully diluted - weighted average common shares outstanding | |
| 1,780,880,649 | | |
| 32,093,709 | | |
| 1,220,846,578 | | |
| 16,247,474 | |
Nyxio
Technologies Corporation
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
| |
Six Months Ended |
| |
June 30, |
| | |
2014 | |
2013 |
| Cash flows from operating activities: | |
| | | |
| | |
| Net (loss) | |
$ | (4,007,520 | ) | |
$ | (3,467,985 | ) |
| Adjustments
to reconcile net (loss) to net cash used by operating activities: | |
| | | |
| | |
| Depreciation | |
| 5,228 | | |
| 5,844 | |
| Shares and options
issued for services | |
| 2,584,000 | | |
| 2,759,167 | |
| Shares issued for
financing costs | |
| — | | |
| 303,186 | |
| Amortization of beneficial
conversion | |
| 259,526 | | |
| 175,046 | |
| Penalty interest on
default of convertible debt | |
| 15,243 | | |
| — | |
| (Gain) loss on derivatives | |
| 841,695 | | |
| 83,685 | |
| (Gain) on settlement
of debt | |
| (1,128 | ) | |
| — | |
| Non-cash services
provided by related party | |
| — | | |
| — | |
| Warrants issued per
merger - related party | |
| — | | |
| — | |
| Impairment of operating
assets | |
| — | | |
| — | |
| Decrease (increase)
in assets: | |
| | | |
| | |
| Accounts receivable | |
| — | | |
| — | |
| Inventory | |
| — | | |
| — | |
| Deposits on inventory | |
| (18,833 | ) | |
| — | |
| Prepaid expenses | |
| — | | |
| — | |
| Other assets | |
| — | | |
| — | |
| Increase (decrease)
in liabilities: | |
| | | |
| | |
| Accounts payable and
accrued expenses | |
| 124,399 | | |
| 610 | |
| Accrued interest | |
| 14,589 | | |
| 28,423 | |
| Deferred
revenue | |
| — | | |
| — | |
| Net
cash used in operating activities | |
| (182,801 | ) | |
| (112,024 | ) |
| Cash flows from investing activities: | |
| | | |
| | |
| Change in due from
related party, net | |
| — | | |
| 12,340 | |
| Purchase
of fixed assets | |
| — | | |
| (300 | ) |
| Net
cash provided by (used in) investing activities | |
| — | | |
| 12,040 | |
| Cash flows from financing activities: | |
| | | |
| | |
| Cash contributed by
related party | |
| — | | |
| — | |
| Cash acquired through
merger | |
| — | | |
| — | |
| Proceeds from notes
payable | |
| — | | |
| — | |
| Payments on notes
payable | |
| — | | |
| — | |
| Proceeds from notes
payable - related party | |
| (1,000 | ) | |
| — | |
| Payments on notes
payable - related party | |
| — | | |
| — | |
| Proceeds from convertible
debt | |
| 172,625 | | |
| 97,400 | |
| Proceeds
from the sale of common stock | |
| — | | |
| — | |
| Net
cash provided by financing activities | |
| 171,625 | | |
| 97,400 | |
| Net increase (decrease) in cash | |
| (11,176 | ) | |
| (2,584 | ) |
| Cash, beginning
of period | |
| 27,082 | | |
| 2,658 | |
| Cash, end of
period | |
$ | 15,906 | | |
| 74 | |
| Supplemental disclosure of cash flow
information: | |
| | | |
| | |
| Cash
paid for income taxes | |
$ | — | | |
$ | — | |
| Cash
paid for interest | |
$ | — | | |
$ | — | |
Nyxio
Technologies Corporation
Unaudited
Notes to Consolidated Financial Statements
NOTE
1 – Significant Accounting Policies and Procedures
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary to present fairly the financial position of the Company as of
June 30, 2014, and the results of its operations and cash flows for the three months and six months ended June 30, 2014 and 2013.
Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant
to rules and regulations of the U.S. Securities and Exchange Commission (“the Commission”). The Company believes that
the disclosures in the unaudited condensed consolidated financial statements are adequate to ensure the information presented
is not misleading. However, the unaudited condensed consolidated financial statements included herein should be read in conjunction
with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended
December 3 1, 2013 filed with the Commission on April 15, 2014.
The
accompanying consolidated financial statements are prepared using the accrual method of accounting in accordance with accounting
principles generally accepted in the United States of America.
Principles
of Consolidation
The
financial statements as of June 30, 2014 and for the six months then ended include Nyxio Technologies Corporation (“NTC”)
and its wholly owned subsidiary, Nyxio Technologies, Inc. (“NTI”). All significant inter-company transactions and
balances have been eliminated. NTC and its subsidiary are collectively referred to herein as the “Company”.
Basis
of presentation
The
Company is in the development stage in accordance with Accounting Standards Codification (“ASC”) Topic No. 915.
Cash
and cash equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of six months or less to be cash equivalents.
At June 30, 2014 and December 31, 2013, the Company had no cash equivalents.
Accounts
receivable
Accounts
receivable is reported at the customers’ outstanding balances less any allowance for doubtful accounts. Interest is not
accrued on overdue accounts receivable.
An
allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance
for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the
adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts
receivable are charged off against the allowance when collectability is determined to be permanently impaired.
Inventory
Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out
(FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive
levels, deterioration, and other factors in evaluating net realizable value. As of June 30, 2014 and December 31, 2013, respectively,
there was no finished goods inventory.
Fixed
Assets
Property
and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements,
maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of,
the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results
of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using
the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated)
for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:
Equipment 3-5
years
Furniture
7 years
The
Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate
that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use
and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment
loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by
management in performing this assessment include current operating results, trends and prospects, the manner in which the property
is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there were
no impairments needed as of June 30, 2014 or December 31, 2013. Depreciation expense for the six months ended June 30, 2014 and
2013 and for the period from July 8, 2010 (inception) to June 30, 2014, was $5,228, $5,844 and $36,013, respectively.
Revenue
recognition
The
Company recognizes revenue in accordance with ASC subtopic 605-10 (formerly SEC Staff Accounting Bulletin No. 104 and 13A, “Revenue
Recognition”) net of expected cancellations and allowances. As of June 30, 2014 and 2013, the Company evaluated evidence
of cancellation in order to make a reliable estimate and determined there were no material cancellations during the years and
therefore no allowances has been made.
The
Company's revenues, which do not require any significant production, modification or customization for the Company's targeted
customers and do not have multiple elements, are recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery
has occurred; (iii) the Company's fee is fixed and determinable; and (iv) collectability is probable.
Substantially
all of the Company's revenues are derived from the sales of Smart TV and Tablet PC technology and products. The Company's clients
are charged for these products on a per transaction basis. Pricing varies depending on the product sold. Revenue is
recognized in the period in which the products are sold.
Loss
per share
The
Company reports earnings (loss) per share in accordance with ASC Topic 260-10, "Earnings per Share." Basic earnings
(loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common
shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator
is increased to include the number of additional common shares that would have been outstanding if the potential common shares
had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since
the effect of the assumed exercise or conversion of stock options, warrants, and debt to purchase common shares, would have an
anti-dilutive effect. At June 30, 2014 and December 31, 2013 the Company had 10,090 and 10,090 potential common shares that have
been excluded from the computation of diluted net loss per share.
Income
taxes
The
Company follows ASC subtopic 740-10 for recording the provision for income taxes. ASC 740-10 requires the use of the asset and
liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are
computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted
marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses
or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely
than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce
the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance
are included in the provision for deferred income taxes in the period of change.
Deferred
income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and
tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of
assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset
or liability are classified as current or non-current depending on the periods in which the temporary differences are expected
to reverse.
Fair
Value of Financial Instruments
The
Company has financial instruments whereby the fair value of the financial instruments could be different from that recorded on
a historical basis in the accompanying balance sheets. The Company's financial instruments consist of cash, receivables, accounts
payable, accrued liabilities, and notes payable. The carrying amounts of the Company's financial instruments approximate their
fair values as of June 30, 2014 and December 31, 2013 due to their short-term nature.
Long-lived
assets
The
Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal
of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the historical cost or carrying value of an asset may no longer be appropriate. The Company
assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the
asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment
loss is recorded equal to the difference between the asset’s carrying value and its fair value or disposable value. For
the six months ended June 30, 2014 and 2013, the Company determined that none of its long-term assets were impaired.
Use
of estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affects the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Advertising
The
Company expenses advertising costs as incurred. The Company’s advertising expenses were $2,631 and $45 during the six months
ended June 30, 2014 and 2013, respectively, and $107,947 for the period from July 8, 2010 through June 30, 2014.
Research
and development
Research
and development costs are expensed as incurred. During the six months ended June 30, 2014 and 2013, and for the period from July
8, 2010 (inception) to June 30, 2014, research and development costs were $0, $0 and $30,850, respectively.
Concentration
of Business and Credit Risk
The
Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging
arrangements. The Company’s financial instruments that are exposed to concentration of credit risks consist primarily of
cash. The Company maintains its cash in bank accounts which, may at times, exceed federally-insured limits.
Financial
instruments which potentially subject the Company to concentrations of business risk consist principally of availability of suppliers.
As of June 30, 2014, the Company was dependent on approximately two vendors for 85% of product supply.
Share-Based
Compensation
The
Company accounts for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC
718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that
are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The
Company accounts for stock-based payments to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments
to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances
of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award
over the requisite service period as measured at its then-current fair value as of each financial reporting date.
The
Company calculates the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model. The amount
of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately
expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to
employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only
the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards
when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant
exercises as well as employee termination patterns.
The
resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line
basis over the requisite service period of the award.
For
the six months ended June 30, 2014 and 2012, and the period from July 8, 2010 (inception) to June 30, 2014, the Company recorded
share-based compensation of $2,584,000, $0, and $12,483,714, respectively.
Recent
accounting pronouncements
Recent
accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are
not believed by management to have a material impact on the Company's present or future financial statements.
International
Financial Reporting Standards
In
November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential
use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued
by the International Accounting Standards Board. Under the proposed roadmap, the Company would be required to prepare financial
statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal
2013 and 2012. The Company is currently assessing the potential impact of IFRS on its financial statements and will continue to
follow the proposed roadmap for future developments.
Year-end
The
Company has adopted December 31, as its fiscal year end.
NOTE
2 - Going concern
These
financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern,
which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization
values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments
that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue
as a going concern. The Company has not yet achieved profitable operations and since its inception (July 8, 2010) through June
30, 2014 the Company had accumulated losses of $18,555,132 and a working capital deficit of $1,390,693. Management expects to
incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability
to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate
future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising
from normal business operations when they come due.
The
Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability
in the near future. Since its inception, the Company has funded operations through short-term borrowings and equity investments
in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability
to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available
from additional borrowings and private placements to meet its business objectives, including anticipated cash needs for working
capital, for a reasonable period of time. However, there can be no assurance that the Company will be able to obtain sufficient
funds to continue the development of its business operation, or if obtained, upon terms favorable to the Company.
NOTE
3 - Accounts receivable
Accounts
receivable consist of the following:
| |
June 30, | |
December 31, |
| | |
2014 | |
2013 |
| Trade
accounts receivable | |
$ | 223 | | |
$ | 223 | |
| Due
from related party | |
| — | | |
| — | |
| Less:
Allowance for doubtful accounts | |
| — | | |
| — | |
| | |
$ | 223 | | |
$ | 223 | |
As
of June 30, 2014 and December 31, 2013, respectively, the Company had not established an allowance for doubtful accounts.
NOTE
4 - Property and equipment
The
following is a summary of property and equipment:
| |
June 30, | |
December 31, |
| | |
2014 | |
2013 |
| Furniture
and fixtures | |
$ | 11,912 | | |
$ | 11,912 | |
| Software | |
| 11,945 | | |
| 11,945 | |
| Computers and equipment | |
| 22,249 | | |
| 22,249 | |
| Less:
accumulated depreciation | |
| (36,013 | ) | |
| (30,785 | ) |
| | |
$ | 10,093 | | |
$ | 15,321 | |
Depreciation
for the six months ended June 30, 2014 and 2013 and for the period from July 8, 2010 (inception) to June 30, 2014 was $5,228,
$5,844 and $36,013, respectively.
NOTE
5 - Related party transactions
Related
party receivable
At
the Company’s inception (July 8, 2010) the sole officer and shareholder contributed all the assets and liabilities distributed
to him from his former limited liability company which was dissolved on July 2, 2010. At the date of contribution, the fair value
of the liabilities contributed exceeded that of the assets by $54,438, which has been recorded as a related party receivable.
The contributed assets and liabilities, including the amount due from the related party are as follows:
| Assets: | |
| | |
| Cash | |
$ | 5,984 | |
| Inventory | |
| 7,877 | |
| Fixed assets, at
fair value | |
| 12,863 | |
| Due from related
party | |
| 54,438 | |
| Deposits
held | |
| 2,965 | |
| Total
assets contributed | |
$ | 84,127 | |
| Liabilities: | |
| | |
| Accrued liabilities | |
$ | 500 | |
| Note
payable | |
| 83,627 | |
| Total
liabilities contributed | |
$ | 84,127 | |
On
July 8, 2010 (inception) the Company issued 100 shares of its common stock to its sole officer as founder’s shares in exchange
for cash of $100. During the period from inception (July 8, 2010) and December 31, 2010, the Company’s sole officer donated
his services valued at $28,500 which was recorded as a reduction on the amount due from him. In addition, the officer made cash
payments totaling $5,400 as further reductions in his related party receivable due to the Company.
During
the six months ended June 30, 2014, the president and CEO donated additional services valued at $125,000, of which $52,090 has
been recorded as a reduction in the officers’ receivable balance and $72,910 was recorded as accrued wages.
Merger
warrants
In
connection with the Company July 5, 2011 merger activities, the Company issued a warrant to purchase up to 83,333 (post-split)
shares of the Company’s common stock at an exercise price of $0.01 per share to its chief executive officer and majority
shareholder. The warrant has a term of twenty-four months expiring on July 1, 2013 and is subject to performance conditions. The
performance conditions allow for the warrant to be exercisable in four increments of 20,833 (post-split) shares for each $1,000,000
of cumulative realized revenue over the twenty-four month term. As of December 31, 2013, performance conditions have not been
met therefore; no portion of the warrant is exercisable. On the date of grant, the estimated fair value of each warrant using
the Black-Scholes model is $189 per share utilizing a strike price of $4.50, volatility of 177%, and a risk-free rate of 4.40%.
The Company estimated the number of shares that would become exercisable throughout the twenty-four month term based on historical
activity and pro forma projections to be 20,833 (post-split) shares resulting in an estimated fair value of $3,967,500 which has
been recorded as a consulting expense during 2011.
Employment/Consulting
commitments
One
June 1, 2011, the Company entered into an Employment Agreement with its chief executive officer. The initial term of the agreement
covers a three-year period commencing on June 1, 2011 and required annual compensation payment of $24,000. On January 1, 2012,
the original agreement was amended to provide for an increase in annual compensation from the original $24,000 to $48,000 per
year. On July 18, 2013, the Company and its CEO entered into an Amended and Restated Employment agreement which increased the
CEO’s annual salary to $250,000 per annum, payable bimonthly effective July 1, 2013.
On
June 1, 2011, the Company issued a Consulting Agreement to its chief financial officer. Pursuant to the agreement, annual consulting
fees of $24,000 will be paid per annum for the term of the agreement which was to expire on March 1, 2014. In September 2011,
the Company replaced the consulting agreement with an offer of employment with annual compensation of $30,041. Employment is considered
“at-will” and therefore can be terminated at any time by either party.
During
May 2013, the board of directors approved the issuance of 50,000,000 to the Company’s president and CEO. The shares were
valued at $10,000,000, and vest over the period of two years. The Company amortized $3,229,167 for the year ended December 31,
2013. Additionally, as board of directors approved the issuance of 10,000,000 shares to the Company’s president and CEO.
The shares were valued at $2,000,000 and expensed for the year ended December 31, 2013. During December 31, 2013, the CEO returned
a net 50,000,000 shares in order to provide additional authorized shares to the Company. The Company is expected to reissue the
shares at a future date and has accordingly recorded a common stock payable of $50,000 for the par value of the shares.
During
June 2013, the Company’s CFO resigned. On June 12, 2013, this former CFO entered into a Business Consulting Agreement to
provide consulting services at a rate of $10,000 per month, payable in bi-monthly installment of $5,000 on the 15th
and last day of the month for the term of one year. During the year ended December 31, 2013 the Company issued 25,391,606 shares
of common valued at $60,000 for the first six months of the agreement and accrued another $10,000. In addition, all prior payroll
liabilities owing from the Company to this individual were released in exchange for 1,961,803 shares of the Company’s common
stock. The stock was valued at $78,472 and satisfied $7,510 in accrued wages. The remaining value of $70,962 was recorded as additional
compensation costs for the year ended December 31, 2013.
Note
payable to a related party
During
the year ended December 31, 2011, the Company’s chief financial officer paid certain liabilities totaling $10,578 on behalf
of the Company. In October 2011, the Company issued a promissory note for the value of the payment which bears interest at a rate
of 8% per annum and matures on September 30, 2012. On January 12, 2012, this same officer provided an additional $20,000 under
the same terms, to the Company for operating expenses. As of June 30, 2014 and December 31, 2013 the note totaled $7,458 and $8,458,
respectively.
NOTE
6 - Notes payable
Chamisa
Technology, LLC
On
July 8, 2010, the Company’s chief executive officer and majority shareholder contributed a note payable in the amount of
$83,627 which originated from his previously dissolved limited liability company. The note balance represented cash advances of
$81,595 and previously accrued interest of $2,032. During the period from inception (July 8, 2010) through December 31, 2010,
the Company received additional advances of $64,491 and $18,000 during the year ended December 31, 2011. No formal agreement pertaining
to the advances had previously been documented, however pursuant to a verbal agreement between the parties, the balance was due
on demand and bears interest at a rate of 12% per annum. March 5, 2012, the Company formalized and acknowledged its liability
to Chamisa Technology, LLC in the form of a promissory note. The promissory note is unsecured bears interest at a rate of 12%
per annum, and matures on August 31, 2012. Pursuant to the new promissory note, the Company is required to make monthly principal
and interest payments through maturity. As of June 30, 2014, the note is in default.
On
April 21, 2012, Chamisa Technology, LLC assigned $81,595 of the note to an individual who further assigned portions of the debt
to various entities. During the year ended December 31, 2012, the original assignee agreed to forgive $56,595 of the debt in exchange
for immediate conversion rights at a conversion rate of $0.001. During the period ended December 31, 2012, the Company authorized
the issuance of 98 (post-split) shares of common stock for the conversion of $25,000 in principal and $936 of accrued interest.
The fair value of the shares issued totaled $737,873 based on the market price of the common stock on the date of conversion.
The difference in the fair value of the shares issued and the principal amount of debt and accrued interest converted totaled
$711,937 and has been recorded as a financing costs.
On
May 1, 2013, Chamisa Technology, LLC assigned the outstanding note to an affiliate who further assigned portions of the debt to
various entities. During the year ended December 31, 2013, the Company authorized the issuance of 19,400,000 shares of common
stock for the conversion of $19,400 in principal. The fair value of the shares issued totaled $336,863 based on the market price
of the common stock on the various dates of conversion. The difference in the fair value of the shares issued and the principal
amount of debt and accrued interest converted totaled $317,463 and has been recorded as a financing costs.
On
December 1, 2013, Chamisa Technology, LLC assigned $65,123 of the note to an individual who further assigned portions of the debt
to various entities. During the year ended December 31, 2013, the original assignee agreed to forgive $21,500 of the debt in exchange
for immediate conversion rights at a conversion rate of $0.001. As of December 31, 2013, the Company recognized an interest expense
of $43,623 from BCF related to the conversion and gain on settlement of debt of $21,500.
As
of June 30, 2014 and December 31, 2013, the unpaid principal balance together with accrued interest totaled $104,782 and $100,606,
respectively. The Company is still negotiating additional terms as it relates to this note.
Coach
Capital LLC
On
September 30, 2011, the Company issued a promissory note in the amount of $111,000 to Coach Capital, LLC. The note is unsecured,
due on demand and bears interest at a rate of 10% per annum. In the event of default, the interest rate will immediately escalate
to 30% per annum. As of June 30, 2014 and December 31, 2013, the unpaid principal balance together with accrued interest totaled
$149,689 and $142,418, respectively.
ICG
USA, LLC
On
February 16, 2012, the Company entered into a Securities Purchase Agreement with ICG USA, LLC (“ICG”) and issued a
Convertible Promissory Note in the amount of $200,000. The note is unsecure, bears interest at a rate of 6% interest per annum,
and is due on demand. The note is convertible into shares of the Company’s common stock beginning year after the date of
issuance and was convertible on August 16, 2012. Pursuant to the terms of the Agreement, the note is convertible at a rate equal
to a 45% discount to the average of the three lowest closing trade prices in the preceding thirty trading days. On the date the
note became convertible; the Company valued the benefit of conversion at $309,631 and recorded a discount of $200,000 and a derivative
liability with a corresponding comprehensive loss in the amount of $109,631. The discount related to the conversion value will
be amortized over the remaining term of the note utilizing the interest method of accretion. During the year ended December 31,
2012, ICG elected to convert $32,743 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company issued
13,634 (post-split) shares at an average conversion rate of $2.40 and recognized a loss on the derivative in the amount of $23,340.
During
the six months ended June 30, 2014, ICG assigned $182,500 in principal and accrued interest to three other entities. As discussed
below, the Company issued new convertible note agreements with those entities. The Company recorded a loss on the derivative in
the amount of $204,187 for the six months ended June 30, 2014 pursuant to the transfers.
As
of the June 30, 2014 accrued interest totaled $28,506.
JMJ
Financial
On
May 7, 2012, the Company issued a Convertible Promissory Note to JMJ Financial (“JMJ”) in the amount of $275,000.
Pursuant to the terms of the note, a 10% original issue discount is included and is due in one year. The Note does not bear interest
if paid in full within 90 days. Thereafter, a one-time interest charge of 5% shall be applied to the principal sum. The Note is
convertible to common stock in whole or in part at conversion price equal to the lesser of $0.06 per share or 65% of the lowest
trading price in the 25 trading days prior to the conversion. As of December 31, 2012, JMJ has funded $55,000 of the note which
includes an original issue discount in the amount of $5,000. The Company has computed the present value of the amount funded at
$52,731 as a result of its non-interest bearing terms. Additionally, the Company recorded a discount in the amount of $44,270
in connection with the initial valuation of the beneficial conversion feature of the note to be amortized utilizing the interest
method of accretion over the one year term of the note. Further, the Company has recognized a derivative asset resulting from
the variable change in conversion rate in relation to the change in market price of the Company’s common stock. During the
year ended December 31, 2012, JMJ elected to convert $7,735 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 11,666 (post-split) shares at an average conversion rate of $1.51 and recognized a loss on the derivative in
the amount of $7,665.
During
January and February 2013, JMJ elected to convert $5,858 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 16,022 (post-split) shares at an average conversion rate of $0.37 and recognized a loss on the derivative in
the amount of $5,689.
During
April 2013, JMJ advanced an additional $5,400 to the Company.
During
June 2013, JMJ elected to convert $5,330 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company
issued 100,000 shares at a conversion rate of $0.053 and recognized a loss on the derivative in the amount of $3,670.
During
July 2013, JMJ elected to convert $6,500 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company
issued 325,000 shares at a conversion rate of $0.02 and recognized a loss on the derivative in the amount of $5,850.
During
August 2013, JMJ elected to convert $13,000 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company
issued 2,600,000 shares at a conversion rate ranging from $0.003 to $0.01 and recognized a gain on the derivative in the amount
of $650.
During
October 2013, JMJ elected to convert $3,575 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company
issued 5,500,000 shares at a conversion rate of $0.00065 and recognized a loss on the derivative in the amount of $3,025.
During
November 2013, JMJ elected to convert $1,885 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company
issued 5,800,000 shares at a conversion rate of $0.000325 and recognized a loss on the derivative in the amount of $2,175.
During
the six months ended June 30, 2014, JMJ elected to convert the remaining $16,517 in principal. Pursuant to the conversion rate
calculation in the Agreement, the Company issued 39,845,000 shares at conversion rates ranging from of $0.0004 to $0.0005 and
recognized a loss on the derivative in the amount of $14,625.
Asher
Enterprises
During
the year ended December 31, 2012, the Company issued three Convertible Promissory Notes to Asher Enterprises, Inc. (“Asher”)
in the amount of $63,000, $37,500 and $40,000, respectively. The notes bears interest at a rate of 8% per annum, are unsecured
and mature on March 8, April 12, 2013 and August 13, 2013. The Notes are convertible into common stock in whole or in part at
a variable conversion price equal to a 39% discount to the 10-day average trading price prior to the conversion date. The Company
recorded a discount in the amount of $117,779 in connection with the initial valuation of the beneficial conversion feature of
the notes to be amortized utilizing the interest method of accretion over the term of the notes. During the year ended December
31, 2012, Asher elected to convert $5,700 in principal. Pursuant to the conversion rate calculation in the Agreement, the Company
issued 14,305 (post-split) shares at an average conversion rate of $2.51 and recognized a loss on the derivative in the amount
of $25. During the year ended December 31, 2013, the Company incurred $51,550 in penalty interest on these notes due to default.
The penalty interest was added to the principal of these notes.
During
the year ended December 31, 2013, the Company issued seven Convertible Promissory Notes to Asher totaling $152,250. The notes
bears interest at a rate of 8% per annum, are unsecured and mature on from November 1, 2013 through June 20, 2014. The notes are
convertible into common stock in whole or in part at a variable conversion price equal to a 45% discount to the average of the
lowest 3 trading prices in the 10-day trading period prior to the conversion date. The Company recorded discounts in the amount
of $131,387 in connection with the initial valuation of the beneficial conversion feature of the notes to be amortized utilizing
the interest method of accretion over the term of the note.
During
January and March 2013, the Company elected to convert $31,700 in principal. Pursuant to the conversion rate calculation in the
Agreement, the Company issued 78,654 (post-split) shares at a conversion rate ranging from $0.36 to $0.44 and recognized a loss
on the derivative in the amount of $40,724.
During
April and May 2013, the Company elected to convert $13,000 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 201,842 shares at a conversion rate ranging from $0.06 to $0.11 and recognized a loss on the derivative in
the amount of $28,933.
During
July and September 2013, the Company elected to convert $59,600 in principal and $2,520 in accrued interest. Pursuant to the conversion
rate calculation in the Agreement, the Company issued 11,331,517 shares at a conversion rate ranging from $0.0011 to $0.0122 and
recognized a loss on the derivative in the amount of $142,186.
During
October 2013, the Company elected to convert $30,450 in principal and $3,000 in accrued interest. Pursuant to the conversion rate
calculation in the Agreement, the Company issued 35,774,642 shares at a conversion rate ranging from $0.00068 to $0.00087 and
recognized a loss on the derivative in the amount of $28,997.
During
November 2013, the Company elected to convert $23,370 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 63,455,501 shares at a conversion rate ranging from $0.00028 to $0.00055 and recognized a loss on the derivative
in the amount of $26,034.
During
December 2013, the Company elected to convert $26,240 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 99,661,141 shares at a conversion rate ranging from $0.00024 to $0.00029 and recognized a loss on the derivative
in the amount of $55,154.
During
the six months ended June 30, 2014, Asher elected to convert $172,990 in principal and $7,490 in accrued interest. Pursuant to
the conversion rate calculation in the Agreements, the Company issued 804,856,857 shares at conversion rates ranging from $0.00009
to $0.00037 and recognized a loss on the derivative in the amount of $252,996. Additionally, for the converted notes Asher waived
accrued interest totaling $10,372, recorded as a gain on debt settlement for the six months ended June 30, 2014.
As
of the June 30, 2014 all balances owed Asher had been converted.
Continental
Equities, LLC
On
September 20, 2012, The Company issued a Convertible Promissory Note to Continental Equities, LLC (“Continental”)
in the amount of $35,000. The note bears interest at a rate of 8% per annum, is unsecured and matured on May 15, 2013. The Note
is convertible into common stock in whole or in part at a variable conversion price equal to a 42.5% discount to the lowest three
average thirty day trading prices prior to the conversion date. The Company recorded a discount in the amount of $35,000 in connection
with the initial valuation of the beneficial conversion feature of the notes to be amortized utilizing the interest method of
accretion over the term of the notes. Further, the Company has recognized a derivative liability in the amount of $1,437 resulting
from the variable change in conversion rate in relation to the change in market price of the Company’s common stock.
On
May 20, 2013, The Company issued a Convertible Promissory Note to Continental Equities, LLC (“Continental”) in the
amount of $13,000. The note bears interest at a rate of 8% per annum, is unsecured and matures on May 31, 2014. The Note is convertible
into common stock in whole or in part at a variable conversion price equal to a 42.5% discount to the lowest three average thirty
day trading prices prior to the conversion date. The Company recorded a discount in the amount of $13,000 in connection with the
initial valuation of the beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion
over the term of the notes. Further, the Company has recognized a derivative liability in the amount of $92,915 resulting from
the variable change in conversion rate in relation to the change in market price of the Company’s common stock.
During
September 2013, the Company elected to convert $12,499 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 8,571,500 shares at a conversion rate ranging from $0.0009 to $0.002 and recognized a loss on the derivative
in the amount of $23,880.
During
October 2013, the Company elected to convert $7,136 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 10,137,806 shares at a conversion rate ranging from $0.0007 to $0.0008 and recognized a loss on the derivative
in the amount of $7,885.
During
November 2013, the Company elected to convert $6,745 in principal. Pursuant to the conversion rate calculation in the Agreement,
the Company issued 13,695,814 shares at a conversion rate ranging from $0.0004 to $0.0006 and recognized a loss on the derivative
in the amount of $2,640.
During
December 2013, Tide Pool Ventures Corporation (“Tide Pool”) purchased the remaining balance of the note.
During
the six months ended June 30, 2014, Tide Pool elected to convert the remaining balance of $21,620. Pursuant to the conversion
rate calculation in the Agreement, the Company issued 105,385,200 shares at a conversion rate ranging from $0.0002 to $0.0003
and recognized a loss on the derivative in the amount of $35,659. Additionally, Tide Pool waived the prior accrued interest on
the note totaling $4,088 recorded as a gain on debt settlement for the six months ended June 30, 2014.
Tide
Pool Ventures Corporation
On
December 10, 2013, the Company issued a Convertible Promissory Note to Tide Pool in the amount of $11,500. The note bears interest
at a rate of 9.875% per annum, is unsecured and matures on December 31, 2014. The Note is convertible into common stock in whole
or in part at a variable conversion price equal to a 30% discount to the lowest volume weighted average price of the five trading
days prior to the conversion date. The Company recorded a discount in the amount of $11,500 in connection with the initial valuation
of the beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion over the term of
the notes.
On
February 20, 2014, ICG assigned $27,500 in principal to Tide Pool and the Company issued a new Convertible Promissory Note agreement.
The note bears interest at a rate of 10% per annum, is unsecured and matures on February 20, 2015. The Note is convertible into
common stock in whole or in part at a variable conversion price equal to a 50% discount to the lowest three average ten day trading
prices prior to the conversion date. The Company recorded a discount in the amount of $27,500 in connection with the initial valuation
of the beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion over the term of
the notes.
On
February 20, 2014, Company issued a Convertible Promissory Note to Tide Pool in the amount of $22,250. The note bears interest
at a rate of 10% per annum, is unsecured and matures on February 20, 2015. The Note is convertible into common stock in whole
or in part at a variable conversion price equal to a 45% discount to the lowest three average ten day trading prices prior to
the conversion date. The Company recorded a discount in the amount of $22,250 in connection with the initial valuation of the
beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
On
April 1, 2014, ICG assigned $60,000 in principal and interest to Tide Pool and the Company issued a new Convertible Promissory
Note agreement. The note bears interest at a rate of 10% per annum, is unsecured and matures on April 1, 2015. The Note is convertible
into common stock in whole or in part at a variable conversion price equal to a 50% discount to the lowest three average ten day
trading prices prior to the conversion date. The Company recorded a discount in the amount of $60,000 in connection with the initial
valuation of the beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion over the
term of the notes.
On
April 1, 2014, Company issued a Convertible Promissory Note to Tide Pool in the amount of $42,500. The note bears interest at
a rate of 10% per annum, is unsecured and matures on April 1, 2015. The Note is convertible into common stock in whole or in part
at a variable conversion price equal to a 45% discount to the lowest three average ten day trading prices prior to the conversion
date. The Company recorded a discount in the amount of $42,500 in connection with the initial valuation of the beneficial conversion
feature of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
During
the six months ended June 30, 2014, Tide Pool elected to convert $56,500 in principal. Pursuant to the conversion rate calculation
in the Agreement, the Company issued 337,740,740 shares at a conversion rate ranging from 0.0003 to 0.0007and recognized a loss
on the derivative in the amount of $82,247.
As
of the June 30, 2014, the Company fair valued the derivative liability related to these notes at $142,527 and recorded a comprehensive
loss of $142,527 representing the change in fair value. As of June 30, 2014, the unpaid principal balance was $32,412, net of
discount in the amount of $74,838. Accrued interest totaled $3,317.
WHC
Capital, LLC, Series Bravo
On
February 5, 2014, ICG assigned $20,000 in principal to WHC Capital, LLC, Series Bravo (“WHC”) and the Company issued
a new Convertible Promissory Note agreement. The note bears interest at a rate of 6% per annum, is unsecured and matures on February
5, 2015. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 45% discount
to the lowest three average thirty day trading prices prior to the conversion date. The Company recorded a discount in the amount
of $20,000 in connection with the initial valuation of the beneficial conversion feature of the notes to be amortized utilizing
the interest method of accretion over the term of the notes.
On
February 7, 2014, Company issued a Convertible Promissory Note to WHC in the amount of $10,000. The note bears interest at a rate
of 10% per annum, is unsecured and matures on February 20, 2015. The Note is convertible into common stock in whole or in part
at a variable conversion price equal to a 40% discount to the lowest three average thirty day trading prices prior to the conversion
date. The Company recorded a discount in the amount of $10,000 in connection with the initial valuation of the beneficial conversion
feature of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
On
May 8, 2014, Company issued a Convertible Promissory Note to WHC in the amount of $20,000. The note bears interest at a rate of
10% per annum, is unsecured and matures on May 8, 2015. The Note is convertible into common stock in whole or in part at a variable
conversion price equal to a 40% discount to the lowest three average thirty day trading prices prior to the conversion date. The
Company recorded a discount in the amount of $20,000 in connection with the initial valuation of the beneficial conversion feature
of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
On
June 16, 2014, Company issued a Convertible Promissory Note to WHC in the amount of $20,000. The note bears interest at a rate
of 10% per annum, is unsecured and matures on June 20, 2015. The Note is convertible into common stock in whole or in part at
a variable conversion price equal to a 40% discount to the lowest three average thirty day trading prices prior to the conversion
date. The Company recorded a discount in the amount of $20,000 in connection with the initial valuation of the beneficial conversion
feature of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
During
the six months ended June 30, 2014, WHC elected to convert $37,404 in principal. Pursuant to the conversion rate calculation in
the Agreement, the Company issued 265,974,767 shares at a conversion rate ranging from 0.0001 to 0.0002 and recognized a loss
on the derivative in the amount of $66,684.
As
of the June 30, 2014, the Company fair valued the derivative liability related to these notes at $176,575 and recorded a comprehensive
loss of $176,575 representing the change in fair value. As of June 30, 2014, the unpaid principal balance was $2,596, net of discount
in the amount of $30,000. Accrued interest totaled $572.
LG
Capital Funding, LLC
On
March 11, 2014, ICG assigned $75,000 in principal to LG Capital Funding, LLC (“LG Capital”) and the Company issued
a new Convertible Promissory Note agreement. The note bears interest at a rate of 8% per annum, is unsecured and matures on March
11, 2015. The Note is convertible into common stock in whole or in part at a variable conversion price equal to a 50% discount
to the lowest closing bid price in the five day trading prices prior to the conversion date. The Company recorded a discount in
the amount of $75,000 in connection with the initial valuation of the beneficial conversion feature of the notes to be amortized
utilizing the interest method of accretion over the term of the notes.
On
March 11, 2014, Company issued a Convertible Promissory Note to LG Capital in the amount of $37,875. The note bears interest at
a rate of 8% per annum, is unsecured and matures on March 11, 2015. The Note is convertible into common stock in whole or in part
at a variable conversion price equal to a 50% discount to the lowest closing bid price in the five day trading prices prior to
the conversion date. The Company recorded a discount in the amount of $37,875 in connection with the initial valuation of the
beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
On
June 17, 2014, Company issued a Convertible Promissory Note to LG Capital in the amount of $20,000. The note bears interest at
a rate of 8% per annum, is unsecured and matures on June 17, 2015. The Note is convertible into common stock in whole or in part
at a variable conversion price equal to a 50% discount to the lowest closing bid price in the five day trading prices prior to
the conversion date. The Company recorded a discount in the amount of $20,000 in connection with the initial valuation of the
beneficial conversion feature of the notes to be amortized utilizing the interest method of accretion over the term of the notes.
During
the six months ended June 30, 2014, LG Capital elected to convert $65,000 in principal. Pursuant to the conversion rate calculation
in the Agreement, the Company issued 481,044,442 shares at a conversion rate ranging from 0.0001 to 0.0003and recognized a loss
on the derivative in the amount of $184,667.
As
of the June 30, 2014, the Company fair valued the derivative liability related to these notes at $39,482 and recorded a comprehensive
loss of $39,482 representing the change in fair value. As of June 30, 2014, the unpaid principal balance was $15,272, net of discount
in the amount of $52,603. Accrued interest totaled $1,458.
NOTE
7 – Commitments
Lease
agreements
In
June 2011, the Company entered into a two-year lease agreement for additional office space commencing July 1, 2011 and expiring
December 31, 2013. Pursuant to the terms of the lease agreement, the monthly rate will increase to $4,175 with an additional increase
at the anniversary date to $4,300. In addition, the Company has increased its security deposit to $4,836. During the year ended
December 31, 2013, the Company terminated all leases for office space.
Consulting
agreements
As
of June 30, 2014 the Company had accrued $218,000 in consulting fees. Active engagements include three consultants at a combined
total of $19,000 per month. During the six months ended June 30, 2014, the Company issued 369,413,761 shares of common stock valued
at $97,000, of which included $13,000 in accrued fees from the previous year.
NOTE
8- Income taxes
Deferred
income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and
liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and liabilities.
The
effective tax rate on the net loss before income taxes differs from the U.S. statutory rate as follows:
| | |
2014 | |
2013 |
| U.S.
Statutory rate | |
| 34 | % | |
| 34 | % |
| Valuation
allowance | |
| (34) | % | |
| (34) | % |
| Effective
tax rate | |
| —
| | |
| —
| |
The
net change in the valuation for the six months ended June 30, 2014 was an increase in valuation of $1,362,557.
The
Company has a net operating loss carryover of approximately $18,555,132 available to offset future income for income tax reporting
purposes, which will expire in various years through 2032, if not previously utilized. However, the Company’s ability to
use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382.
The
Company had no material unrecognized income tax assets or liabilities as of June 30, 2014. The Company’s policy regarding
income tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax
purposes. During the six months ended June 30, 2014 and 2013, there were no income tax, or related interest and penalty items
in the income statement, or as a liability on the balance sheet. We file income tax returns in the U.S. federal jurisdiction and
various state jurisdictions. The Company is subject to U.S. federal or state income tax examination by tax authorities for years
beginning at our inception of July 8, 2010 through current. The Company is not currently involved in any income tax examinations.
NOTE
9 - Fair value measurement
The
Company adopted ASC Topic 820-10 at the beginning of 2009 to measure the fair value of certain of its financial assets required
to be measured on a recurring basis. The adoption of ASC Topic 820-10 did not impact the Company’s financial condition or
results of operations. ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). ASC
Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell
the asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value
hierarchy under ASC Topic 820-10 are described below:
Level
I – Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has
the ability to access.
Level
II – Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for
identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by
observable data for substantially the full term of the assets or liabilities.
Level
III – Valuations based on inputs that are supportable by little or no market activity and that are significant
to the fair value of the asset or liability.
The
following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of June
30, 2014 and December 31, 2013:
| |
Level
I | |
Level
II | |
Level
III | |
Fair
Value |
| June 30, 2014 | |
| |
| |
| |
|
| | Notes
payable | | $ |
— | |
$ | (179,088 | ) | |
$ | — | | |
$ | (179,088 | ) |
| | Convertible
debt, net | | |
— | |
| (50,280 | ) | |
| | | |
| (50,280 | ) |
| | Derivative
Liabilities | | |
— | |
| (358,584 | ) | |
| — | | |
| (358,584 | ) |
| | | | $ |
— | |
$ | (587,952 | ) | |
$ | — | | |
$ | (587,952 | ) |
| | December
31, 2013 | | |
| |
| | | |
| | | |
| | |
| | Notes
payable | | $ |
— | |
$ | (180,088 | ) | |
$ | — | | |
$ | (180,088 | ) |
| | Convertible
debt, net | | |
— | |
| (328,361 | ) | |
| | | |
| (328,361 | ) |
| | Derivative
Liabilities | | |
— | |
| (505,647 | ) | |
| — | | |
| (505,647 | ) |
| | | | $ |
— | |
$ | (1,014,096 | ) | |
$ | — | | |
$ | (1,014,096 | ) |
NOTE
10 – Shareholders’ equity
Common
stock issuances
During
the six months ended March 31, 2013, the Company issued a total of 94,676 (post-split) shares of common stock in connection with
the conversion of $37,558 in convertible debt.
During
the six months ended June 30, 2013, the Company issued a total of 3,301,842 shares of common stock in connection with the conversion
of $21,330 in debt. Additionally, the Company recorded finance costs pursuant to these issuances totaling $243,000.
During
the six months ended September 30, 2013, the Company issued a total of 30,009,620 shares of common stock in connection with the
conversion of $99,519 in debt, including accrued interest of $2,520. Additionally, the Company recorded finance costs pursuant
to these issuances totaling $63,770.
During
the six months ended December 31, 2013, the Company issued a total of 248,822,386 shares of common stock in connection with the
conversion of $113,401 in debt, including accrued interest of $3,000. Additionally, the Company recorded finance costs pursuant
to these issuances totaling $10,693.
During
the year ended December 31, 2013, the Company issued 41,521,023 shares of common stock pursuant to consulting services valued
at $488,080.
During
June 2013, the Company incorrectly issued 100,000 shares and is expecting their return.
During
May 2013, the Company issued 60,000,000 shares of common stock to the Company’s president and CEO valued at $12,000,000,
of which the Company expensed $2,729,167 for the year ended December 31, 2013. Additionally, the CEO temporarily returned 50,000,000
shares to provide additional outstanding shares to the company, which was recorded as a common stock payable totaling $50,000.
During
June 2013, the Company issued 1,961,803 shares of common stock to the Company’s former CFO in satisfaction of accrued wages
totaling $7,510. The remaining value of $70,962 was recorded as compensation for the year ended December 31, 2013.
Effective
March 20, 2013, the Company performed a 1 for 450 reverse split of its common stock.
Effective
December 9, 2013, the Company amended its articles to increase the authorized shares to 1,000,000,000.
Effective
March 21, 2014 the Company amended its articles to increase the authorized shares to 5,000,000,000.
During
the six months ended June 30, 2014, the Company issued a total of 2,076,779,839 shares of common stock in connection with the
conversion of $381,846 in debt, including accrued interest of $8,270.
During
the six months ended June 30, 2014, the Company issued a total of 369,413,761 shares of common stock valued at $97,000, including
accrued expenses of $13,000, in connection with consulting agreements.
NOTE
11 - Subsequent events
During
July and August 2014, Tide Pool elected to convert an additional $13,500 in principal of which the Company issued common stock
in connection with $4,500. As of the date of this report, the Company failed to issue the stock for the remaining $9,000. Pursuant
to the terms with Tide Pool, this failure to honor the conversion notice would result in a cash penalty of $2,000 per day per
each conversion. As of August 20, 2014, that amount would total $82,000.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements.” These forward-looking statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are
subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our
ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have
a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes
in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted
accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
Company
Overview
Through
our wholly-owned subsidiary, Nyxio Technologies Inc., an Oregon corporation (“Nyxio”), we develop and provide technology
for the entertainment and commercial markets within the consumer electronic industry. Since inception, the company’s approach
to the industry can be best described as disruptive evolution. The general population has evolved to the point where computers
and devices that rely on an internal computer for operation have become second nature. Gone are the days when people were intimidated
by their electronics. Consumer electronics continue to evolve and morph into new form factors. Touch cell phones, web tablets
and now TV with browsers incorporated have become an accepted and expected part of our society. Nyxio’s flagship product,
The VioSphere, is the first TV with a fully functional personal computer built in. Unlike TVs with limited browser capabilities,
the VioSphere has no limitations. Like many of the company’s innovative products, it is an entertainment destination. This
destination philosophy has become a driving force for product innovation and development, which, we believe, we provide at a reasonable
cost. We are determined to become a leading-edge driver and developer of technology across a wide range of vertical
markets that include retail, education, B2B, and digital signage. We strive to reduce the overall environmental footprint
of end users by consolidating key hardware into more efficient devices.
Products
| • |
The Realm - All in One
PC/TV, combining the latest in PC technology with HDTV. |
| • |
The Realm Pro – Robust
all in One PC/TV geared for commercial and digital signage markets. |
| • |
Venture MMV - Mobile Media
Viewer is a new class of video eyewear offering designer styling in a sleek ergonomic design with unmatched features and performance. |
| • |
The Vuzion – The
world’s first TV with Android OS built in enabling 400,000 Android applications on a TV for the first time. |
Sales
and Marketing
Nyxio
Technologies has implemented a sales strategy that has proven to be an effective way to bring product to market. Regional rep
firms across the country have been employed to represent Nyxio products to their existing base of dealers. These respected firms
leverage relationships they have developed with dealers in their respective territories to add Nyxio products to their stable
of product offerings. The firms also offer training, technical and logistics support to the dealers. The firms are compensated
on a commission basis so their success is directly tied to the success of the products represented. This symbiotic relationship
will allow Nyxio to introduce products nationally in a quick effective yet affordable manner. Nyxio is also working with its international
distribution partners as we have found that many international markets are very receptive to new technology, especially in the
consumer sector.
We
are implementing a marketing plan for our platform of products. The key areas of the plan include public relations, advertising,
website, trade shows, product identity, and social media. We believe that when executed successfully, our marketing plan will
result in interest and attention within the Consumer Electronics Industry as well as with the end consumer. We have recently engaged
a progressive agency which specializes in branding, advertising and marketing that we believe will be a great asset in this area
and aid us in delivering a compelling story to our consumer.
Public
Relations - Pending the appropriate funding, we hope to accomplish the following goals through our public relations
efforts: (i) Create buzz among key target audiences; (ii) Develop national brand recognition; (iii) Drive
awareness for current products to support 2012 launches; (iv) Develop relationships with key influencers in the marketplace; (v)
Introduce the Company to key analysts; (vi) Drive sales through a strategic public relations program, (vii) Educate our consumers
to understand our differentiation and product versatility.
Advertising
- We will be creative with our advertising and use social media to innovatively create awareness and introduce our product
lines. We will also place ads in industry-specific publications in order to introduce our product line to a large population of
key companies and individuals within the consumer electronics industry. These companies and individuals represent regional and
national electronics distributors as well as custom audio/video installers and retailers. The publications currently being considered
for advertising placement include:
•
CE Pro
•
Smarthouse
•
GQ
•
Electronic House
•
First Glimpse
•
Connected World
We
are also be submitting our products for reviews in magazines like Good Housekeeping and GQ, building public awareness. We may
use TV commercials as well as obtain a nationally recognized but local Portland personality to endorse and promote our product.
Website
- We have established a website that is a great source of information to the general population as well as distributors, retailers,
and custom audio/video installation companies, all of whom are potential customers for the Company. We have also established the
website as a platform for online gaming and as a social media tool. Our goal is for this website to grow as a vital resource for
our employees, customers, and for the industry itself.
Trade
Shows - Trade shows are an effective marketing tool for us. We expect to participate in half a dozen trade shows annually,
as well as private distributor sponsored shows. January 2012 represented our debut appearance at the Consumer Electronics Show
(CES), a major milestone in our marketing process. The following trade shows serve to cover the identified target markets of electronics
distributors, retailers, and the education market.
•
CES
•
CEDIA Expo
•
Digital Signage Expo
•
Engage
•
NAB Show
•
InfoComm
Innovative
Product Development - Our product development efforts are based on the concept that market penetration is contingent upon
continued innovation. We have proven our ability to be innovative with the release of the first VioSphere. This release came a
full three years before the market, we believe, determined that connected TV’s and smart TV’s were the next consumer
technology wave and are already into our 4th version of the VioSphere. Continued creativity in development has also
been illustrated by our development and release of our Android TV and the Nyxio Venture MMV’s. With continued focus on creative
and innovative product development, we strive to become a leader in the consumer electronics industry. We are continuing along
the path of technology convergence and reducing the environmental footprint, packing more features and components into easy to
use products.
Product
Identity - Through the design of our products, we aim to distinguish ourselves in the market place and establish a reputation
for innovative technology. We believe that this, combined with our unique designs, should give us an advantage over our competitors.
Our designs will also serve to create more demand for our entire product line with our goal being that customers will be able
to identify a Nyxio product before seeing the Nyxio name on it.
Social
Media - Social media is also a major focus for our marketing efforts. Our team will focus on maximizing our presence through
Facebook, Twitter, digg, YouTube and email marketing. By maximizing our exposure through these various social media sites, we
strive to effectively brand ourselves to millions of potential customers on a continual basis.
Achievements
to Date and Recent Developments
During the latter part of 2012 and the earlier
part of 2013, our management analyzed our then current position, financially, and as a whole. We discovered that our business plan
and original direction and focus was not being implemented to its full potential and decided to put a plan together to reorganize
and redirect our efforts. As has always been our largest challenge, we have not had the type of funding needed to secure the
level of executives and support employees needed to move the company to its next stage of growth. We therefore developed a plan
to retain key consultants through stock based payments and incentives. This allowed us to contract individuals with the experience
we needed to move forward, secure sales, implement marketing strategies, create distribution channels and alliances, and create
the partnerships we need to realize sales in our target markets. We also made decisions to engage advisors to introduce the company
to healthy investment opportunities. We are pleased to announce major changes have been implemented, and we are on our way to creating
a new chapter.
Reorganization and Redirection: Our
CEO, Giorgio Johnson, determined that for us to capitalize on market share potential without a substantial investment or any meaningful
revenues, we had to be creative to attract top notch talent. We contacted a number of industry professionals and through those
contacts, we were able to contract professionals with the experience and relationships we needed to open doors and introduce our
products to companies that understood the targeted positioning for our products in the market. Through consulting agreements featuring
stock-based compensation which were registered on Form S-8, we were able to bring in a new head of sales, a new head of business
development, a new head of operations, and a new product development and marketing manager, all directly from our industry. These
experienced professionals assisted in creating a new direction for the company, as well as new relationships. One such relationship
was created with a manufacturing representative firm, KMH Associates, Inc., that proved to be one of the most valuable assets
we have acquired to date. KHM Associates and its President, Howard Blumberg, introduced our product line to leading retailers
and distributors in the consumer electronics market in the US.
Sales and Marketing: We have recently
been presented with a number of exciting opportunities at a level never offered to us before. However, we needed to make some changes
in order to refocus and redefine our sales and marketing efforts. We therefore made the decision to suspend pushing our entire
product line and we focused solely on our flagship product, the VioSphere. Our team readdressed the marketing approach for the
product. Since the product was never really a Smart TV, but actually smarter than the common description, the VioSphere has now
been coined the first “Genius TV” in the market. In the past, because the smart TV was the only product close enough
to compare the VioSphere to, pricing had been a challenge for the product. Since the introduction of new all-in-one (AIO) personal
computers by major brands, the market reception to the VioSphere has changed dramatically. This was due, in part, to the hiring
of another manufacturing representative in Asia that has assisted us in finding a new manufacturer. The new contract manufacturer
enabled Nyxio to lower the cost of the VioSphere, making the price more competitive. The VioSphere is now, in many cases, priced
lower than the cost of the all-in-one computers currently in the market, and in larger sizes offering significantly more functionality.
Standard sizes in the all-in-one computer range from 22 inches to 26 inches, with pricing ranging from $1,000 to $2,600. Nyxio’s
VioSphere sizes range from 26 inches to 65 inches. Pricing for the 32 inch product is actually priced competitively in regard to
the smaller screen sizes in the all-in-one PC category. The VioSphere, however, is still a television first, with a personal computer
built inside.
The changes in pricing and marketing strategy
allowed for KMH Associates to change its selling strategy. The VioSphere now has a competitive product in the market, and with
better pricing and more options. Due to this, KMH Associates was able to procure our first national distribution contract, with
D&H distributing, as well as attain purchase orders from D&H. Due to the contract being considered similar to consignment,
and because of the offsets, we were not able to get the orders funded with purchase order loans or funding. We are still in the
process of negotiations with D&H, but due to the company’s policy of not reassigning payables, we have been in the process
of pursuing alternate funding options to deliver to the client. The purchase orders from D&H are in the excess of $250,000.
The pursuit of funding the purchase order has been vigorous, but to date, we have not been able to fund the purchase orders.
Through the efforts of our new head of sales,
we have also received a second contract for distribution with Harco Industries. We are still waiting to receive a purchase order
from the company.
Through KMH Associates, we also received a
purchase order from a retail store, Adorama. Through Adorama, we were offered our first ever sale/trade with an NFLTM
stadium, as well as marketing deals with two NFLTM teams Although we pursued funding to fulfill the deal, we were not
able to procure the funding necessary for delivery. We are still in contact with one of the NFLTM teams and, if funding
is found, the team is still interested in working with us. Although the marketing deals with the two NFLTM teams were
not solidified, Adorama offered us another marketing deal for the 2013/2014 NFLTM season. Associated with the deal are
some branding options associated with the New York Giants. TM Through this contract, we were offered radio and print
advertising, industry magazine articles, in stadium marketing at MetLifeTM stadium, as well as product commercials in
New York City.
We are currently in negotiations with a number
of other companies in reference to sales and distribution opportunities.
Product Development: We have been in
development of a new product that we have been working on since before becoming a public company. The product is now in final stages.
Our new product is our first software driven product, as well as a first of its kind in the industry. Our patent applications for
the new product are in the process of being prepared by the law firm of Stites & Harbison. Details of the product will be released
once our patent filings have been completed. We have also completed development of a new VioSphere model with a new color and much
thinner mold, and a few other additions. Samples of the product have already started shipping. Consumers should be able to see
the new VioSphere product in the fourth quarter of this year.
Key
Objectives
Nyxio
Technologies has identified three key objectives that will help guide Company growth for the next five years and beyond. These
include:
| • |
Continue to determine competitive strategies,
organizational management, and divisional structure for the Company’s roadmap for growth. |
| • |
Partnerships, in product development,
supply chain, and sales, leveraging established expertise in innovative and create something new. |
| • |
Multi-channel focus, with targeted
solutions for home Consumer Electronics, B2B, Digital Signage, Education Legal & Courtroom, Museums, etc. |
Nyxio’s
product development efforts are based on the concept that market penetration is contingent upon continued innovation. “Convergence”
is our driving philosophy, combining technologies that already exist to make products that are more effective, more powerful,
reduce environmental footprints and clutter, and are fun and easy to use. We feel we are well positioned to define the connected
and smart TV market, through continued creativity in development and innovative products we are forging our own path as a unique
leader in the electronics industry.
In
this demanding and competitive technology industry, Nyxio has intentionally designed a conservative sales and marketing plan,
looking to ensure the achievement of corporate goals along with an solid ROI to investor/partners. Nyxio is looking beyond the
short term to a long range revenue stream and profitability with a dominant market share within key niche segments. Our funding
goals are to partner with like-minded investors who understand our long term focus.
Goals
Nyxio
Technologies has six achievable goals:
| • |
Company Growth |
| • |
Profitability |
| • |
Product Development |
| • |
Fast Innovation |
| • |
Market Penetration |
| • |
Industry Expansion |
Results
of operations for the three and six months ended June 30, 2014 and 2013
The
discussion that follows is derived from our unaudited interim balance sheets and the unaudited statements of operations and cash
flows for the three months ended June 30, 2014 and 2013.
Revenues,
net
We
generated no revenue during the quarter ended June 30, 2014 and the quarter ended June 30, 2016. Our operating revenues during
the six months ended June 30, 2014 were $0 compared to $6,065 during the six months ended June 30, 2013.
We
recognize revenue when delivery has occurred, the sales price is fixed and collectability is reasonably assured. Ownership and
title of our products pass to customers upon delivery of the products to customers. We record revenues, net of sales discounts.
Cost
of Sales
Our
costs of sales were $0 for the quarters ended June 30, 2014 and June 30, 2013. Our cost of sales for the six months ended June
30, 2014 was $0, compared to $1,445 for the six months ended June 30, 2013. Cost of sales includes finished goods, assembly services,
and cost to deliver our product. Cost of sales has remained consistent with the previous year comparable period. As we are able
to increase our revenues, we expect our cost variables to decrease due to volume discounts.
Gross
Profit
Our
gross profit was $0 for the quarters ended June 30, 2014 and June 30, 2013. During the six months ended June 30, 2014 our gross
profit was $0, compared to a gross profit for the six months ended June 30, 2013 of $4,620. Cost of our initial inventory assembly
was high due to modifications in assembly techniques and testing, higher than normal freight costs, and higher raw material costs
due to low volume purchasing. Freight costs were higher as a result of oversea assembly and a single port of entry. These costs
will decrease as we assemble and distribute from strategically located warehouse facilities. We expect gross profits to normalize
at 38% in the near-term and 40% in the long-term. Gross profit, as a percentage of sales, will also increase as we have a higher
weighting of sales through direct distribution to our end customer.
Expenses
During
the quarter ended June 30, 2014 we incurred $1,477,232 in operating expenses, compared to $2,849,091 for the quarter ended June
30, 2013. The decrease in operating expenses for the three months ended June 30, 2014 compared to the same period in 2013 was
attributable primarily to a decrease in the value of stock based officer compensation, as well as a decrease in cash officer compensation.
Cash
salaries and wages were $62,500 for the quarter ended June 30, 2014, compared to $12,000 for the quarter ended June 30, 2013.
Professional fees were $78,819 for the quarter ended June 30, 2014, compared to $25,019 for the quarter ended June 30, 2013. We
incurred $68,050 consulting fees for the quarter ended June 30, 2014, compared to consulting fees of $71,000 for the quarter ended
June 30, 2013.
During
the quarter ended June 30, 2014, we incurred $3,160 in travel and entertainment expenses, compared to $3,445 in travel and entertainment
expenses during the quarter ended June 30, 2013. This expense is expected to increase during the remainder of the year as we continue
our product marketing and business development strategies.
During
the quarter ended June 30, 2014, we incurred $2,631 in promotional and marketing expense, compared to $0 in promotions and marketing
during the quarter ended June 30, 2013. These costs include demonstration products, advertising, shipping samples to retailers
and distributors, and promotion allowances for distributors and tradeshows which includes booth costs, and various other tradeshow
costs. We expect this expense to increase over the remainder of the year.
During
the quarter ended June 30, 2014, we incurred $2,610 in depreciation, compared to $2,893 for the quarter ended June 30, 2013. General
and administrative expenses were $8,954 for the quarter ended June 30, 2014, compared to $2,525 for the quarter ended June 30,
2013. Stock based officer compensation was valued at $1,250,000 for the quarter ended June 30, 2014, compared to $2,729,167 for
the quarter ended June 30, 2013. We incurred $0 in rent expense for the quarter ended June 30, 2014 compared to $3,042 for the
three months ended June 30, 2013. Finally, we incurred $2,508 in research and development expenses during the quarter ended June
30, 2014, compared to $0 for the quarter ended June 30, 2013.
During
the six months ended June 30, 2014, our total operating expenses were $2,871,557, compared $2,882,264 for the six months ended
June 30, 2013.
Other
Income and Expense
During
the quarter ended June 30, 2014, we experienced a loss on the change in the value of a derivative liability in the amount of $270,500,
financing costs of $3,240, interest expense of $11,042, interest expense to a related party of $214, amortization of debt discounts
in the amount of $1888,047, a gain on settlement of debt in the amount of $1,128, and other income of $1.
As
a result of various financing agreements, we have incurred additional costs which are attributable to the terms of each agreement
with respect to their variable conversion rights. Until such time the agreements are satisfied in full, we will continue to incur
costs related to the valuation of these terms.
Net
Loss
During
the quarter ended June 30, 2014 we incurred a net loss of $1,949,146. By comparison, we incurred a net loss of $3,253,582 during
the quarter ended June 30, 2013. The decrease in net loss of compared to the same period last year is primarily attributable to
a decrease in the value of stock based officer compensation issued during the three months ended June 30, 2014 as compared to
the same quarter last year.
Our
net loss for the six months ended June 30, 2014 was $4,007,520, compared to $3,467,985 for the six months ended June 30, 2013.
Since
July 8, 2010, the inception date of Nyxio, through June 30, 2014, we have incurred a net loss of $18,555,132. Our greatest challenges
which have prohibited us from executing our business plan are as follows:
- Lack
of adequate funding to obtain a small inventory, establish a healthy PR campaign, recruit a world class management team, and fund
future development to enhance current product features and new products to stay ahead of the technology curve.
- Manufacturing
in Asia – Too far away to monitor quality and suppliers without costly travel.
- Lack
of adequate funding to retain skilled sales team.
Our
current and future operations are focused on continuing to carry out our business plan through the marketing and continued development
of our current products, including the VioSphere, Realm, RealmPro, Venture MMV technology and Vuzion Android TV, and our future
products, continued development efforts, and the continued evaluation of potential strategic acquisitions and/or partnerships.
Our
operations to date have consisted primarily of the following:
| • | Enhancing
product features and aesthetics |
| • | Negotiations
to reduce product cost and enhance quality |
| • | Building
a reliable Bill of Material for all products and sourcing from established suppliers
|
| • | Work
with technology partners such as Avnet, Intel, and AMD, with whom we have collaboration
agreements, to develop new CPU list of options and board options. To date we have not
entered into any Purchase Orders with these partners. |
| • | Develop
new products with alternate revenue streams, such as gaming and cloud commerce |
| • | Develop
clear and concise marketing, sales, and specification literature and tools |
Our
efforts are directed at generating revenue through the sales of our current products, which are available for purchase at the
following locations: Amazon.com, OrderBorder, Rapid Buyer, Focus, University Book Stores, Smith and Associates, Sterling Technology,
and at our proprietary web-site.
Key
factors affecting our results of operations include capitalization, revenues, cost of revenues, operating expenses and income
and taxation.
Liquidity
and Capital Resources
As
of June 30, 2014, we had cash and equivalents on hand of $15,906, accounts receivable of $223, deposits on inventory of $18,833
and a working capital deficit of $1,390,693. We determined that our cash on hand and working capital were not sufficient to meet
our current anticipated cash requirements. As such, we evaluated several options to obtain short term financing, as discussed
below. While we hope to see a significant increase in revenue in the second quarter of 2014 as a result on pending product orders,
we have continued to rely on funds obtained through the issuance of debt and equity securities throughout 2013. We may enter into
further debt and equity agreements to fund operations and inventory requirements if management feels it is required. We
anticipate our additional cash requirements to fund cost of goods sold and operations to be roughly $1.7 million dollars, at which
point revenues from sales should be sufficient to fund inventory and operational expenses. Our operations to date have been primarily
funded through the issuance of debt and equity securities.
Coach
Capital LLC
Specifically,
on September 30, 2011, we entered into a promissory note with Coach Capital LLC in the amount of $111,000 (the “Coach Note”).
The Coach Note is unsecured, bears interest at 10% per annum and is due on demand. The holder of the Coach Note may elect to convert
all or part of the indebtedness owing under the Coach Note into our securities at such rate as that being offered to investors
at the time of conversion. As of June 30, 2014, the unpaid principal balance and accrued interest under the Coach Note totaled
$149,689.
ICG
USA, LLC
On
February 16, 2012, we entered into a Securities Purchase Agreement with and issued a Convertible Promissory Note in the amount
of $200,000, at 6% interest per annum, to ICG USA, LLC (the “ICG Note”). As discussed below, ICG has assigned a total
of $182,500 in principal to three other entities.
LG
Capital Funding, LLC
On
March 11, 2014, ICG assigned $75,000 in principal to LG Capital Funding, LLC (“LG”). LG issued a “Replacement
Note” for the amount of $75,000. The note accrues interest at 8% per annum and matures March 11, 2014. Further, LG Capital
may convert all or any amount of the principal at a rate equal to 50% of the lowest closing bid price for the five prior trading
days, including the day of notice.
During
March 2014, LG Capital advanced an additional $37,875 to us, subject to the same terms and Maturity date as the Replacement Note.
On
June 17, 2014, we issued a Convertible Promissory Note to LG Capital in the amount of $20,000. The note accrues interest at 8%
per annum and matures June 17, 2015. Further, LG Capital may convert all or any amount of the principal at a rate equal to 50%
of the lowest closing bid price for the five prior trading days, including the day of notice.
During
the six months ended June 30, 2014, LG Capital elected to convert $65,000 in principal to common stock. As of June 30, 2014, the
unpaid principal balance owed to LG was $15,272 net of discount in the amount of $52,603, with accrued interest of $1,458.
Tide
Pool Ventures Corp.
On December
10, 2013, we issued a convertible promissory note to Tide Pool Venture Corp. (“Tide Pool”) in the amount of $11,500.
The note bears interest at a rate of 9.875% per annum, is unsecured and matures on December 31, 2014. The Note is convertible
into common stock in whole or in part at a variable conversion price equal to a 30% discount to the lowest volume weighted average
price of the five trading days prior to the conversion date.
On
February 20, 2014, ICG assigned $27,500 in principal to Tide Pool. We entered into a new Convertible Promissory Note agreement
with Tide Pool. The replacement note bears interest at a rate of 10% per year, and matures on February 20, 2015. The Note is convertible
to our common stock at a price equal to a 50% discount to the average of the lowest three trading prices in the 30 days preceding
the conversion date.
Also
on February 20, 2014, we issued a new convertible promissory note to Tide Pool in the amount of $22,250. The Note bears interest
at a rate of 10% per year, and matures on February 20, 2015. The Note is convertible to our common stock at a price equal to a
45% discount to the average of the lowest three trading prices in the 30 days preceding the conversion date.
In
April of 2014, ICG assigned $60,000 in principal to Tide Pool. We entered into a new Convertible Promissory Note with Tide Pool.
The replacement note bears interest at a rate of 10% per year, and matures on February 20, 2015. The Note is convertible to our
common stock at a price equal to a 50% discount to the average of the lowest three trading prices in the 30 days preceding the
conversion date.
On
April 1, 2014, we issued a new convertible promissory note to Tide Pool in the amount of $42,500. The Note bears interest at a
rate of 10% per year, and matures on April 1, 2015. The Note is convertible to our common stock at a price equal to a 45% discount
to the average of the lowest three trading prices in the 30 days preceding the conversion date.
During
the six months ended June 30, 2014, Tide Pool elected to convert $56,500 in principal into common stock. As of June 30, 2014,
the unpaid principal balance owed to Tide Pool was $32,142, net of discount of $74,838, with accrued interest of $3,317.
WHC
Capital, LLC, Series Bravo
On
February 5, 2014, ICG assigned $20,000 in principal to WHC Capital, LLC, Series Bravo (“WHC”). We entered into a new
Convertible Promissory Note agreement with WHC. The replacement note bears interest at a rate of 6% per year, and matures on February
5, 2015. The Note is convertible to our common stock at a price equal to a 40% discount to the average of the lowest three trading
prices in the 30 days preceding the conversion date.
On
February 7, 2014, we issued a new convertible promissory note to WHC in the amount of $10,000. The Note bears interest at a rate
of 10% per year, and matures on February 20, 2015. The Note is convertible to our common stock at a price equal to a 40% discount
to the average of the lowest three trading prices in the 30 days preceding the conversion date.
On
May 8, 2014, we issued a new convertible promissory note to WHC in the amount of $20,000. The Note bears interest at a rate of
10% per year, and matures on May 8, 2015. The Note is convertible to our common stock at a price equal to a 40% discount to the
average of the lowest three trading prices in the 30 days preceding the conversion date.
On
June 16, 2014, we issued a new convertible promissory note to WHC in the amount of $20,000. The Note bears interest at a rate
of 10% per year, and matures on June 16, 2015. The Note is convertible to our common stock at a price equal to a 40% discount
to the average of the lowest three trading prices in the 30 days preceding the conversion date.
During
the six months ended June 30, 2014, WHC elected to convert $37,404 in principal into common stock. As of June 30, 2015, the unpaid
principal balance owed to WHC was $2,596, net of discount of $30,000, with accrued interest of $572.
JMJ
Financial
On
May 7, 2012, we entered into a $275,000 Promissory Note (the “Note”) with JMJ Financial (“JMJ”). Under
the Note, we received $50,000 in loan proceeds with JMJ. Additional sums up to a maximum total of $275,000 may be advanced in
the sole discretion of JMJ. An additional $5,400 was advanced during April of 2013. The Note included a 10% original issue discount
and is due in 1 year. The Note would not bear interest if paid in full within 90 days. Thereafter, a one-time interest charge
of 5% was to be applied to the principal sum. The Note was convertible to common stock in whole or in part at conversion price
equal to the lesser of $0.06 per share or 65% of the lowest trading price in the 25 trading days prior to the conversion. As of
June 30, 2014, this Note has been fully converted to common stock.
Asher
Enterprises, Inc.
In
addition, we have received debt financing from Asher Enterprises, Inc. under a series of Convertible Promissory Notes. The notes
issued to Asher Enterprises, Inc., were as follows:
| Amount |
|
Issue
date |
|
Due
date |
|
Shares
issued upon conversion |
|
Conversion
date(s) |
|
Principal
amount |
| $ |
63,000 |
|
|
|
June 6,
2012 |
|
|
March
8, 2013 |
|
|
|
|
|
|
$ |
63,000 |
|
| |
|
|
|
|
|
|
|
|
|
7,246 |
|
|
12 /17/12 |
|
|
(3,000 |
) |
| |
|
|
|
|
|
|
|
|
|
7,059 |
|
|
12 /31/12 |
|
|
(2,700 |
) |
| |
|
|
|
|
|
|
|
|
|
6,991 |
|
|
01 /14/13 |
|
|
(2,800 |
) |
| |
|
|
|
|
|
|
|
|
|
7,029 |
|
|
01 /16/13 |
|
|
(3,100 |
) |
| |
|
|
|
|
|
|
|
|
|
7,029 |
|
|
01 /18/13 |
|
|
(3,100 |
) |
| |
|
|
|
|
|
|
|
|
|
16,187 |
|
|
03 /01/13 |
|
|
(5,900 |
) |
| |
|
|
|
|
|
|
|
|
|
16,187 |
|
|
03 /08/13 |
|
|
(5,900 |
) |
| |
12,800 |
|
|
|
|
|
|
|
|
|
|
|
03 /09/13 |
|
|
12,800 |
|
| |
|
|
|
|
|
|
|
|
|
25,231 |
|
|
03 /15/13 |
|
|
(10,900 |
) |
| |
|
|
|
|
|
|
|
|
|
27,322 |
|
|
04 /25/13 |
|
|
(3,000 |
) |
| |
|
|
|
|
|
|
|
|
|
174,520 |
|
|
05 /20/13 |
|
|
(10,000 |
) |
| |
|
|
|
|
|
|
|
|
|
1,304,348 |
|
|
7 /8/13 |
|
|
(12,000 |
) |
| |
|
|
|
|
|
|
|
|
|
1,304,918 |
|
|
7 /19/13 |
|
|
(13,400 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
37,500 |
|
|
|
July 10, 2012 |
|
|
April 12, 2013 |
|
Variable |
|
|
n/a |
|
$ |
37,500 |
|
| |
18,750 |
|
|
|
|
|
|
|
|
|
|
|
04 /12/13 |
|
|
18,750 |
|
| |
|
|
|
|
|
|
|
|
|
1,229,500 |
|
|
7 /19/13 |
|
|
(15,000 |
) |
| |
|
|
|
|
|
|
|
|
|
1,153,896 |
|
|
7 /31/13 |
|
|
(12,000 |
) |
| |
|
|
|
|
|
|
|
|
|
6,545,455 |
|
|
7 /19/13 |
|
|
(7,200 |
) |
| |
|
|
|
|
|
|
|
|
|
6,545,455 |
|
|
10 /1/13 |
|
|
(7,200 |
) |
| |
|
|
|
|
|
|
|
|
|
8,505,747 |
|
|
10 /7/13 |
|
|
(7,400 |
) |
| |
|
|
|
|
|
|
|
|
|
8,045,977 |
|
|
10 /14/13 |
|
|
(7,000 |
) |
| |
|
|
|
|
|
|
|
|
|
4,367,089 |
|
|
10 /21/13 |
|
|
(450 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
40,000 |
|
|
|
November, 13, 2012 |
|
|
August 15, 2013 |
|
Variable |
|
|
n/a |
|
$ |
40,000 |
|
| |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
8 /24/13 |
|
|
20,000 |
|
| |
|
|
|
|
|
|
|
|
|
4,166,667 |
|
|
10 /21/13 |
|
|
(3,000 |
) |
| |
|
|
|
|
|
|
|
|
|
7,941,176 |
|
|
10 /28/13 |
|
|
(5,400 |
) |
| |
|
|
|
|
|
|
|
|
|
8,545,455 |
|
|
11 /1/13 |
|
|
(4,700 |
) |
| |
|
|
|
|
|
|
|
|
|
8,540,000 |
|
|
11 /6/13 |
|
|
(4,270 |
) |
| |
|
|
|
|
|
|
|
|
|
8,542,857 |
|
|
11 /11/13 |
|
|
(2,990 |
) |
| |
|
|
|
|
|
|
|
|
|
4,571,429 |
|
|
11 /11/13 |
|
|
(1,600 |
) |
| |
|
|
|
|
|
|
|
|
|
16,612,903 |
|
|
11 /22/13 |
|
|
(5,150 |
) |
| |
|
|
|
|
|
|
|
|
|
16,642,857 |
|
|
11 /26/13 |
|
|
(4,660 |
) |
| |
|
|
|
|
|
|
|
|
|
16,551,724 |
|
|
12 /2/13 |
|
|
(4,800 |
) |
| |
|
|
|
|
|
|
|
|
|
16,551,724 |
|
|
12 /5/13 |
|
|
(4,800 |
) |
| |
|
|
|
|
|
|
|
|
|
16,653,846 |
|
|
12 /16/13 |
|
|
(4,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,625,000 |
|
|
12 /18/13 |
|
|
(3,990 |
) |
| |
|
|
|
|
|
|
|
|
|
16,625,000 |
|
|
12 /23/13 |
|
|
(3,990 |
) |
| |
|
|
|
|
|
|
|
|
|
16,653,846 |
|
|
12 /30/13 |
|
|
(4,330 |
) |
| |
|
|
|
|
|
|
|
|
|
9,702,703 |
|
|
1 /2/14 |
|
|
(1,990 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
37,500 |
|
|
|
January 31, 2013 |
|
|
November 1, 2013 |
|
Variable |
|
|
n/a |
|
$ |
37,500 |
|
| |
18,750 |
|
|
|
|
|
|
|
|
|
|
|
10 /31/13 |
|
|
18,750 |
|
| |
|
|
|
|
|
|
|
|
|
16,486,486 |
|
|
1 /7/14 |
|
|
(6,100 |
) |
| |
|
|
|
|
|
|
|
|
|
16,451,613 |
|
|
1 /13/14 |
|
|
(5,100 |
) |
| |
|
|
|
|
|
|
|
|
|
16,655,172 |
|
|
1 /15/14 |
|
|
(4,830 |
) |
| |
|
|
|
|
|
|
|
|
|
16,538,462 |
|
|
1 /22/14 |
|
|
(4,300 |
) |
| |
|
|
|
|
|
|
|
|
|
16,538,462 |
|
|
1 /28/14 |
|
|
(4,300 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /4/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /6/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /10/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /14/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
51,290,323 |
|
|
2 /20/14 |
|
|
(15,900 |
) |
| |
|
|
|
|
|
|
|
|
|
12,580,645 |
|
|
2 /24/14 |
|
|
(2,400 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
41,500 |
|
|
|
April 11, 2013 |
|
|
January 16, 2014 |
|
Variable |
|
|
n/a |
|
$ |
41,500 |
|
| |
|
|
|
|
|
|
|
|
|
54,032,258 |
|
|
2 /24/14 |
|
|
(16,750 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
80,030,303 |
|
|
(24,750 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
22,500 |
|
|
|
June 27, 2013 |
|
|
March 31, 2014 |
|
Variable |
|
|
n/a |
|
$ |
22,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
80,689,655 |
|
|
(22,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
15,750 |
|
|
|
August 20, 2013 |
|
|
May 20, 2014 |
|
Variable |
|
|
n/a |
|
$ |
15,750 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
81,900,000 |
|
|
(15,750 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
10,000 |
|
|
|
September, 20, 2013 |
|
|
June 20, 2014 |
|
Variable |
|
|
n/a |
|
$ |
10,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
74,285,714 |
|
|
(10,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
2,500 |
|
|
|
October 25, 2013 |
|
|
July 18, 2014 |
|
Variable |
|
|
n/a |
|
$ |
2,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
18,571,429 |
|
|
(2,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
22,500 |
|
|
|
November 11, 2013 |
|
|
August 13, 2014 |
|
Variable |
|
|
n/a |
|
$ |
22,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
175,000,000 |
|
|
(21,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
26,666,667 |
|
|
(1,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| |
Amount |
|
|
|
Issue
date |
|
|
Due
date |
|
Shares
issued upon conversion |
|
|
Conversion
date(s) |
|
|
Principal
amount |
|
| $ |
63,000 |
|
|
|
June 6, 2012 |
|
|
March 8, 2013 |
|
|
|
|
|
|
$ |
63,000 |
|
| |
|
|
|
|
|
|
|
|
|
7,246 |
|
|
12 /17/12 |
|
|
(3,000 |
) |
| |
|
|
|
|
|
|
|
|
|
7,059 |
|
|
12 /31/12 |
|
|
(2,700 |
) |
| |
|
|
|
|
|
|
|
|
|
6,991 |
|
|
01 /14/13 |
|
|
(2,800 |
) |
| |
|
|
|
|
|
|
|
|
|
7,029 |
|
|
01 /16/13 |
|
|
(3,100 |
) |
| |
|
|
|
|
|
|
|
|
|
7,029 |
|
|
01 /18/13 |
|
|
(3,100 |
) |
| |
|
|
|
|
|
|
|
|
|
16,187 |
|
|
03 /01/13 |
|
|
(5,900 |
) |
| |
|
|
|
|
|
|
|
|
|
16,187 |
|
|
03 /08/13 |
|
|
(5,900 |
) |
| |
12,800 |
|
|
|
|
|
|
|
|
|
|
|
03 /09/13 |
|
|
12,800 |
|
| |
|
|
|
|
|
|
|
|
|
25,231 |
|
|
03 /15/13 |
|
|
(10,900 |
) |
| |
|
|
|
|
|
|
|
|
|
27,322 |
|
|
04 /25/13 |
|
|
(3,000 |
) |
| |
|
|
|
|
|
|
|
|
|
174,520 |
|
|
05 /20/13 |
|
|
(10,000 |
) |
| |
|
|
|
|
|
|
|
|
|
1,304,348 |
|
|
7 /8/13 |
|
|
(12,000 |
) |
| |
|
|
|
|
|
|
|
|
|
1,304,918 |
|
|
7 /19/13 |
|
|
(13,400 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
37,500 |
|
|
|
July 10, 2012 |
|
|
April 12, 2013 |
|
Variable |
|
|
n/a |
|
$ |
37,500 |
|
| |
18,750 |
|
|
|
|
|
|
|
|
|
|
|
04 /12/13 |
|
|
18,750 |
|
| |
|
|
|
|
|
|
|
|
|
1,229,500 |
|
|
7 /19/13 |
|
|
(15,000 |
) |
| |
|
|
|
|
|
|
|
|
|
1,153,896 |
|
|
7 /31/13 |
|
|
(12,000 |
) |
| |
|
|
|
|
|
|
|
|
|
6,545,455 |
|
|
7 /19/13 |
|
|
(7,200 |
) |
| |
|
|
|
|
|
|
|
|
|
6,545,455 |
|
|
10 /1/13 |
|
|
(7,200 |
) |
| |
|
|
|
|
|
|
|
|
|
8,505,747 |
|
|
10 /7/13 |
|
|
(7,400 |
) |
| |
|
|
|
|
|
|
|
|
|
8,045,977 |
|
|
10 /14/13 |
|
|
(7,000 |
) |
| |
|
|
|
|
|
|
|
|
|
4,367,089 |
|
|
10 /21/13 |
|
|
(450 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
40,000 |
|
|
|
November, 13, 2012 |
|
|
August 15, 2013 |
|
Variable |
|
|
n/a |
|
$ |
40,000 |
|
| |
20,000 |
|
|
|
|
|
|
|
|
|
|
|
8 /24/13 |
|
|
20,000 |
|
| |
|
|
|
|
|
|
|
|
|
4,166,667 |
|
|
10 /21/13 |
|
|
(3,000 |
) |
| |
|
|
|
|
|
|
|
|
|
7,941,176 |
|
|
10 /28/13 |
|
|
(5,400 |
) |
| |
|
|
|
|
|
|
|
|
|
8,545,455 |
|
|
11 /1/13 |
|
|
(4,700 |
) |
| |
|
|
|
|
|
|
|
|
|
8,540,000 |
|
|
11 /6/13 |
|
|
(4,270 |
) |
| |
|
|
|
|
|
|
|
|
|
8,542,857 |
|
|
11 /11/13 |
|
|
(2,990 |
) |
| |
|
|
|
|
|
|
|
|
|
4,571,429 |
|
|
11 /11/13 |
|
|
(1,600 |
) |
| |
|
|
|
|
|
|
|
|
|
16,612,903 |
|
|
11 /22/13 |
|
|
(5,150 |
) |
| |
|
|
|
|
|
|
|
|
|
16,642,857 |
|
|
11 /26/13 |
|
|
(4,660 |
) |
| |
|
|
|
|
|
|
|
|
|
16,551,724 |
|
|
12 /2/13 |
|
|
(4,800 |
) |
| |
|
|
|
|
|
|
|
|
|
16,551,724 |
|
|
12 /5/13 |
|
|
(4,800 |
) |
| |
|
|
|
|
|
|
|
|
|
16,653,846 |
|
|
12 /16/13 |
|
|
(4,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,625,000 |
|
|
12 /18/13 |
|
|
(3,990 |
) |
| |
|
|
|
|
|
|
|
|
|
16,625,000 |
|
|
12 /23/13 |
|
|
(3,990 |
) |
| |
|
|
|
|
|
|
|
|
|
16,653,846 |
|
|
12 /30/13 |
|
|
(4,330 |
) |
| |
|
|
|
|
|
|
|
|
|
9,702,703 |
|
|
1 /2/14 |
|
|
(1,990 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ |
37,500 |
|
|
|
January 31, 2013 |
|
|
November 1, 2013 |
|
Variable |
|
|
n/a |
|
$ |
37,500 |
|
| |
18,750 |
|
|
|
|
|
|
|
|
|
|
|
10 /31/13 |
|
|
18,750 |
|
| |
|
|
|
|
|
|
|
|
|
16,486,486 |
|
|
1 /7/14 |
|
|
(6,100 |
) |
| |
|
|
|
|
|
|
|
|
|
16,451,613 |
|
|
1 /13/14 |
|
|
(5,100 |
) |
| |
|
|
|
|
|
|
|
|
|
16,655,172 |
|
|
1 /15/14 |
|
|
(4,830 |
) |
| |
|
|
|
|
|
|
|
|
|
16,538,462 |
|
|
1 /22/14 |
|
|
(4,300 |
) |
| |
|
|
|
|
|
|
|
|
|
16,538,462 |
|
|
1 /28/14 |
|
|
(4,300 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /4/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /6/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /10/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
16,650,000 |
|
|
2 /14/14 |
|
|
(3,330 |
) |
| |
|
|
|
|
|
|
|
|
|
51,290,323 |
|
|
2 /20/14 |
|
|
(15,900 |
) |
| |
|
|
|
|
|
|
|
|
|
12,580,645 |
|
|
2 /24/14 |
|
|
(2,400 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
41,500 |
|
|
|
April 11, 2013 |
|
|
January 16, 2014 |
|
Variable |
|
|
n/a |
|
$ |
41,500 |
|
| |
|
|
|
|
|
|
|
|
|
54,032,258 |
|
|
2 /24/14 |
|
|
(16,750 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
80,030,303 |
|
|
(24,750 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
-0- |
|
| $ |
22,500 |
|
|
|
June 27, 2013 |
|
|
March 31, 2014 |
|
Variable |
|
|
n/a |
|
$ |
22,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
80,689,655 |
|
|
(22,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
15,750 |
|
|
|
August 20, 2013 |
|
|
May 20, 2014 |
|
Variable |
|
|
n/a |
|
$ |
15,750 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
81,900,000 |
|
|
(15,750 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
10,000 |
|
|
|
September, 20, 2013 |
|
|
June 20, 2014 |
|
Variable |
|
|
n/a |
|
$ |
10,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
74,285,714 |
|
|
(10,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
2,500 |
|
|
|
October 25, 2013 |
|
|
July 18, 2014 |
|
Variable |
|
|
n/a |
|
$ |
2,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
18,571,429 |
|
|
(2,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
| $ |
22,500 |
|
|
|
November 11, 2013 |
|
|
August 13, 2014 |
|
Variable |
|
|
n/a |
|
$ |
22,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
175,000,000 |
|
|
(21,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
26,666,667 |
|
|
(1,500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-0- |
|
All
Notes issued to Asher Enterprises, Inc. bore interest at a rate of 8% per year and are convertible at a conversion price equal
to 55% of the Market Price of our common stock on the conversion date. For purposes of the Notes, “Market Price”
was defined as the average of the 3 lowest closing prices for our common stock on the 10 trading days immediately preceding the
conversion date. The number of shares issuable upon conversion of the Notes is limited so that the holder’s total
beneficial ownership of our common stock may not exceed 4.99% of the total issued and outstanding shares. This condition may be
waived at the option of the holder upon not less than 61 days-notice.
As
of June 30, 2014, all notes issued to Asher have been converted in full.
Continental
Equities, LLC
On
September 20, 2012, we received additional financing under a Convertible Promissory Note issued to Continental Equities, LLC (“Continental”)
in the amount of $35,000. The note bears interest at a rate of 8% per annum, is unsecured and matures on May 15, 2013. The Note
is convertible into common stock in whole or in part at a variable conversion price equal to a 42.5% discount to the lowest three
average thirty day trading prices prior to the conversion date. In addition, we entered into a Registration Rights Agreement with
Continental under which, upon demand of Continental, we must register resale of the common shares issuable upon conversion of
the Note on Form S-1. In addition, Continental has “piggy-back” registration rights, which require us to include the
re-sale of shares issuable upon conversion of the Note in any registration statement we may file, except for registrations on
Forms S-4 or S-8. On May 20, 2013, we issued an additional Convertible Promissory Note to Continental in the amount of $13,000,
bearing the same terms. During December of 2013, Tide Pool Ventures Corporation (“Tide Pool”) purchased the remaining
balance of the notes. As of June 30, 2014, the Notes have been fully converted to common stock.
Chamisa
Technology, LLC
On
July 8, 2010, in connection with our reverse acquisition, we assumed a Promissory Note owed by Nyxio Technologies, LLC dated March
15, 2010 and issued to Chamisa Technology, LLC (“Chamisa”). The total principal and interest owing at the time we
assumed the Note was $83,627. The Note bore interest at an annual rate of twelve percent (12%). From July of 2010 through December
of 2010, additional advances were made under the Note in the principal amount of $64,491. In 2011, additional advances in the
amount of $18,000 were made under the Note. On April 20, 2012, a portion of the balance due under the Note in the amount of $81,595
was assigned by Chamisa to Michelle Nelson, leaving total principal and interest due to Chamisa of $120,782. On April 25, 2012,
we entered into an amendment of the Note portion purchased by Ms. Nelson. Under this amendment, Ms. Nelson agreed to forgive $56,595
of the principal balance in exchange for conversion rights on the remaining balance of $25,134. In accordance with the amendment,
the remaining portion of the obligation was made convertible to common stock at $0.001 per share. Over the course of 2012, Ms.
Nelson and various subsequent assignees converted the Nelson portion of the Note into common stock.
On
December 1, 2013, Chamisa assigned the remaining portion of the Note still owing to Reign Investment Group, LLC. On December 1,
2013, Reign Investment Group, LLC assigned portions of the debt to various entities. During the year ended December 31, 2013,
the original assignee agreed to forgive $21,500 of the debt in exchange for immediate conversion rights at a conversion rate of
$0.001. As of December 31, 2013, the Company recognized an interest expense of $43,623 from BCF related to the conversion and
gain on settlement of debt of $21,500.
As
of June 30, 2014, the unpaid principal balance together with accrued interest totaled $104,782. We are still negotiating additional
terms as it relates to this note.
To
meet our future objectives, we will need to meet our revenue objectives and/or sell additional equity and debt securities, which
could result in dilution to current shareholders. The incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available
in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at
all, could limit our ability to expand our business operations and could harm our overall business prospects.
Our
current cash requirements are significant due to planned development and marketing of our current products, and we anticipate
generating losses. In order to execute on our business strategy, we will require additional working capital, commensurate
with the operational needs of our planned marketing, development and production efforts. Our management believes that we
should be able to raise sufficient amounts of working capital through debt or equity offerings, as may be required to meet our
short-term obligations. However, changes in our operating plans, increased expenses, acquisitions, or other events, may
cause us to seek additional equity or debt financing in the future. We anticipate continued and additional marketing, development
and production expenses. Accordingly, we expect to continue to use debt and equity financing to fund operations for the
next twelve months, as we look to expand our asset base and fund marketing, development and production of our products.
There
are no assurances that we will be able to raise the required working capital on terms favorable, or that such working capital
will be available on any terms when needed. Any failure to secure additional financing may force us to modify our business
plan. In addition, we cannot be assured of profitability in the future.
Off
Balance Sheet Arrangements
As
of June 30, 2014, there were no off balance sheet arrangements.
Going
Concern
We
have negative working capital, have incurred losses since inception, and have not yet received significant revenues from sales
of products or services. These factors create substantial doubt about our ability to continue as a going concern. The financial
statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.
Our
ability to continue as a going concern is dependent on generating cash from the sale of our common stock and/or obtaining debt
financing and attaining future profitable operations. Management’s plans include selling our equity securities and obtaining
debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance we will be successful
in these efforts.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
A
smaller reporting company is not required to provide the information required by this Item.
Item
4. Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2014. This evaluation was carried out under the supervision and
with the participation of our Chief Executive Officer and Chief Financial Officer, Giorgio Johnson. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2014, our disclosure controls and procedures
are not effective. There have been no changes in our internal controls over financial reporting during the quarter ended June
30, 2014.
In performing
the above-referenced assessment, our management identified the following material weaknesses:
| i) |
We
have insufficient quantity of dedicated resources and experienced personnel involved in reviewing and designing internal
controls. As a result, a material misstatement of the interim and annual financial statements could occur and not be prevented
or detected on a timely basis.
|
| ii) |
We
do not have an audit committee or an independent audit committee financial expert. While not being legally obligated to
have an audit committee or independent audit committee financial expert, it is the management’s view that to have
an audit committee, comprised of independent board members, and an independent audit committee financial expert is an
important entity-level control over our financial statements.
|
| iii) |
We
did not perform an entity level risk assessment to evaluate the implication of relevant risks on financial reporting,
including the impact of potential fraud related risks and the risks related to non-routine transactions, if any, on our
internal control over financial reporting. Lack of an entity-level risk assessment constituted an internal control design
deficiency which resulted in more than a remote likelihood that a material error would not have been prevented or detected,
and constituted a material weakness.
|
Disclosure
controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed
in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods
specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated
to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure.
Limitations
on the Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily
prevent all fraud and material error. Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by
the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The
design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there
can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time,
control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may
deteriorate.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
On
February of 2013, we were sued in the Multnomah County Circuit Court of the State of Oregon by four former consultants, Joe Fijak,
Steve Wiseman, Richard Walsh, and Robert Calderella (the “Fijak Litigation”). The plaintiffs in the Fijak Litigation
allege that we breached consulting agreements with them by failing to pay compensation required by the agreements. The Complaint
filed by the Plaintiffs seeks damages in the amount of $501,000, but management does not believe a recovery at or near that amount
is likely. We contend that we complied with the terms of the agreements until such time as they were terminated by the Plaintiffs
and that the Plaintiffs performed very limited services and, in some cases, no services at all. After being served with the Complaint,
we removed the Fijak Litigation to the United States District Court for the District of Oregon, where it remains pending as Wiseman
et al v. Nyxio Technologies Corporation et al, Case No. 3:14-cv-00420-PK. Following removal of the action to federal court,
we have been engaged in active settlement discussions with the Plaintiffs. On March 25, 2014, the court stayed the proceedings
for a period of ninety (90) days in order to allow the parties to continue settlement discussions. At this time, settlement discussions
are continuing and we believe this matter will be settled.
Item
1A: Risk Factors
A
smaller reporting company is not required to provide the information required by this Item. Risk factors regarding our current
business can be found in our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the Securities and Exchange
Commission on April 16, 2012.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3. Defaults upon Senior Securities
None
Item
4. Mine Safety Disclosures
Not
applicable.
Item
5. Other Information
None.
Item
6. Exhibits
| Exhibit
Number |
Description
of Exhibit |
| 10.1 |
Convertible Promissory Note issued to Tide Pool Ventures Corporation, dated April 1, 2014 ($42,500) |
| 10.2 |
Convertible Promissory Note issued to WHC Capital, LLC, Series Bravo, dated May 8, 2014 ($20,000) |
| 10.3 |
Convertible Promissory Note issued to WHC Capital, LLC, Series Bravo, dated June 16, 2014 ($20,000) |
| 10.4 |
Convertible Promissory Note issued to LG Capital Funding, LLC, dated June 17, 2014 ($20,000) |
| 31.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
| 31.2 |
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 |
| 32.1 |
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 |
| 101** |
The
following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 formatted
in Extensible Business Reporting Language (XBRL). |
**Provided
herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
| |
Nyxio
Technologies Corporation |
| |
|
| Date: |
August
21, 2014
|
| |
|
| |
By: /s/
Giorgio Johnson
Giorgio
Johnson
Title: Chief
Executive Officer and Chief Financial Officer |
THIS CONVERTIBLE PROMISSORY NOTE HAS BEEN
ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT FOR DISTRIBUTION AND MAY BE TRANSFERRED OR OTHERWISE DISPOSED OF ONLY INCOMPLIANCE
WITH THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THIS LEGEND SHALL BE ENDORSED UPON ANY CONVERTIBLE PROMISSORY
NOTE ISSUED IN EXCHANGE FOR THIS CONVERTIBLE PROMISSORY NOTE.
NYXIO TECHNOLOGIES CORP.
| ISSUE DATE: APRIL 1, 2014 |
$42,500.00 |
CONVERTIBLE PROMISSORY NOTE
Due: APRIL 1, 2015
NYXIO TECHNOLOGIES CORP.,
a Nevada corporation (the "Company"),for value received, hereby promises to pay to TIDE POOL VENTURE CORPORATION (the
"Holder") on the Ist day of April, 2015 (the "Maturity Date") at the offices of the Company,2156 NE Broadway,
Portland, Oregon 97232 the principal sum of FOURTY TWO THOUSAND FIVE HUNDRED DOLLARS ($42,500.00) in such coin or currency of the
United States of America as at the time of payment shall be legal tender for the payment of public and private debts and to pay
simple interest on said principal sum at the rate of 10% per annum from the date hereof through the Maturity Date. Any accrued
and unpaid interest shall be paid on the Maturity Date.
1.
Registered Owner. The Issuer may consider
and treat the person in whose name this Note shall be registered as the absolute owner thereof for all purposes whatsoever (whether
or not this Note shall be overdue) and the Issuer shall not be affected by any notice to the contrary. Subject to the provisions
hereof, the registered owner of this Note shall have the right to transfer it by assignment and the transferee thereof: upon his
registration as owner of this Note, shall become vested with all the powers and rights of the transferor. Registration of any new
owner shall take place upon presentation of this Note to the Issuer at its offices together with the Note Assignment Form attached
hereto duly executed. In case of transfers by operation of law, the transferee shall notify the Issuer of such transfer and of
his address, and shall submit appropriate evidence regarding the transfer so that this Note may be registered in the name of the
transferee. This Note is transferable only on the books of the Issuer by the Holder on the surrender hereof duly endorsed. Communications
sent to any registered owner shall be effective as against all holders or transferees of this Note not registered at the time of
sending the communication. In the event of the assignment by the Holder of a portion of the principal amount of this Note, the
transferee thereof shall not have the right to exercise the Conversion Right (as hereinafter defined) unless the entire remaining
principal portion of this Note is converted simultaneously therewith.
2.
Conversion.
(a)
Conversion Right. The Holder shall have the
right from time to time, and at any time during the period commencing on the Issue Date and ending the later of (i) the Maturity
Date and (ii) the date of payment of the remaining outstanding principal amount, plus any accrued and unpaid interest of this Note,
to convert the outstanding and unpaid principal amount of this Note (each a "Conversion") into fully paid and non-assessable
shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the
Issuer into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the "Conversion Price")
determined as provided herein (a "Conversion"); provided, however, that in no event shall the Holder be entitled to convert
any portion of this Note in excess of that portion of this Note upon conversion of which the sum of ( l) the number of shares of
Common Stock beneficially owned by the Holder and its affiliates(other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security
of the Issuer subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number
of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this
proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Regulations
13D-G thereunder, except as otherwise provided in clause(1) of such proviso; provided further, however, that the limitations on
conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days' prior notice to the Issuer,
and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined
by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion
of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in
effect on the dates specified in the notice of conversion, in the form attached hereto as Exhibit A (the ''Notice of Conversion
"), delivered to the Issuer by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is
submitted by facsimile or e mail (or by other means resulting in, or reasonably expected to result in, notice) to the Issuer before
6:00 p.m.New York, New York time on such conversion date (the "Conversion Date"). The term “Conversion Amount"
means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Issuer's option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in
this Note to the Conversion Date.
(b)
Conversion Price. The Conversion Price (the
"Conversion Price,') shall equal the Variable Conversion Price (as defined herein) (subject to equitable adjustments for stock
splits, stock dividends or rights offerings by the Issuer relating to the Issuer's securities or the securities of any subsidiary of the Issuer, combinations, recapitalization
, reclassifications, extraordinary distributions and similar events). The "Variable Conversion Price" shall mean 55%
multiplied by the Market Price (as defined herein) (representing a discount rate of 45%). "Market Price" means the of
the lowest three (3) Trading Prices (as defined below) for the Common Stock during the five (5) Trading Day period ending one Trading
Day prior to the date the Conversion Notice is sent by the Holder to the Issuer via facsimile (the "Conversion Date").
''Trading Price" means, for any security as of any date, the prices of the security on the Over-the-Counter Bulletin Board
(the "OTCBB") as reported by a reliable reporting service ("Reporting Service") mutually acceptable to Issuer
and Holder, or, if the OTCBB is not the principal trading market for such security, the price of such security on the principal
securities exchange or trading market where such security is listed or traded or, if no price of such security is available in
any of the foregoing manners, the average of the Trading prices of any market makers for such security that are listed in the pink
sheets" by the National Quotation Bureau Inc. If the Trading Price cannot be calculated for such security on such date in
the manner provided above, the Trading Price shall be the fair market value as mutually determined by the Issuer and the holders
of a majority in interest of the Notes being converted for which the calculation of the Trading Price is required in order to determine
the Conversion Price of such Notes. "Trading Day”, shall mean any day on which the Common Stock is traded for any period
on the OTCBB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
(c)
Anti-Dilution Provisions.
2.c.1.
Adjustments for Stock Dividends; Combinations, Etc.
In the event that the Issuer, at any time or from time to time hereafter, shall (i) declare any dividend or other distribution
on its Common Stock payable in Common Stock of the Issuer or in securities convertible into or exchangeable for Common Stock, including
without limitation rights; (ii) effect a subdivision of its outstanding Common Stock into a greater number of shares of Common
Stock by reclassification stock split or otherwise than by payment of a dividend in shares of Common Stock; (iii) effect a combination
or consolidation of its outstanding Common Stock into a lesser number of shares of Common Stock by reclassification, reverse split
or otherwise; (iv) issue by reclassification, exchange or substitution of its Common Stock any shares of capital stock of the Issuer;
or (v) effect any other transaction having similar effect, then the Holder may convert into the exchangeable securities. The purpose
of the adjustment shall be that, in the event of a conversion at any time after the occurrence of any event described in (i) through
(v) above, the Holder shall be entitled to receive the shares of Conversion Stock (or other securities) to which such Holder would
have been finally entitled, after giving effect to the occurrence of such event, as if such Holder had converted this Note immediately
prior to the occurrence of such event. An adjustment made pursuant to this Section 2.3.1 shall become effective immediately after
the record date in the case of a dividend or other distribution and shall become effective immediately upon the effective date
in the case of a subdivision, combination, reclassification, exchange or substitution. The Corporation shall take no such action
with respect to the Common Stock unless the Corporation shall simultaneously reserve out of the authorized, unissued and unreserved
shares of common stock a sufficient number of shares of Common Stock to be available for full conversion of the Note at the new
Conversion Price.
2.c.2. Adjustment
for Consolidation or Merger. In case of any consolidation or merger to which the
Issuer is a party, other than a merger or consolidation in which the Issuer is the surviving or continuing corporation and which
does not result in any reclassification of, or change (other than a change in par value or from par value to no par value or from
no par value to par value, or as a result of a subdivision or combination) in, outstanding Common Stock, then, as part of and
as a condition to such transaction, provision shall be made so that, in the event of a conversion, the Holder of this Note, shall
receive, in lieu of the securities and property receivable upon the conversion of this Note prior to consummation of the transaction,
the kind and amount of shares or other securities and property receivable upon such consolidation or merger by a holder of the
number of shares of Common Stock into which this Note would have been converted immediately prior to such consolidation or merger
had the conversion occurred, all subject to further adjustment as provided in Section 2.3.1; in each such case, the terms of this
Note shall be applicable to the securities or property receivable upon the conversion of this Note after such consummation. In
any such case, appropriate adjustment shall be made in the application of this Section 2 with respect to the rights of the Holder
of this Note after the transaction to the end that the provisions of this Section 2 shall be applicable after that event. The
Corporation shall take no such action with respect to the Common Stock unless the Corporation shall simultaneously reserve out
of the authorized, unissued and unreserved shares of such class or series into which the Common Stock has been changed a sufficient
number of shares of such class or series into which the Common Stock has been changed to be available for full conversion of the
Note at the new Conversion Price.
(d)
Reservation of Shares. The Issuer will at
all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance and delivery upon conversion
of this Note, free of preemptive or rights of purchase, the number of shares of Conversion Stock issuable upon conversion of this
Note at the minimum Conversion Price. The Issuer covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly and validly authorized, issued and fully paid and nonassessable. . The initial reserve of shares is 308,000,000,
which may be increased automatically in the event the initial reserve is exhausted.
(e)
Fractional Shares. The Issuer shall not be
required to issue certificates representing fractions of shares, nor shall it be required to issue scrip or pay cash in lieu of
fractional interests, it being the intent of the Issuer and the Holder that all fractional interests shall be eliminated and that
all issuances of Common Stock be rounded up to the nearest whole share.
(f)
Rights of the Holder.
The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder of the Issuer, either at law or in equity, and
the rights of the Holder are limited to those expressed in this Note.
(g)
Certificate. When the Conversion Price is
adjusted pursuant to the provisions hereof, the Issuer shall file with its official corporate records a certificate of its chief
financial or accounting officer setting forth in detail the facts requiring such adjustment, the computation thereof and the adjusted
Conversion Price, and shall mail a copy of the certificate to the Holder.
(h)
DTC Status. The Company's Common Stock are
currently eligible for OTC book-entry delivery, settlement and depository services and accordingly are not subject to a deposit
transfer restriction ("Deposit Chi11"). In the event, the Company's Common Stock becomes subject to a Deposit Chill,
the Variable Conversion Rate shall be amended to 35% multiplied by the Market Price (as defined herein) (representing a discount
rate of 65%).
(i)
Short Sales. Other than the transaction contemplated
hereunder, the Investor bas not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding
with such Investor, executed any disposition, including Short Sales, in the securities of the Company during the period commencing
from the time that such Investor first received a term sheet (written or oral) from the Company. In addition, the Investor shall
not engage in Short Sales of the Company's in the future. "Short Sales" shall include all ''short sales" as defined
in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable
shares of Common Stock).
(j)
Delivery of Common Stock Upon Conversion.
Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication)
of a Notice of Conversion meeting the requirements for conversion as provided in this Section 2.10, the Borrower shall issue and
deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon
such conversion within three (3) business days after such receipt (the "Deadline") (and, solely in the case of conversion
of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
(k)
Obligation of Borrower to Deliver Common Stock. Upon
receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable
upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced
to reflect such conversion, and, unless the Borrower defaults on its obligations under this Note, all rights with respect to the
portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities,
cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided
herein, the Borrower's obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective
of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower
to the holder of record, or any setoff, counterclaim, recoupment. limitation or termination, or any breach or alleged breach by
the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation
of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time,
on such date.
(l)
Delivery of Common Stock by Electronic Transfer.
In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating
in the Depository Trust Company ("OTC,,) Fast Automated Securities Transfer ("FAST'') program, upon request of the Holder
and its compliance with the provisions contained in this Note, the Borrower shall use its best efforts to cause its transfer agent
to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC,,) system.
(m)
Failure to Deliver Common Stock Prior to Deadline.
Without in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the
parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline, the
Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such
Common Stock through willful or deliberate acts on the part of the Borrower. Such cash amount shall be paid to Holder by the fifth
day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower
by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note,
in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall
be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right
are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained
in this Section 2.13 are justified.
3.
Redemption. The Borrower shall have no
right of prepayment.
4.
Defaults. If any one or more of the following
shall (Events of Default) shall occur:
(a)
the Issuer shall (i)
admit in writing its inability to pay its debts generally as they mature;(ii) make a general assignment for the benefit of creditors;(iii)
fail or be unable to pay its debts as they mature iv) be adjudicated a bankrupt or insolvent; (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking an arrangement with creditors; (vi) take advantage of any bankruptcy, insolvency
or readjustment of debt law or statute or file an answer admitting the material allegations of a petition filed against it in any
proceeding under any such law; (vii) apply for or consent to the appointment of a receiver, trustee or liquidation for all or a
substantial portion of its assets; (viii) have an involuntary case commenced against it under the Federal bankruptcy laws, which
case is not dismissed or stayed within thirty (30) days; or (viii) fail to pay its taxes on a timely basis; ix) violate any covenant
provided for in this Note, and such violation shall continue unremedied for a period of fifteen (t 5) days following the giving
of written notice thereof from the Holder;
(b)
any judgment is entered against the Issuer which is not bonded or discharged within 30
days;
(c)
a levy of any sort is made on or against some or all of the assets of the Issuer.
(d)
the sale, transfer, assignment or disposition of any of the Issuer's assets that are material
to the business and/or operations of the Issuer's business.
then, at any time thereafter and unless such
Event of Default shall have been cured or shall have been waived in writing by the Holder (which waiver shall not be deemed a waiver
of any subsequent default), at the option of the Holder and in the Holder's sole discretion, the Holder may, by written notice
to the Issuer, declare the entire unpaid principal amount of this Note then outstanding, together with accrued interest thereon,
to be forthwith due and payable, whereupon the same shall become forthwith due and payable.
(e)
Upon an event of default the Debenture will become immediately due and payable in an amount
in cash (the "Default Prepayment Amount") equal to 150%, multiplied by the sum of: (w) the then outstanding principal
amount of this Debenture plus (x) accrued and unpaid interest on the unpaid principal amount of this Debenture to the Default Date
plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) hereof.
5.
Investment Intent. The Holder, by its acceptance
hereof, hereby represents and warrants that this Note is being acquired, and the Common Stock issuable upon the conversion of this
Note will be acquired, for investment purposes only and without a view to the distribution thereof, and may be transferred only
in compliance with the Act. Unless, prior to the conversion of this Note, the issuance of the Common Stock has been registered
with the Securities and Exchange Commission pursuant to the Act, the Note Conversion Form shall be accompanied by a representation
of the Holder to the Issuer to the effect that such securities are being acquired for investment and not with a view to the distribution
thereof, and such other representations and documentation as may be reasonably required by the Issuer, unless in the opinion of
counsel to the Issuer such representations or other documentation are not necessary to comply with the Act.
6.
Default Rate of Interest;
Costs of Collection. In the event the Issuer shall default in the payment of this
Note when due, then (i) effective with such date of default, the interest rate payable hereunder shall be increased to eighteen
percent (18%) per annum and (ii) the Issuer agrees to pay, in addition to unpaid principal and interest, all the costs and expenses
incurred in effecting collection hereunder or enforcing the terms of this Note, including reasonable attorneys' fees.
7.
Applicable Law. This Note is issued under
and shall for all purposes be governed by and construed in accordance with the laws of the State of New York.
8.
Notices. Any notice required or permitted to be given
pursuant to this Note shall be deemed to have been duly given when delivered by hand or sent by certified or registered mail, return
receipt requested and postage prepaid, overnight mail or telecopier as follows:
If to the Holder:
Tide Pool Ventures Corporation
326 Pacific Coast Highway, Suite 207
Redondo Beach, California 90277
Attn: Todd Violette
If to the Company:
Nyxio Technologies Corp.
2156 NE Broadway
Portland, Oregon 97232
Attention:Giorgio Johnson
or at such other address as the Holder or the
Issuer shall designate by notice to the other given in accordance with this Section 8.
9.
Miscellaneous. This Note constitutes the rights
and obligations of the Holder and the Issuer. No provision of this Note may be modified except by an instrument in writing signed
by the party against whom the enforcement of any modification is sought.
The Issuer shall not take
any action that would impair the rights and privileges of the Holder herein or avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Issuer, but will at all times act in good faith to assist in carrying
out the provisions of this Note, including the Conversion rights provided in paragraph 2 herein and will take all such action as
may be necessary or appropriate in order to protect the conversion rights of the Holder of the Note.
The waiver by the Holder
of a breach of any provision of this Note shall not operate or be construed as a waiver of any subsequent breach.
If any provision, or part
thereof, of this Note shall be held to be invalid or unenforceable, such invalidity or enforceability shall attach only to such
provision and shall not in any way affect or render invalid or unenforceable any other provisions of this Note and this Note shall
be carried out as if such invalid or unenforceable provision, or part thereof: had been reformed, and any court of competent jurisdiction
is authorized to so reform such invalid or unenforceable provision, or part thereof, so that it would be valid, legal and enforceable
to the fullest extent permitted by applicable law.
In no event shall the rate of interest payable hereunder exceed the maximum rate
permitted by applicable law.
No provision of this Note
shall alter or impair the absolute and unconditional obligation of the Issuer to pay the principal of, and interest on, this Note
in accordance with the provisions hereof.
The Issuer agrees that
irreparable damage would occur in the event that any of the provisions of this Note were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that, except with respect to the payment of the amounts due
hereunder, the Holder of this Note shall be entitled to swift specific performance, injunctive relief or other equitable remedies
to prevent or cure breaches of the provisions of this Note and to enforce specifically the terms and provisions hereof, this being
in addition to any other remedy to which the Holder may be entitled under this Note.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the
Company has caused this Note to be signed on its behalf, in its corporate name, by its duly authorized officer, all as of the day
and year first above written.
NYXIO TECHNOLOGIES CORP.
By. /s/ Giorgio Johnson
Giorgio Johnson, CEO
CONVERTIBLE PROMISSORY NOTE
DUE APRIL 1, 2015
NOTICE OF CONVERSION
The undersigned hereby
elects to convert $_____________ principal amount of the Note (defined below) into that number of shares of Common Stock to be
issued pursuant to the conversion of the Note ("Common Stock'') as set forth below, of NYXTO TECHNOLOGIES CORP., a Nevada
corporation (the "Borrower") according to the conditions of the convertible note of the Borrower dated as of April l,
2014,(the "Note"},as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer
taxes, if any.
Box Checked as to applicable instructions (DWAC
Transfer shall apply only if Borrower is
DWAC eligible):
[ ] The Borrower shall electronically transmit
the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through
its Deposit Withdrawal Agent Commission system (''DWAC Transfer").
Name of DTC Prime Broker; Account Number:
[ ] The undersigned hereby requests that the
Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based
on the Holder's calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on
an attachment hereto:
____________________
____________________
____________________
____________________
Date of Conversion: ____________________
Applicable Conversion Price: $____________________
Number of Shares of Common Stock to be Issued
Pursuant to Conversion of the Note: ____________________
Amount of Principal Balance Due remaining
Under the Note after this conversion: ____________________
Tide Pool Venture Corporation
By: ____________________
Name:
Title:
Date: ____________________
NYXIO TECHNOLOGIES CORP.
CONVERTIBLE PROMISSORY NOTE
DUE APRIL 1, 2015
NOTE ASSIGNMENT FORM
FOR VALUE RECEIVED
The undersigned ____________________ (please
print or typewrite name of assignor) hereby sells, assigns and transfers unto ____________________ (please print or typewrite name,
address and social security or taxpayer identification number, if any, of assignee) the within Convertible Promissory Note of NYXIO
TECHNOLOGIES CORP.in the original principal amount of $42,500.00 and hereby authorizes the Company to transfer this Note on its
books.
| If the Holder is an individual: |
If the Holder is not an individual: |
| |
|
| Name(s) of Holder |
Name of Holder |
| |
By: |
| Signature of Holder |
Signature of Authorized Representative |
| |
|
| Signature, if jointly held |
Name and Title of Authorized Representative |
| |
|
| Date |
Date |
(Signature(s) guaranteed)
NEITHER THE ISSUANCE
AND SALE OF THE SECURITIES
REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
CONVERTIBLE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING,
THE SECURITIES MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
Principal
Amou nt: $20,000
Date:
May 8, 2014
CONYVERTIBLE PROMISSORY NOTE
NYXIO
Technologies, Corp.,
(hereinafter called the
"Issuer','
or "NYXO
"), hereby promises to pay
to the order of WHC Capital, LLC, a Delaware Limited Liability Company, or its registered assigns
(the "Holder ") the sum of $20,000,
together with any interest as set forth herein, on May 8, 2015 (the
"Maturity Date"), and to pay interest on the unpaid principal balance
hereof at the rate of Twelve percent
(12%) (the "Interest Rate") per annum from the date hereof
(the "Issue Date") until
the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise.
This Note
may not be
prepaid in whole
or in part
except as otherwise
explicitly set
forth herein. Any amount
of principal or interest on this Note which is not
paid when due shall bear interest at the rate of twenty
two percent (22%) per annum from
the due date
thereof until the same is paid ("Default
Interest "). Interest shall commence
accruing on the date that the
Note is fully paid
and shall be computed
on the basis of a 365-day year and
the actual number of
days elapsed. All payments due hereunder
(to the extent not
converted into common stock) shall be made in lawful money
of the United States of America.
All payments
shall be made
at such address
as the Holder shall
hereafter give to
the Issuer by
written notice made in accordance
with the provisions of this Note. Whenever any amount expressed to be due by the terms
of this Note is due on any day which is not a business
day, the same shall instead be due on the next succeeding day which
is a business day and, in the case of any interest payment date which is not
the date on which this Note is paid in
full, the extension of the due
date thereof shall not be taken into account for purposes of
determining the amount
of interest due
on such date. As
used in this Note, the term "business
day" shall mean any day
other than a Saturday, Sunday or a
day on which commercial banks in the
city of New York, New York are authorized
or required by law or executive order to remain closed. Each capitalized term used
herein, and not otherwise defined, shall have the
meaning ascribed thereto in the supporting documents of same date (attached hereto).
This
Note is free
from all taxes,
liens, claims
and encumbrances with
respect to the
issue thereof and shall
not be subject to preemptive rights or
other similar rights of shareholders of the Issuer and will not impose personal
liability upon the holder thereof.
The following
terms shall apply
to this Note:
ARTICLE
I. CONVERSION
RIGHTS
1.1
Conversion Right.
The Holder shall
have the right
and at any
time during the period
beginning on the
date of this Note to convert
all or any part of
the outstanding and unpaid principal amount of this Note into
fully paid and non- assessable shares of Common Stock,
as such Common Stock exists on the Issue
Date, or any shares of capital stock
or other securities of
the Issuer into which such Common Stock shall hereafter be changed or reclassified
at the conversion price (the "Conversion
Price") determined as provided herein
(a "Conversion"); provided, however, that
in no event shall the
Holder be entitled to convert any portion of this
Note in excess of that portion of this
Note upon conversion of which the sum of
(1) the number of
shares of Common Stock beneficially owned by the Holder and its
affiliates (other than shares of Common Stock which may be
deemed beneficially owned through the ownership of
the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Issuer subject to a limitation
on conversion or exercise analogous to the
limitations contained herein) and (2) the
number of shares of
Common Stock issuable upon the conversion of the
portion of this Note with respect to which
the determination of this proviso is being made, would result
in beneficial ownership by the Holder and its affiliates of more than 4.99%
of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, beneficial
ownership shall be determined in accordance
with Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Regulations l3D-G thereunder,
except as otherwise provided in clause (I ) of such proviso, provided,
further, however, that the limitations on conversion may be waived by the
Holder upon, at the election of the Holder, not less than 61 days' prior notice to the Issuer, and the provisions of the
conversion limitation shall continue to apply until such 61st day (or such later date,
as determined by the Holder, as may be specified in such notice of waiver). The number
of shares of Common Stock
to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below)
by the applicable Conversion Price then in effect on the date specified i n the notice of conversion, (the "Notice of Conversion"),
delivered to the Issuer by the Holder in accordance with
the Sections below; provided that the Notice of Conversion is submitted by facsimile
or e-mail (or by other means resulting in, or reasonably expected to result in,
notice) to the Issuer before 6:00 p.m., New York, New York
time on such conversion date
(the "Conversion Date").
The term
"Conversion Amount" means,
with respect to
any conversion
of this Note,
the sum of
(1)
the principal amount
of this Note
to be converted
in such conversion
plus (2) at
the Issuer's
option, accrued and
unpaid interest, if any,
on such principal amount at the
interest rates provided in this Note
to the Conversion Date, plus (3) at the Issuer's option, Default Interest, if any, on the amounts referred to in the immediately
preceding clauses (1)
and/or (2) plus (4) at the Holder's
option, any amounts owed to the
Holder.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. Holder,
at its discretion,
shall have the
right to convert this
Note in its
entirety or
in part(s) into
common stock of the
Company valued at a Forty Five
Percent (45%) discount off
of the average
of the Three (3) lowest intra-day
trading prices for the Company's common
stock during the
Thirty (30) trading days immediately preceding
a conversion date, as reported by
Quotestream.
(b)
Conversion Price During
Ma jor Announcements. Notwithstanding
anything contained in the
preceding section to
the contrary, in
the event the
Issuer (i) makes a
public announcement that it intends to consolidate or merge with any other corporation (other than a merger
in which the Issuer is the surviving or continuing corporation and its
capital stock is unchanged) or sell or transfer all or substantially all of the assets of
the Issuer or (ii) any person, group
or entity (including
the Issuer) publicly announces a tender
offer to purchase 50% or more of
the Issuer's Common Stock (or any
other takeover scheme)
(the date of the announcement referred to in clause
(i) or (ii) is hereinafter referred to as
the "Announcement Date"), then
the Conversion Price shall, effective upon the Announcement Date and continuing
through the Adjusted Conversion Price Termination Date (as defined below), be equal to
the lower of (x) the Conversion Price which
would have been applicable for a
Conversion occurring on
the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From
and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in
this Section. For purposes hereof,
"Adjusted Conversion Price Termination Date" shall mean,
with respect to any proposed transaction or tender offer (or takeover scheme)
for which a public announcement as contemplated
by this Section has been made,
the date upon which the Issuer (i n
the case of clause (i) above) or the person, group
or entity (in the case of clause (ii)
above) consummates or publicly announces the termination or abandonment of the proposed
transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to
become operative.
1.3
Authorized Shares. The Issuer
covenants that during
the period
the conversion right exists,
the Issuer will
reserve from its authorized and unissued
Common Stock a sufficient number of shares,
free from preemptive rights, to provide for the issuance of Common Stock upon the full
conversion of this Note. The Issuer is required at
all times to have authorized and
reserved five times the number of
shares that is actually issuable upon full conversion of the Note
(based on the Conversion Price of
the Notes in effect from time to time)(the "Reserved
Amount"). The Reserved Amount shall be increased
from time to time in accordance with the Issuer's obligations.
The
Issuer represents that
upon issuance,
such shares will
be duly
and validly issued, fully
paid and non-assessable. In addition, if
the Issuer shall issue
any securities or make any change to its capital structure which would change the number of
shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Issuer shall
at the same time make proper provision so
that thereafter there shall be a
sufficient number of shares of Common Stock
authorized and reserved, free
from preemptive rights, for
conversion of the outstanding Notes.
The
Issuer (i) acknowledges
that it has
irrevocably instructed its transfer agent
to issue certificates
for the Common
Stock issuable upon
conversion of this Note, and (i i)
agrees that its issuance of this Note shall constitute
full authority to its officers
and agents who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates
for shares of Common Stock in accordance with the terms and conditions of
this Note.
If,
at any time
the Issuer does
not maintain the
Reserved Amount it
will be considered an Event of Default
as defined in this Note.
1.4
Method of
Conversion.
(a)
Mechanics of
Conversion. This Note may
be converted by
the Holder in whole
or in part
at any time
from time to time after the Issue
Date, by (A) submitting to the Issuer a Notice
of Conversion (by facsimile, e-mail or other
reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m.,
New York, New York time).
(b)
Surrender of
Note Upon Conversion. Notwithstanding
anything to the
contrary set forth
herein, upon conversion
of this Note
in accordance with
the terms hereof, the
Holder shall not be required to physically
surrender this Note to the
Issuer unless the entire unpaid principal amount
of this Note is so
converted. The Holder and the Issuer shall maintain records showing the
principal amount so converted and
the dates of such conversions or shall use
such other method, reasonably satisfactory
to the Holder and the Issuer,
so as not to require physical surrender
of this Note upon each such conversion. In the event of any dispute or discrepancy,
such records of the Issuer shall, prima facie, be
controlling and determinative in the absence of manifest error. Notwithstanding
the foregoing, if any portion of this
Note is converted as aforesaid, the Holder
may not transfer this Note unless the Holder first
physically surrenders this Note to the Issuer, whereupon
the Issuer will forthwith issue and deliver
upon the order of the Holder a new Note of
like tenor, registered as the Holder
(upon payment by the Holder of any applicable transfer taxes) may request, representing
in the aggregate the remaining unpaid principal amount
of this Note. The Holder
and any assignee,
by acceptance of this Note, acknowledge and
agree that, by reason of the provisions of this
paragraph, following conversion of a portion
of this Note, the unpaid and unconverted
principal amount of this Note represented by this Note may
be less than the amount stated
on the face hereof.
(c)
Payment of Taxes.
The Issuer
shall not be
required to pay
any tax which
may be payable in
respect of any transfer involved in the issue
and delivery of shares of
Common Stock or other
securities or property on conversion of this
Note in a name other than that of
the Holder (or in street name), and the
Issuer shall not
be required to issue or
deliver any such shares or other securities
or property unless and until the person
or persons (other than the Holder or the
custodian in whose street name such shares are to be held for the
Holder's account) requesting the issuance
thereof shall have paid to the Issuer the amount of
any such tax or shall have established to
the satisfaction of the Issuer that
such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion.
Upon receipt by the
Issuer from the
Holder of a
facsimile transmission or
e-mail (or other
reasonable means of communication)
of a Notice of Conversion meeting the requirements for conversion as provided in
this Section, the
Issuer shall issue and deliver or
cause to be issued and delivered to or upon
the order of the
Holder certificates for the Common
Stock issuable upon such conversion within
three (3) business days
after such receipt (the "Deadline") (and,
solely in the case of conversion of
the entire unpaid principal amount hereof,
surrender of this Note) in accordance with the terms hereof and the Purchase Agreement.
(e)
Obligation of
Issuer to Deliver Common Stock.
Upon receipt
by the Issuer
of a Notice of Conversion,
the Holder shall
be deemed to
be the holder of record of the
Common Stock issuable upon such conversion,
the outstanding principal amount and the amount
of accrued and unpaid interest on this
Note shall be reduced to reflect such conversion,
and, unless the Issuer defaults on its
obligations under this Article
I, all rights with respect to
the portion of this Note
being so converted shall forthwith
terminate except the right to receive the
Common Stock or other securities,
cash or other assets, as herein provided,
on such conversion. If the Holder shall have given a Notice of Conversion
as provided herein, the Issuer's obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective
of the absence of any action
by the Holder to enforce the same, any
waiver or consent with respect to any provision
thereof, the recovery of any judgment
against any person or any action to enforce
the same, any failure or delay in the enforcement of any
other obligation of the Issuer to the holder of record, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or
alleged breach by the Holder of any obligation to the Issuer, and
irrespective of any other circumstance
which might otherwise limit
such obligation of the Issuer
to the Holder in connection with such
conversion. The Conversion Date specified in the Notice of Conversion
shall be the Conversion
Date so long as the Notice of Conversion
is received by the Issuer before 6:00
p.m., New York, New York time, on such date.
(f)
Delivery of Common
Stock by Electronic Transfer. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the Issuer is
participating in the Depository Trust Company
("DTC") Fast Automated Securities Transfer ("FAST") program,
upon request of the Holder and its compliance with
the provisions contained in
Section 1.1 and
in this Section 1.4, the Issuer
shall use its best efforts to cause its
transfer agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account
of Holder 's Broker with DTC through its
Deposit Withdrawal Agent Commission ("DWAC")
system.
(g)
Failure to
Deliver Common Stock Prior to Deadline.
Without in
any way limiting
the Holder's
right to pursue
other remedies, including
actual damages and/or equitable relief, the parties agree that if delivery
of the Common Stock issuable upon conversion
of this Note is not delivered by the Deadline
(other than a failure due to the circumstances described in Section 1.3 above,
which failure shall be governed by such Section) the
Issuer shall pay to the Holder $2,000 per day in cash,
for each day beyond the Deadline that the
Issuer fails to deliver such Common Stock. Such cash
amount shall be paid to
Holder by the fifth day of
the month following the month in which it has accrued or, at
the option of the Holder (by written notice
to the Issuer by the first day of the month following the
month in which it has accrued), shall be added to the principal amount of
this Note, in which event interest
shall accrue thereon in accordance with the
terms of this Note and such additional
principal amount shall be convertible into
Common Stock in accordance with the terms of this Note. The Issuer agrees that the
right to convert is a
valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such
conversion right are difficult if not impossible to qualify.
Accordingly the parties acknowledge that
the liquidated damages provision contained in this Section are justified.
Any delay or failure of performance by the Issuer hereunder
shall be excused if and to the extent caused by Force Majeure.
For purposes of this agreement, Force Majeure shall mean a cause or event that is
not reasonably foreseeable and/or
caused by the Issuer, including acts of God, fires,
floods, explosions, riots wars, hurricanes, etc.
1.5
Concerning the Shares. The shares of Common
Stock issuable upon conversion of this
Note may not
be sold or
transferred unless (i)
such shares are
sold pursuant to an effective registration
statement under the Act or (ii) the Issuer
or its transfer agent shall have been furnished with an
opinion of counsel (which opinion shall be
in form, substance and scope customary for opinions
of counsel in comparable transactions) to the
effect that the shares to be sold or transferred may be sold
or transferred pursuant to an exemption from such registration or (iii) such shares
are sold or transferred pursuant to Rule
144 under the Act (or a successor rule)
("Rule 144") or (iv) such shares
are transferred to an "affiliate" (as defined in Rule 144) of the
Issuer who agrees to sell or
otherwise transfer the shares on l y
in accordance with this Section 1.5
and who is an Accredited Investor. Except as otherwise
provided herein (and subject
to the removal provisions set
forth below), until
such time as the shares of Common
Stock issuable upon conversion of this Note
have been registered under the Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities
as of a particular date that can then be immediately
sold, each certificate for shares
of Common Stock issuable upon conversion of this Note that
has not been so included in an effective
registration statement or that has not been sold pursuant to
an effective registration statement or
an exemption that permits removal of the
legend, shall bear a legend substantially in the following
form, as appropriate:
"NEITHER THE ISSUANCE AND
SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE
BEEN REGISTERED UNDER THE
SECURITIES ACT OF
1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A)
AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED
BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO RULE 144 OR RULE 144A UNDER SAID
ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
The
legend set forth
above shall be
removed and the
Issuer shall issue
to the Holder a new certificate therefore
free of any transfer legend if (i) the
Issuer or its transfer agent shall
have received an opinion of counsel,
in form, substance and scope customary
for opinions of counsel in comparable transactions,
to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company
so that the sale or transfer is effected
or (ii) in
the case of the
Common Stock issuable upon conversion of
this Note, such security is registered for sale by the Holder
under an effective registration statement filed under the
Act or otherwise may be sold
pursuant to Rule 144 without any
restriction as to the number of securities
as of a particular date that can then be
immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Buyer
with respect to the transfer of
Securities pursuant to an exemption
from registration, such as Rule
144 or Regulation S, at the Deadline, it will
be considered an Event of Default pursuant to this note.
1.6
Effect of
Certain Events.
(a)
Effect of
Merger, Consolidation, Etc. At the
option of the
Holder,
the sale, conveyance
or disposition of all
or substantially all of
the assets of the Issuer, the effectuation
by the Issuer of a transaction or series of related
transactions in which more
than 50% of the voting power of the
Issuer is disposed of, or the consolidation, merger or
other business combination of the Issuer with or into any other Person (as
defined below) or Persons when
the Issuer is not the survivor shall either: (i) be deemed to
be an Event of Default (as defined in
Article UT) pursuant to which the Issuer shall
be required to pay to the Holder upon the
consummation of and as a condition
to such transaction an
amount equal to the Default Amount (as defined in Article III) or
(ii) be treated pursuant to Section l.6(b) hereof. "Person" shall mean any individual, corporation, limited
liability company, partnership, association, trust or other entity or organization.
(b)
Adjustment Due to
Merger, Consolidation, Etc.
If, at any time
when this Note
is issued and
outstanding
and prior to conversion of
all of the Notes,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a
result of which shares of Common Stock of the Issuer shall be changed into the
same or a different number of shares
of another class or classes of stock
or securities of the Issuer or another entity,
or in case of any sale or conveyance of all or substantially all
of the assets of
the Issuer other than in connection
with a plan of complete liquidation of the Issuer, then the Holder of
this Note shall thereafter
have the right to receive upon conversion of this Note,
upon the basis and upon the terms and conditions
specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Holder
would have been entitled to receive in such
transaction had this Note been converted
in full immediately prior to such transaction
(without regard to any limitations on conversion
set forth herein), and in any such case
appropriate provisions shall be made with respect
to the rights and interests of the Holder of this Note to the end that the provisions
hereof (including, without limitation, provisions for adjustment of the Conversion Price
and of the number of shares issuable upon
conversion of the Note) shall thereafter
be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion
hereof. The Issuer shall not affect any
transaction described in this Section l.6(b) unless (a) it first gives, to
the extent practicable, thirty (30) days prior written notice
(but in any event at least fifteen
(15) days prior written notice) of the
record date of the special
meeting of shareholders to approve, or if there is no such record date, the
consummation of, such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event
or sale of assets
(during which time the Holder shall
be entitled to convert this Note) and (b) the resulting successor or acquiring
entity (if not the Issuer) assumes by written instrument the obligations of this Section 1.6(b).
The above provisions shall similarly apply to successive consolidations, mergers, sales,
transfers or share exchanges.
(c)
Adjustment Due to
Distribution. If the
Issuer shall declare
or make any distribution
of its assets
(or rights to acquire its
assets) to holders of
Common Stock as a dividend, stock
repurchase, by way of return of capital or
otherwise (including any
dividend or distribution to the Issuer's shareholders in cash or shares (or rights
to acquire shares) of capital stock of a
subsidiary (i.e., a spin-off)) (a
"Distribution"), then the Holder of this Note
shall be entitled, upon any conversion
of this Note after the date of record for determining shareholders entitled to
such Distribution, to receive the amount
of such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion
had such Holder been
the holder of such shares of Common
Stock on the record date for the determination
of shareholders entitled to such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If,
at any time
when any
Notes are issued
and outstanding, the
Issuer issues or sells, or in accordance
with this Section hereof is deemed to have issued or sold, any shares of Common
Stock for no consideration or for a consideration
per share (before deduction of reasonable expenses or commissions or underwriting discounts
or allowances in connection therewith) less than
the Conversion Price in effect on the date
of such issuance (or
deemed issuance) of such shares of Common
Stock (a "Dilutive Issuance"), then immediately upon
the Dilutive Issuance,
the Conversion Price
will be reduced to the amount of the consideration
per share received by the Issuer in
such Dilutive Issuance.
The
Issuer shall be
deemed to have
issued or sold
shares of Common Stock
if the Issuer in
any manner issues
or grants any warrants, rights or options
(not including employee stock option
plans), whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable
for Common Stock ("Convertible Securities") (such
warrants, rights and options to purchase
Common Stock or Convertible Securities
are hereinafter referred to as "Options")
and the price per share for
which Common Stock is issuable upon
the exercise of such Options
is less than the Conversion Price then in effect, then the
Conversion Price shall be equal to
such price per share. For purposes of the preceding
sentence, the "price per share for which Common Stock is
issuable upon the exercise of such Options" is determined by dividing (i) the
total amount, if any, received or receivable by the Issuer as consideration for the
issuance or granting of all such Options, plus the minimum aggregate amount of additional
consideration, if any, payable
to the Issuer upon the exercise of all such Options, plus,
in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the
exercise of all such Options (assuming
full conversion of Convertible Securities, if
applicable). No further adjustment to
the Conversion Price will be made upon
the actual issuance of such Common Stock upon
the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of
such Options.
Additionally,
the Issuer shall
be deemed to
have issued or
sold shares of Common Stock
if the Issuer in
any manner issues
or sells any Convertible Securities,
whether or not immediately convertible (other
than where the same are issuable upon the exercise of
Options), and the price
per share for which Common Stock
is issuable upon such conversion or exchange
is less than the Conversion Price then in effect, then the
Conversion Price shall be equal
to such price
per share. For the
purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon such
conversion or exchange" is determined by dividing
(i) the total amount, if any, received
or receivable by the Issuer as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Issuer
upon the conversion or exchange thereof at the time such Convertible
Securities first become convertible or
exchangeable, by (ii) the maximum total
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment to the
Conversion Price will be made upon
the actual issuance of such Common
Stock upon conversion or exchange of such
Convertible Securities.
(e)
Purchase Rights.
If, at any
time when any
Notes are issued
and outstanding, the
Issuer issues any
convertible securities or
rights to purchase stock, warrants,
securities or other property (the "Purchase Rights")
pro rata to the record holders of
any class of Common Stock, then
the Holder of this Note will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which such
Holder could have acquired if
such Holder had held the number of shares of Common Stock acquirable upon complete conversion of
this Note (without regard to any limitations on conversion contained herein) immediately
before the date on
which a record is taken for the grant,
issuance or sale of such Purchase Rights or, if
no such record is taken, the date as
of which the record holders
of Common Stock are to be determined for the
grant, issue or sale of such Purchase
Rights.
(f)
Notice of Adjustments. Upon
the occurrence
of each adjustment
or readjustment of
the Conversion Price
as a result
of the events described
in this Section 1.6, the Issuer, at its expense,
shall promptly compute such adjustment or readjustment and prepare and furnish
to the Holder of a certificate setting forth
such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The Issuer shall,
upon the written request at any time of the Holder, furnish to such Holder a
like certificate setting forth (i) such
adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of
shares of Common Stock and the amount,
if any, of other securities or property which
at the time would be received upon conversion of the Note.
1.7
Trading Market
Limitations. Unless permitted
by the applicable
rules and regulations of the
principal securities market on which
the Common Stock is then listed or traded,
in no
event shall the Issuer issue
upon conversion of or otherwise pursuant to this Note and the other Notes issued
pursuant to the Purchase Agreement more
than the maximum number of shares of
Common Stock that the Issuer can issue pursuant to any rule
of the principal United States securities market
on which the Common Stock is then traded (the "Maximum Share Amount"), which shall
be 4.99% of the total shares outstanding on the Closing Date (as defined in the
Purchase Agreement), subject to equitable adjustment from
time to time for stock
splits, stock dividends, combinations, capital reorganizations and similar events
relating to the Common Stock occurring
after the date hereof. Once the Maximum Share Amount has been issued,
if the Issuer fails to eliminate
any prohibitions under applicable law or the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with jurisdiction over the
Issuer or any of its securities
on the Issuer's ability to issue shares of Common Stock in excess of the Maximum
Share Amount, in lieu of any further right to convert this Note, this
will be considered an Event of Default under Section 3.3 of the Note.
1.8
Status as Shareholder.
Upon submission
of a Notice
of Conversion by
a Holder,
(i) the shares
covered thereby (other than the shares,
if any, which cannot
be issued because their issuance would exceed such
Holder's allocated portion of the
Reserved Amount or Maximum Share Amount) shall be
deemed converted into shares of Common
Stock and (i i) the Holder's rights as a Holder
of such converted portion of this
Note shall cease and terminate, excepting
only the right to receive
certificates for such shares of Common
Stock and to any remedies provided herein
or otherwise available at law or in equity to such Holder because of
a failure by the Issuer to comply with the terms of this Note. Notwithstanding
the foregoing, if a Holder has not received certificates for all shares of Common Stock
prior to the tenth (10th) business day after
the expiration of the
Dead line with respect to a
conversion of any portion of this Note for any
reason, then (unless the Holder otherwise elects to
retain its status as a holder of Common
Stock by so notifying the Issuer) the Holder shall regain the rights of a Holder
of this Note with
respect to such unconverted portions of this Note and
the Issuer shall, as soon as practicable, return such unconverted Note to the
Holder or, if the Note has not been surrendered, adjust its records to reflect
that such portion of this Note has not
been converted. In all cases, the Holder shall retain
all of its rights and remedies (including,
without limitation, (i) the right to receive
Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for
such Conversion Default and any subsequent
Conversion Default and (ii) the right to have the Conversion
Price with respect to subsequent
conversions determined in accordance with Section 1.3) for the Issuer's failure to convert
this Note.
1.9
Prepayment. Maker
may prepay this
Note, in
accordance with the following
schedule: If within 180
calendar days of
the execution of this
Note, $135% of all outstanding principal
and interest due on each outstanding Note
in one payment; After 18 calendar days of
this Note being executed, any prepayments
must be approved by both parties in
writing.
ARTICLE
II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock.
So long as
the Issuer shall
have any obligation under
this Note, the
Issuer shall not
without the Holder's written consent (a) pay, declare
or set apart for such payment, any dividend or other distribution (whether in
cash, property or other securities) on shares of capital
stock other than dividends on shares
of Common Stock solely in the form
of additional shares of Common Stock
or (b) directly or indirectly or through
any subsidiary make any other
payment or distribution in respect of its
capital stock except for distributions pursuant to any shareholders' rights
plan which is approved by a majority of the
Issuer's disinterested directors.
2.2
Restriction on Stock
Repurchases. So long
as the Issuer
shall have any obligation
under this Note,
the Issuer shall
not without the Holder's written consent redeem, repurchase or otherwise
acquire (whether for cash
or in exchange for property
or other securities or otherwise) in any one
transaction or series
of related transactions any shares of capital stock of the Issuer or any warrants,
rights or options
to purchase or acquire any such shares.
2.3
Borrowings. So
long as the
Issuer shall have
any obligation
under this Note, the Issuer shall
not, without the Holder's written consent, create,
incur, assume guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any person,
firm, partnership, joint venture or corporation, except
by the endorsement of negotiable
instruments for deposit or collection, or suffer
to exist any liability for borrowed money, except (a) borrowings in existence
or committed on the date hereof and of which
the Issuer has informed
Holder in writing prior to the date hereof, (b) indebtedness to trade creditors
or financial institutions incurred in the
ordinary course of business or (c) borrowings,
the proceeds of which shall be used to repay this
Note.
2.4
Sale of
Assets. So long
as the Issuer
shall have any
obligation under
this Note, the Issuer shall not, without
the Holder's written consent, sell, lease or otherwise dispose of
any significant portion of its assets outside the ordinary course of business.
Any consent to the disposition of any assets may be conditioned on
a specified use of the proceeds
of disposition.
2.5
Advances and
Loans. So long
as the Issuer
shall have any
obligation under this Note,
the Issuer shall
not, without the
Holder's written consent, lend money, give credit
or make advances to any person, firm, joint
venture or corporation, including, without limitation, officers, directors, employees,
subsidiaries and affiliates of the Issuer, except loans, credits or advances (a) in existence or
committed on the date hereof and which the Issuer
has informed Holder in writing prior to the date hereof, (b)
made in the ordinary course of business or (c) not in excess
of $100,000.
ARTICLE III.
EVENTS OF
DEFAULT
If
any of the
following events of
default (each, an
"Event of Default")
shal1 occur:
3.1
Failure to
Pay Principal or
Interest. The Issuer fails to pay the principal
hereof or interest thereon when due on this
Note, whether at maturity, upon acceleration or
otherwise.
3.2
Conversion and the Shares. The Issuer fails to issue shares of Common
Stock to the
Holder (or announces
or threatens in
writing that it
will not honor
its obligation to
do so) upon exercise by the
Holder of the conversion rights of the Holder
in accordance with the terms of
this Note, fails to transfer or cause
its transfer agent to transfer (issue)
(electronically or in certificated form) any certificate for shares of Common
Stock issued to the Holder upon conversion of
or otherwise pursuant to this Note as and when required by this Note,
the Issuer directs its transfer agent
not to transfer or delays, impairs, and/or hinders its transfer agent in transferring
(or issuing) (electronically or in certificated form) any certificate for shares of
Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to
this Note as and when required by this Note, or fails to remove (or directs its transfer
agent not to remove or impairs, delays, and/or hinders its transfer
agent from removing) any restrictive legend (or to withdraw any stop transfer
instructions in respect thereof) on any certificate for any
shares of Common Stock issued to the Holder upon
conversion of or otherwise pursuant to this Note as and when required by this Note
(or makes any written announcement, statement or threat that it does not intend to honor
the obligations described in this paragraph)
and any such failure shall continue uncured (or any written announcement,
statement or threat not to honor its obligations shall not
be rescinded in writing) for
three (3) business days after
the Holder shall have delivered a Notice of Conversion. It
is an obligation of the Issuer to remain current in its
obligations to its transfer agent. It shall be an event of default of this Note,
if a conversion of this Note is delayed, hindered
or frustrated due to a balance owed by the Issuer to its transfer agent. If
at the option of the Holder, the
Holder advances any funds to the Issuer's
transfer agent in order to process a conversion, such advanced funds shall
be paid by the Issuer to the Holder within forty eight (48) hours of a demand from the Holder.
3.3
Breach of Covenants. The Issuer
breaches any material
covenant or other material
term or condition
contained in this
Note and any
collateral documents including but
not limited to the Purchase Agreement and
such breach continues for
a period of ten (10) days after written notice thereof to the Issuer from the Holder.
3.4
Breach of Representations and
Warranties. Any representation or warranty
of the Issuer
made herein or
in any agreement,
statement or certificate
given in writing pursuant
hereto or in
connection herewith (including, without l imitation,
the Purchase Agreement), shall be
false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have)
a material adverse effect on the
rights of the Holder with respect to this
Note or the Purchase Agreement.
3.5
Receiver or Trustee.
The Issuer or
any subsidiary of
the Issuer shall make
an assignment for
the benefit of
creditors, or apply for or consent
to the appointment
of a receiver or trustee for it or for a substantial part of its property or
business, or such a receiver or trustee shall otherwise be appointed.
3.6
Judgments. Any
money judgment, writ
or similar
process shall be
entered or filed
against the Issuer
or any subsidiary of
the Issuer or any of its property or other
assets for more than $50,000, and
shall remain unvacated, unbonded or unstayed
for a period of twenty (20) days unless otherwise consented to by the Holder,
which consent will not be unreasonably withheld.
3.7
Bankruptcy.
Bankruptcy, insolvency,
reorganization or liquidation proceedings
or other proceedings,
voluntary or involuntary,
for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted
by or against the Issuer or any subsidiary
of the Issuer.
3.8
Delisting of Common Stock.
The Issuer shall
fail to maintain
the listing of
the Common Stock on at least
one of the
OTCBB or an equivalent replacement
exchange, the Nasdaq National Market,
the Nasdaq SmallCap Market,
the New York Stock Exchange, or the American Stock Exchange.
3.9
Failure to Comply with the Exchange Act.
The Issuer shall
fail to comply with
the reporting requirements
of the Exchange
Act; and/or
the Issuer shall cease to be subject to
the reporting requirements of the Exchange Act.
3.10
Liquidation. Any
dissolution, liquidation,
or winding up
of Issuer or
any substantial
portion of its
business.
3.11
Cessation of
Operations. Any cessation
of operations by
Issuer or Issuer admits
it is otherwise
generally unable to
pay its debts
as such debts become due, provided,
however, that any disclosure of the Issuer's ability
to continue as a "going concern" shall not be an
admission that the Issuer cannot pay its debts
as they become due.
3.12
Maintenance of Assets.
The failure by Issuer to maintain any material
intellectual property rights,
personal, real property
or other assets
which are necessary
to conduct its business
(whether now or in
the future).
3.13
Financial Statement Restatement. The restatement
of any financial statements filed
by the Issuer
with the SEC
for any date
or period from
two years prior
to the Issue Date of this Note
and until this Note is no longer outstanding, if the result
of such restatement would, by comparison to the
original financial statement, have constituted a material adverse effect on the
rights of the Holder with respect to this Note or supporting documents.
3.14
Reverse Splits. The Issuer effectuates
a reverse split of its Common Stock
without at least
twenty (20) days
prior written notice
to the Holder.
3.15
Replacement of
Transfer Agent. In
the event that the
Issuer proposes to replace
its transfer agent, the
Issuer fails to
provide, prior to the effective date
of such replacement, a fully executed Irrevocable Transfer Agent
Instructions in a form as initially
delivered pursuant to the Purchase Agreement
(including but not limited to
the provision to irrevocably reserve shares of Common Stock in the Reserved Amount)
signed by the successor transfer agent to Issuer
and the Issuer.
3.16
Cross-Default. Notwithstanding
anything to the
contrary contained
in this Note
or the other
related or companion
documents, a breach or default by
the Issuer of any covenant or other term
or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods,
shall, at
the option of the Issuer, be considered
a default under this
Note and the Other Agreements,
in which event the Holder shall be entitled
(but in no event required) to
apply all rights and remedies
of the Holder under
the terms of this Note and
the Other Agreements by reason of
a default under said Other Agreement or
hereunder. "Other Agreements" means, collectively, all agreements and instruments
between, among or by: (1)
the Issuer, and, or for the benefit of, (2) the Holder and any affiliate
of the Holder, including, without limitation,
promissory notes; provided, however, the term "Other
Agreements" shall not include the
related or companion documents to this Note. Each
of the loan transactions will
be cross-defaulted with each other loan
transaction and with all other existing and
future debt of Issuer
to the Holder.
Upon
the occurrence and
during the continuation
of any Event
of Default specified
in Section 3.1
(solely with respect to failure to pay the principal hereof or interest thereon
when due at the Maturity Date), the Note shall become immediately due and
payable and the Issuer shall pay to the
Holder, in full satisfaction of its obligations hereunder, an amount
equal to the Default Sum (as defined herein). UPON
THE OCCURRENCE AND DURING THE CONTINUATION OF ANY
EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY DUE AND PAYABLE AND
THE ISSUER SHALL PAY TO THE HOLDER,
IN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO: (Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z)
TWO (2). Upon the
occurrence and during
the continuation of any Event of Default specified in Sections 3.1 (solely with
respect to failure to pay the principal
hereof or interest thereon when due on this Note
upon a Trading Market Prepayment Event pursuant to
Section 1.7 or upon acceleration), 3.3, 3.4,
3.6, 3.8, 3.9, 3.11, 3.12, 3.13, 3.14, and/or 3. 15 exercisable
through the delivery
of written notice to the Issuer by such
Holders (the "Default Notice"), and upon the occurrence of an Event
of Default specified the remaining sections of
Articles III (other than failure
to pay the principal hereof
or interest thereon at the Maturity Date specified in Section 3, I
hereof), the Note shall become immediately
due and payable and the
Issuer shall pay to the Holder, in full satisfaction of its obligations hereunder,
an amount equal to the greater of (i) 150%
times the sum of (w) the then outstanding principal amount
of this Note plus (x) accrued
and unpaid interest on the unpaid
principal amount of this Note to the date of payment (the "Mandatory Prepayment
Date") plus (y) Default
Interest, if any, on the amounts
referred to in clauses (w) and/or (x) (z)
any amounts owed to the Holder pursuant
to Sections 1.3 and 1.4(g) hereof
(the then outstanding principal amount of this Note
to the date of payment plus the
amounts referred to in clauses (x), (y)
and (z) shall collectively
be known as the "Default Sum") or (ii) the "parity value"
of the Default Sum to be prepaid, where
parity value means (a) the highest number of
shares of Common Stock issuable upon
conversion of or otherwise pursuant
to such Default Sum in accordance with
Article I, treating the Trading Day immediately preceding the Mandatory Prepayment
Date as the "Conversion Date" for purposes of
determining the lowest applicable Conversion
Price, unless the Default Event arises as a
result of a
breach in respect of a
specific Conversion Date in which case
such Conversion Date shall be the Conversion
Date), multi plied by (b) the highest Closing Price
for the Common Stock during the period beginning on
the date of first occurrence of the Event
of Default and ending
one day prior to
the Mandatory Prepayment Date (the
"Default Amount") and all other amounts payable hereunder shall
immediately become due and payable, al l without demand, presentment or notice, al l
of which hereby are expressly waived, together with all costs, including, without
limitation, legal fees and expenses, of collection,
and the Holder shall be entitled to exercise
all other rights and remedies available
at law or in equity.
If the
Issuer fails to
pay the Default
Amount within five
(5) business days
of written notice that
such amount is
due and
payable, then the Holder shall
have the right
at any time, so long
as the Issuer remains in default (and
so long and to the extent that there
are sufficient authorized shares), to require the
Issuer, upon written notice,
to immediately issue, in
lieu of the Default Amount, the number of shares of Common Stock of the Issuer
equal to the Default Amount divided by the Conversion Price then
in effect.
ARTICLE IV.
MISCELLANEOUS
4.1
Failure or
Indulgence Not Waiver.
No failure
or delay on
the part of
the Holder in the exercise
of any power, right or privilege
hereunder shall operate as a waiver
thereof, nor shall any
single or partial exercise
of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privileges. All rights and remedies existing hereunder are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
4.2
Notices.
All notices, demands,
requests, consents,
approvals, and other
communications required or
permitted hereunder shall
be in writing and, unless otherwise specified herein, shall be (i)
personally served, (ii) deposited in the mail, registered
or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air
courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth below
or to such other address as such party shall
have specified most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery
by facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a
business day during normal business hours where such notice
is to be received), or the first business
day following such delivery (if delivered other
than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express
courier service, fully prepaid , addressed to such address, or upon actual receipt
of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to
the Issuer, to:
_________________
_________________
_________________
_________________
Attn: Facsimile:
If to
the Holder:
WHC
Capital, LLC.
200 Stonehinge
Lane,
Suite
3
Carle Place,
NY. 11514
Tel: 718.530.0182
4.3
Amendments. This
Note and any
provision hereof may
only be amended by
an instrument in
writing signed by
the Issuer and the Holder. The
term "Note" and all reference
thereto, as used throughout this
instrument, shall
mean this instrument (and the
other Notes issued pursuant to the
Purchase Agreement) as originally
executed, or if later
amended or supplemented, then as so amended
or supplemented.
4.4
Assignability. This Note
shall be binding
upon the Issuer
and its successors and
assigns, and shall
inure to be
the benefit of
the Holder and its successors and assigns. Each transferee of
this Note must be an "accredited investor" (as defined
in Rule 501(a) of the 1933 Act). Notwithstanding anything in
this Note to the
contrary, this Note may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement.
4.5
Cost of
Collection. If default is
made in the payment of
this Note, the Issuer
shall pay the
Holder hereof costs
of collection , including reasonable attorneys'
fees.
4.6
Governing Law. This
Note shall be governed
by and construed
in accordance with
the laws of
the State of
New York without
regard to principles of conflicts
of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Note shall be brought
onl1y in the state courts of New York or
in the federal courts located in the
state and county of Nassau . The parties to this
Note hereby irrevocably waive any objection to jurisdiction and venue
of any action instituted hereunder and shall
not assert any defense based on Jack of jurisdiction or venue or based upon forum
non conveniens. The Issuer and Holder waive trial
by jury. The prevailing party shall
be entitled to recover from the other
party its reasonable attorney's fees and costs. In the
event that any provision of this Note
or any other agreement delivered in
connection herewith is invalid or unenforceable
under any applicable statute or rule
of law, then such provision shall be deemed
inoperative to the extent that it
may conflict therewith and shall be deemed mod ified to
conform with such statute or rule
of law. A n y
such provision which may prove
invalid or unenforceable under any
law shall not affect the validity
or enforceability of any other provision of any agreement. Each
party hereby irrevocably waives personal service of process and consents to process
being served in any suit, action or proceed ing
in connection with this Agreement
or any other Transaction Document by
mailing a copy thereof via
registered or certified mail or overn ght delivery
(with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that
such service shall constitute good
and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any other
manner permitted by law.
4.7
Certain Amounts. Whenever pursuant
to this Note
the Issuer is required
to pay an
amount
in excess of
the outstanding principal amount (or the
portion thereof required to
be paid at that time) pl us accrued and unpaid interest plus Default
Interest on such interest, the Issuer
and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be
difficult to determine and the amount to
be so paid by the Issuer
represents stipulated damages
and not a penalty and is intended to compensate
the Holder in part for loss of the opportunity
to convert this Note and
to earn a return
from the sale of shares of Common Stock
acquired upon conversion
of this Note at a
price in excess of the price paid for
such shares pursuant to this Note . The Issuer and
the Holder hereby agree
that such amount of stipulated damages
is not plainly disproportionate
to the possible loss to the Holder from
the receipt of a cash payment without the opportunity to convert this
Note into shares of Common Stock.
4.8
Purchase Agreement. By
its acceptance of
this Note,
each party agrees
to be bound
by the applicable
terms of the Purchase
Agreement.
4.9
Notice of Corporate Events. Except as
otherwise provided below,
the Holder of
this Note shall
have no rights
as a Holder
of Common Stock
unless and only to the extent that it converts this Note
into Common Stock. The Issuer shall provide the Holder with prior notification
of any meeting of the Issuer's
shareholders (and copies
of proxy materials and other information sent to shareholders). In the event
of any taking by the Issuer of a
record of its shareholders for the purpose of determining shareholders who
are entitled to receive payment of any dividend or
other distribution, any right to
subscribe for, purchase or otherwise
acquire (including by way of merger, consolidation,
reclassification or recapitalization) any share of any class
or any other securities or property, or to receive any other right,
or for the purpose of determining shareholders who are entitled to vote in connection
with any proposed sale, lease or conveyance
of all or substantially all
of the assets of the Issuer or any proposed liquidation, dissolution
or winding up of the Issuer, the Issuer
shall mail a notice to the Holder, at least
twenty (20) days prior to the record date specified therein
(or thirty (30) days prior to
the consummation of the transaction or
event, whichever is earlier), of
the date on which any
such record is to be taken for the
purpose of such dividend , distribution,
right or other event, and
a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the extent known at such
time. The Issuer shall make a
public announcement of any event
requiring notification to the Holder hereunder substantially simultaneously with the notification
to the Holder in accordance with the terms of this Section 4.9.
4.10
Remedies. The Issuer
acknowledges that a
breach by it
of its obligations hereunder
will cause irreparable
harm to the
Holder, by vitiating the intent and purpose
of the transaction contemplated hereby. Accordingly, the Issuer acknowledges
that the remedy at law for a breach
of its obligations under this Note will be inadequate and agrees,
in the event of a breach or threatened breach
by the Issuer of the provisions of
this Note, that the Holder shall be
entitled, in addition to all
other available remedies at
law or in equity, and
in addition to the penalties assessable herein , to an injunction or injunctions
restraining, preventing or curing any breach of this Note and to
enforce specifically the terms and provisions thereof, without the necessity of showing
economic loss and without any bond
or other security being required.
IN WITNESS
WHEREOF, Issuer has
caused this Note
to be signed
in its name
by its duly authorized
officer:
NYXIO
Technologies, Corp.
By: /s/ Giorgio Johnson
Print: Giorgio
Johnson
Title/Date: CE0
05/09/2014
NEITHER
THE ISSUANCE
AND SALE OF
THE SECURITIES
REPRESENTED BY THIS
NOTE NOR THE SECURITIES INTO
WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR (B)
AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A
UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY
THE SECURITIES.
Principal
Amount: $20,000
Date:
June 16, 2014
CONVERTIBLE PROMISSORY NOTE
NYXIO Technologies, Corp., (hereinafter called
the "Issuer'' or "NYXO"), hereby promises to pay to the order of WHC Capital, LLC, a Delaware Limited Liability
Company, or its registered assigns (the "Holder") the sum of $20,000, together with any interest as set forth herein,
on June 16, 2015 (the "Maturity Date"), and to pay interest on the unpaid principal balance hereof at the rate of Twelve
percent (12%) (the "Interest Rate") per annum from the date hereof (the "Issue Date") until the same becomes
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.
This Note may not be prepaid in whole or in
part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note which is not paid when due
shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid ("Default
Interest"). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of
a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into common stock)
shall be made in lawful money of the United States of America.
All payments shall be made at such address
as the Holder shall hereafter give to the Issuer by written notice made in accordance with the provisions of this Note. Whenever
any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead
be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on
which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining
the amount of interest due on such date. As used in this Note, the term "business day'' shall mean any day other than a Saturday,
Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order
to remain closed. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in the
supporting documents of same date (attached hereto).
This Note is free from
all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other
similar rights of shareholders of the Issuer and will not impose personal liability upon the holder thereof.
The following terms shall
apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1
Conversion Right. The Holder shall have the right and at any time during the period
beginning on the date of this Note to convert all or any part of the outstanding and unpaid principal amount of this Note into
fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital
stock or other securities of the Issuer into which such Common Stock shall hereafter be changed or reclassified at the conversion
price (the "Conversion Price") determined as provided herein (a "Conversion"); provided , however, that in
no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion
of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares
of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised
or unconverted portion of any other security of the Issuer subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this
Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder
and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and Regulations 13D-G thereunder, except as otherwise provided in clause (1)
of such proviso, provided , further, however, that the limitations on conversion may be waived by the Holder
upon, at the election of the Holder, not less than 61 days' prior notice to the Issuer, and the provisions of the conversion limitation
shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice
of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing
the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice
of conversion, (the ''Notice of Conversion"), delivered to the Issuer by the Holder in accordance with the Sections below;
provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected
to result in, notice) to the Issuer before 6:00 p.m., New
York, New York time on such conversion date
(the "Conversion Date").
The term "Conversion Amount" means,
with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion
plus (2) at the Issuer's option, accrued and unpaid interest, if any, on such. principal amount at the interest rates provided
in this Note to the Conversion Date, plus (3) at the Issuer's option, Default Interest, if any, on the amounts referred to in the
immediately preceding clauses (1) and/or (2) plus (4) at the Holder' s option, any amounts owed to the Holder.
1.2
Conversion Price.
(a)
Calculation of Conversion Price. Holder, at its discretion, shall have the right to
convert this Note in its entirety or in part(s) into common stock of the Company valued at a Forty Five Percent (45%) discount
off of the average of the Three (3) lowest intra-day trading prices for the Company's common stock during the Thirty (30) trading
days immediately preceding a conversion date, as reported by Quotestream.
(b)
Conversion Price During Major Announcements. Notwithstanding anything contained in
the preceding section to the contrary, in the event the Issuer (i) makes a public announcement that it intends to consolidate or
merge with any other corporation (other than a merger in which the Issuer is the surviving or continuing corporation and its capital
stock is unchanged) or sell or transfer all or substantially all of the assets of the Issuer or (ii) any person, group or entity
(including the issuer) publicly announces a tender offer to purchase 50% or more of the Issuer's Common Stock (or any other takeover
scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the "Announcement Date"),
then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination
Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring
on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion
Price Termination Date, the Conversion Price shall be determined as set forth in this Section. For purposes hereof, "Adjusted
Conversion Price Termination Date" shall mean, with respect to any proposed transaction or tender offer (or takeover scheme)
for which a public announcement as contemplated by this Section has been made, the date upon which the Issuer (in the case of clause
(i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination
or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(b) to become operative.
1.3
Authorized Shares. The Issuer covenants that during the period the conversion right
exists, the Issuer will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive
rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Issuer is required at all times
to have authorized and reserved five times the number of shares that is actually issuable upon full conversion of the Note (based
on the Conversion Price of the Notes in effect from time to time)(the "Reserved Amount"). The Reserved Amount shall be
increased from time to time in accordance with the Issuer's obligations.
The Issuer represents that
upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Issuer shall issue
any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the
Notes shall be convertible at the then current Conversion Price, the Issuer shall at the same time make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved , free from preemptive rights,
for conversion of the outstanding Notes.
The Issuer (i) acknowledges that it has
irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note,
and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with
the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance
with the terms and conditions of this Note.
If, at any time the Issuer
does not maintain the Reserved Amount it will be considered an Event of Default as defined in this Note.
1.4
Method of Conversion.
(a)
Mechanics of Conversion. This Note may be converted by the Holder in whole or in part
at any time from time to time after the Issue Date, by (A) submitting to the Issuer a Notice of Conversion (by facsimile, e-mail
or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time).
(b)
Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth
herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender
this Note to the Issuer unless the entire unpaid principal amount of this Note is so converted. The Holder and the Issuer shall
maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably
satisfactory to the Holder and the Issuer, so as not torequire physical surrender of this Note upon each such conversion. In the
event of any dispute or discrepancy, such records of the Issuer shall, prima facie, be controlling and determinative in the absence
of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer
this Note unless the Holder first physically surrenders this Note to the Issuer, whereupon the Issuer will forthwith issue and
deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable
transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any
assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion
of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the
amount stated on the face hereof.
(c)
Payment of Taxes. The Issuer shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion
of this Note in a name other than that of the Holder (or in street name), and the Issuer shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian
in whose street name such shares are to be held for the Holder's account) requesting the issuance there of shall have paid to the
Issuer the amount of any such tax or shall have established to the satisfaction of the Issuer that such tax has been paid.
(d)
Delivery of Common Stock Upon Conversion. Upon receipt by the Issuer from the Holder
of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements
for conversion as provided in this Section, the Issuer shall issue and deliver or cause to be issued and delivered to or upon the
order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt
(the "Deadline") (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this
Note) in accordance with the terms hereof and the Purchase Agreement.
(e)
Obligation of Issuer to Deliver Common Stock. Upon receipt by the Issuer of a Notice
of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding
principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion , and,
unless the Issuer defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so
converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as
herein provided , on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Issuer's obligation
to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any
action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment
against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Issuer
to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by
the Holder of any obligation to the Issuer, and irrespective of any other circumstance which might otherwise limit such obligation
of the Issuer to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall
be the Conversion Date so long as the Notice of Conversion is received by the Issuer before 6:00 p.m., New York, New York time,
on such date.
(f)
Delivery of Common Stock by Electronic Transfer.
In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Issuer is participating in the Depository Trust Company ("OTC") Fast Automated
Securities Transfer ("FAST') program, upon request of the Holder and its compliance with the provisions contained in Section
1.1 and in this Section 1.4, the Issuer shall use its best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Holder by crediting the account of Holder's Broker with OTC through its Deposit Withdrawal
Agent Commission ("DWAC") system.
(g)
Failure to Deliver Common Stock Prior to Deadline. Without
in any way limiting the Holder's right to pursue other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a
failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Issuer shall
pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Issuer fails to deliver such Common Stock.
Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option
of the Holder (by written notice to the Issuer by the first day of the month following the month in which it has accrued), shall
be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this
Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The
Issuer agrees that the right to convert is a valuable right to the Holder. The damages resulting
from a failure, attempt to frustrate, interference with such conversion
right are difficult if not impossible to qualify. Accordingly the parties acknowledge
that the liquidated damages provision contained in this Section are justified. Any delay or failure of performance by the Issuer
hereunder shall be excused if and to the extent caused by Force Majeure. For purposes of this agreement, Force Majeure shall mean
a cause or event that is not reasonably foreseeable and/or caused by the Issuer, including acts of God, fires, floods, explosions,
riots wars, hurricanes, etc.
1.5
Concerning the Shares. The shares of Common Stock issuable upon conversion of this
Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act
or (ii) the Issuer or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred
may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant
to Rule 144 under the Act (or a successor rule) ("Rule 144") or (iv) such shares are transferred to an "affiliate"
(as defined in Rule 144) of the Issuer who agrees to sell or otherwise transfer the shares only in accordance with this Section
1.5 and who is an Accredited Investor. Except as otherwise provided herein (and subject to the removal provisions set forth below),
until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise
may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be
immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included
in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption
that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:
"NEITHER THE ISSUANCE AND SALE
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THEHOLDER), IN A GENERALLY ACCEPTABLE
FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES."
The legend set forth above
shall be removed and the Issuer shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Issuer
or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel
in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration
under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected or (ii) in the case of the
Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration
statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities
as of a particular date that can then be immediately sold. In the event that the Company does not accept the opinion of counsel
provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration , such as Rule 144
or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to this note.
1.6
Effect of Certain Events.
(a)
Effect of Merger. Consolidation, Etc. At the option of the Holder, the sale, conveyance
or disposition of all or substantially all of the assets of the Issuer, the effectuation by the Issuer of a transaction or series
of related transactions in which more than 50% of the voting power of the Issuer is disposed of, or the consolidation, merger or
other business combination of the Issuer with or into any other Person (as defined below) or Persons when the Issuer is not the
survivor shall either: (i) be deemed to be an Event of Default (as defined in Article ill) pursuant to which the Issuer shall be
required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount
(as defined in Article III) or (ii) be treated pursuant to Section l.6(b) hereof. "Person" shall mean any individual,
corporation, limited liability company, partnership, association, trust or other entity or organization.
(b)
Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued
and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common Stock of the Issuer shall be changed into the same
or a different number of shares of another class or classes of stock or securities of the Issuer or another entity, or in case
of any sale or conveyance of all or substantially all of the assets of the Issuer other than in connection with a plan of complete
liquidation of the Issuer, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note,
upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction
had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set
forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder
of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Issuer shall not affect any transaction
described in this Section l .6(h) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but
in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve,
or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization
or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting
successor or acquiring entity (if not the Issuer) assumes by written instrument the obligations of this Section l.6(b). The above
provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
(c)
Adjustment Due to Distribution. If the Issuer shall declare or make any distribution
of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of
capital or otherwise (including any dividend or distribution to the Issuer's shareholders in cash or shares (or rights to acquire
shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution "), then the Holder of this Note shall
be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution,
to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable
upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of
shareholders entitled to such Distribution.
(d)
Adjustment Due to Dilutive Issuance. If, at any time when any Notes
are issued and outstanding, the Issuer issues or sells, or in accordance with this Section hereof is deemed to have issued or sold,
any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the Conversion Price in effect on the date of such issuance
(or deemed issuance) of such shares of Common Stock (a "Dilutive Issuance"), then immediately upon the Dilutive Issuance,
the Conversion Price will be reduced to the amount of the consideration per share received by the Issuer in such Dilutive Issuance.
The Issuer shall be deemed
to have issued or sold shares of Common Stock if the Issuer in any manner issues or grants any warrants, rights or options (not
including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or
other securities convertible into or exchangeable for Common Stock ("Convertible Securities") (such warrants, rights
and options to purchase Common Stock or Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options is less than the Conversion Price then in effect,
then the Conversion Price shall be equal to such price per share. For purposes of the preceding sentence, the "price per share
for which Common Stock is issuable upon the exercise of such Options" is determined by dividing (i) the total amount, if any,
received or receivable by the Issuer as consideration for the issuance or granting of all such Options, plus the minimum aggregate
amount of additional consideration , if any, payable to the Issuer upon the exercise of all such Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable
upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii)
the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Conversion Price will be made upon the actual issuance of
such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon
exercise of such Options.
Additionally, the Issuer
shall be deemed to have issued or sold shares of Common Stock if the Issuer in any manner issues or sells any Convertible Securities,
whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per
share for which Common Stock is issuable upon such conversion or exchange is less than the Conversion Price then in effect, then
the Conversion Price shall be equal to such price per share. For the purposes of the preceding sentence, the "price per share
for which Common Stock is issuable upon such conversion or exchange" is determined by dividing (i) the total amount, if any,
received or receivable by the Issuer as consideration for the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Issuer upon the conversion or exchange thereof at the time
such Convertible Securities first become convertible or exchangeable , by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(e)
Purchase Rights. If, at any time when any Notes are issued and outstanding, the Issuer
issues any convertible securities or rights to purchase stock, warrants, securities or other property (the "Purchase Rights")
pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had
held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(f)
Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the
Conversion Price as a result of the events described in this Section 1.6, the Issuer, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to the Holder of a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is based. The Issuer shall, upon the written request
at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of the Note.
1.7
Trading Market Limitations. Unless permitted by the applicable rules and regulations
of the principal securities market on which the Common Stock is then listed or traded, in no event shall the Issuer issue upon
conversion of or otherwise pursuant to this Note and the other Notes issued pursuant to the Purchase Agreement more than the maximum
number of shares of Common Stock that the Issuer can issue pursuant to any rule of the principal United States securities market
on which the Common Stock is then traded (the "Maximum Share Amount"), which shall be 4.99% of the total shares outstanding
on the Closing Date (as defined in the Purchase Agreement), subject to equitable adjustment from time to time for stock splits,
stock dividends, combinations, capital reorganizations and similar events relating to the Common Stock occurring after the date
hereof. Once the Maximum Share Amount has been issued, if the Issuer fails to eliminate any prohibitions under applicable law or
the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction
over the Issuer or any of its securities on the Issuer's ability to issue shares of Common Stock in excess of the Maximum Share
Amount, in lieu of any further right to convert this Note, this will be considered an Event of Default under Section 3.3 of the
Note.
1.8
Status as Shareholder. Upon submission of a Notice of Conversion by a Holder, (i) the
shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii)
the Holder's rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive
certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to
such Holder because of a failure by the Issuer to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder
has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the
Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain
its status as a holder of Common Stock by so notifying the Issuer) the Holder shall regain the rights of a Holder of this Note
with respect to such unconverted portions of this Note and the Issuer shall, as soon as practicable, return such unconverted Note
to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been
converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to
receive Conversion Default Payments pursuant to Section 1.3 to the extent required thereby for such Conversion Default and any
subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined
in accordance with Section 1.3) for the Issuer's failure to convert this Note.
1.9
Prepayment. Maker may prepay this Note, in accordance with the following schedule:
If within 180 calendar days of the execution of this Note, $135% of all outstanding principal and interest due on each outstanding
Note in one payment; After 180 calendar days of this Note being executed, any prepayments must be approved by both parties in writing.
ARTICLE II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Issuer shall have any obligation under
this Note, the Issuer shall not without the Holder's written consent (a) pay, declare or set apart for such payment , any dividend
or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares
of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary
make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders' rights
plan which is approved by a majority of the Issuer's disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Issuer shall have any obligation under
this Note, the Issuer shall not without the Holder's written consent redeem, repurchase or otherwise acquire (whether for cash
or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares
of capital stock of the Issuer or any warrants, rights or options to purchase or acquire any such shares.
2.3
Borrowings. So long as the Issuer shall have any obligation under this Note, the Issuer
shall not, without the Holder's written consent, create, incur, assume guarantee, endorse, contingently agree to purchase or otherwise
become liable upon the obligation of any person, firm, partnership, joint venture or corporation, except by the endorsement of
negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in
existence or committed on the date hereof and of which the Issuer has informed Holder in writing prior to the date hereof, (b)
indebtedness to trade creditors or financial institutions incurred in the ordinary course of business or (c) borrowings, the proceeds
of which shall be used to repay this Note.
2.4
Sale of Assets. So long as the Issuer shall have any obligation under this Note, the
Issuer shall not, without the Holder's written consent, sell, lease or otherwise dispose of any significant portion of its assets
outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of
the proceeds of disposition.
2.5
Advances and Loans. So long as the Issuer shall have any obligation under this Note, the Issuer
shall not, without the Holder's written consent, lend money, give credit or make advances to any person, firm, joint venture or
corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Issuer, except loans,
credits or advances (a) in existence or committed on the date hereof and which the Issuer has informed Holder in writing prior
to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $100,000.
ARTICLE III. EVENTS OF DEFAULT
If any of the following
events of default (each, an "Event of Default") shall occur:
3.1
Failure to Pay Principal or Interest. The Issuer fails to pay the principal hereof
or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.
3.2
Conversion and the Shares. The Issuer fails to issue shares of Common Stock to the
Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the
conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer
(issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion
of or otherwise pursuant to this Note as and when required by this Note, the Issuer directs its transfer agent not to transfer
or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any
certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and
when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders
its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on
any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and
when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations
described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not
to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a
Notice of Conversion. It is an obligation of the Issuer to remain current in its obligations to its transfer agent. It shall be
an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the
Issuer to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Issuer's transfer agent in order
to process a conversion, such advanced funds shall he paid by the Issuer to the Holder within forty eight (48) hours of a demand
from the Holder.
3.3
Breach of Covenants. The Issuer breaches any material covenant or other material term
or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement and such breach
continues for a period of ten (10) days after written notice thereof to the Issuer from the Holder.
3.4
Breach of Representations and Warranties. Any representation or warranty of the Issuer
made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including,
without limitation, the Purchase Agreement), shall be false or misleading in any material respect when made and the breach of which
has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note or
the Purchase Agreement.
3.5
Receiver or Trustee. The Issuer or any subsidiary of the Issuer shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part
of its property or business, or such a receiver or trustee shall otherwise be appointed.
3.6
Judgments. Any money judgment, writ or similar process shall be entered or filed against
the Issuer or any subsidiary of the Issuer or any of its property or other assets for more than $50,000, and shall remain unvacated,
unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably
withheld.
3.7
Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted
by or against the Issuer or any subsidiary of the Issuer.
3.8
Delisting of Common Stock. The Issuer shall fail to maintain the listing of the Common
Stock on at least one of the OTCBB or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market,
the New York Stock Exchange, or the American Stock Exchange.
3.9
Failure to Comply with the Exchange Act. The Issuer shall fail to comply with the reporting
requirements of the Exchange Act; and/or the Issuer shall cease to be subject to the reporting requirements of the Exchange Act.
3.10
Liquidation. Any dissolution, liquidation, or winding up of Issuer or any substantial
portion of its business.
3.11
Cessation of Operations. Any cessation of operations by Issuer or Issuer admits it
is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Issuer's
ability to continue as a "going concern" shall not be an admission that the Issuer cannot pay its debts as they become
due.
3.12
Maintenance of Assets. The failure by Issuer to maintain any material intellectual
property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).
3.13
Financial Statement Restatement. The restatement of any financial statements filed
by the Issuer with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no
longer outstanding, if the result of such restatement would, by comparison to the original financial statement, have constituted
a material adverse effect on the rights of the Holder with respect to this Note or supporting documents.
3.14
Reverse Splits. The Issuer effectuates a reverse split of its Common Stock without at least
twenty (20) days prior written notice to the Holder.
3.15
Replacement of Transfer Agent. In the event that the Issuer proposes to replace its
transfer agent, the Issuer fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer
Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision
to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Issuer and the
Issuer.
3.16
Cross-Default. Notwithstanding anything to the contrary contained in this Note or the
other related or companion documents, a breach or default by the Issuer of any covenant or other term or condition contained in
any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the
Issuer, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no
event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason
of a default under said Other Agreement or hereunder. "Other Agreements" means, collectively, all agreements and instruments
between, among or by: (1) the Issuer, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without
limitation, promissory notes; provided, however, the term "Other Agreements" shall not include the related or companion
documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other
existing and future debt of Issuer to the Holder.
Upon the occurrence and
during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof
or interest thereon when due at the Maturity Date), the Note shall become immediately due and payable and the Issuer shall pay
to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the Default Sum (as defined herein). UPON
THE OCCURRENCE AND DURING THE CONTINUATION OF ANY EVENT OF DEFAULT SPECIFIED IN SECTION 3.2, THE NOTE SHALL BECOME IMMEDIATELY
DUE AND PAYABLE AND THE ISSUER SHALL PAY TO THE HOLDER, JN FULL SATISFACTION OF ITS OBLIGATIONS HEREUNDER, AN AMOUNT EQUAL TO:
(Y) THE DEFAULT SUM (AS DEFINED HEREIN); MULTIPLIED BY (Z) TWO (2). Upon the occurrence and during the continuation of any Event
of Default specified in Sections 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due on
this Note upon a Trading Market Prepayment Event pursuant to Section 1.7 or upon acceleration), 3.3, 3.4, 3.6, 3.8, 3.9, 3.11,
3.12, 3.13, 3.14, and/or 3. 15 exercisable through the delivery of written notice to the Issuer by such Holders (the "Default
Notice"), and upon the occurrence of an Event of Default specified the remaining sections of Articles Ill (other than failure
to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3,1 hereof), the Note shall become immediately
due and payable and the Issuer shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to the
greater of (i) 150% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest
on the unpaid principal amount of this Note to the date of payment (the "Mandatory Prepayment Date") plus (y) Default
Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof (the then outstanding principal amount of this Note to the date of payment plus the amounts referred to in
clauses (x), (y) and (z) shall collectively be known as the "Default Sum") or (ii) the "parity value" of the
Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of
or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory
Prepayment Date as the "Conversion Date" for purposes of determining the lowest applicable Conversion Price, unless the
Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall
be the Conversion Date), multiplied by (b) the highest Closing Price for the Common Stock during the period beginning on the date
of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the "Default Amount")
and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all
of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection,
and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
If the Issuer fails to
pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall
have the right at any time, so long as the Issuer remains in default (and so long and to the extent that there are sufficient authorized
shares), to require the Issuer, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares
of Common Stock of the Issuer equal to the Default Amount divided by the Conversion Price then in effect.
ARTICLE IV. MISCELLANEOUS
4.1
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in
the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise
of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All
rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2
Notices. All notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested, postage prepaid , (iii) delivered by reputable air courier
service with charges prepaid, or (iv) transmitted by hand delivery, telegram , or facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written notice. Any notice or other communication required
or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation
generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during
normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following
the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be:
If to the Issuer, to:
Nyxio Technologies, Inc.
1330 SW 3rd Ave
Portland OR 97201
Attn: Giorgio Johnson
Facsimile: 971-255-0930
If to the Holder:
WHC Capital, LLC.
200 Stonehinge Lane,
Suite 3
Carle Place, NY. 11514
Tel: 718.530.0182
4.3
Amendments. This Note and any provision hereof may only be amended by an instrument
in writing signed by the Issuer and the Holder. The term "Note" and all reference thereto, as used throughout this instrument,
shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later
amended or supplemented, then as so amended or supplemented.
4.4
Assignability. This Note shall be binding upon the Issuer and its successors and assigns,
and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an "accredited
investor"(as defined in Rule 50l(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may
be pledged as collateral in connection with a bona fide margin account or other lending arrangement.
4.5
Cost of Collection. If default is made in the payment of this Note, the Issuer shall
pay the Holder hereof costs of collection, including reasonable attorneys' fees.
4.6
Governing Law. This Note shall be governed by and construed in accordance with the
laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the
other concerning the transactions contemplated by this Note shall be brought only in the state courts of New York or in the federal
courts located in the state and county of Nassau. The parties to this Note hereby irrevocably waive any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. The Issuer and Holder waive trial by jury. The prevailing party shall be entitled to recover from
the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered
in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.
Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any
other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being
served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy
thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect
for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted
by law.
4.7
Certain Amounts. Whenever pursuant to this Note the Issuer is required to pay an amount
in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid
interest plus Default Interest on such interest, the Issuer and the Holder agree that the actual damages to the Holder from the
receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Issuer represents stipulated
damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and
to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price
paid for such shares pursuant to this Note. The Issuer and the Holder hereby agree that such amount of stipulated damages is not
plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert
this Note into shares of Common Stock.
4.8
Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by
the applicable terms of the Purchase Agreement.
4.9
Notice of Corporate Events. Except as otherwise provided below, the Holder of this
Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock.
The Issuer shall provide the Holder with prior notification of any meeting of the Issuer's shareholders (and copies of proxy materials
and other information sent to shareholders). In the event of any taking by the Issuer of a record of its shareholders for the purpose
of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation , reclassification or recapitalization) any share of any
class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are
entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Issuer
or any proposed liquidation, dissolution or winding up of the Issuer, the Issuer shall mail a notice to the Holder, at least twenty
(20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right
or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to
the extent known at such time. The Issuer shall make a public announcement of any event requiring notification to the Holder hereunder
substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 4.9.
4.10
Remedies. The Issuer acknowledges that a breach by it of its obligations hereunder
will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly,
the Issuer acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in
the event of a breach or threatened breach by the Issuer of the provisions of this Note, that the Holder shall be entitled , in
addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction
or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof,
without the necessity of showing economic loss and without any bond or other security being required.
IN WITNESS WHEREOF, Issuer
has caused this Note to be signed in its name by its duly authorized officer:
NYXIO Technologies, Corp.
By: /s/ Giorgio Johnson
Print: Giorgio Johnson
Title/Date: CEO, 6/17/2014
THIS NOTE AND THE COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT")
US $20,000.00
NYXIO TECHNOLOGIES CORP.
8% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 13, 2015
FOR VALUE RECEIVED, Nyxio
Technologies Corp. (the ‘Company”) promises to pay to the order of LG CAPITAL FUNDING, LLC and its authorized successors
and permitted as signs ("Holder"), the aggregate principal face amount of Twenty Thousand Dollars exactly (U.S.
$20,000.00) on June 13, 2015 ("Maturity Date") and to pay interest on the principal amount out standing hereunder
at the rate of 8% per annum commencing on June 13, 2014. The interest will be paid to the Holder in whose name this Note is registered
on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are
payable at 1218 Union Street, Suite #2, Brooklyn, NY 11225, initially, and if changed, last appearing on the records of the Company
as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding
principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the
Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company.
The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and
discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest
shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to
the following additional provisions:
1.
This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized
denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer
or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith.
2.
The Company shall be entitled to withhold from all payments any amounts required to be withheld
under applicable laws.
3.
This Note may be transferred or exchanged only in compliance with the Securities Act of 1933,
as amended ("Act"), and applicable state securities laws. Any attempted transfer to a non-qualifying party shall
be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company
may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes,
whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary.
Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements
set forth in Section 4(a), and any prospective transferee of this Note, also is required to give the Company written confirmation
that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The
date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date.
4.
(a)
The Holder of this Note is entitled, at its option, at any time after 180 days, to convert all or any amount of the principal face
amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") without restrictive
legend of any nature, at a price ("Conversion Price") for each share of Common Stock equal to 50% of the lowest
trading price of the Common Stock as reported on the OTCQB marketplace which the Company' s shares are traded or any market
upon which the Common Stock may be traded in the future ("Exchange"), for the five prior trading
days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered
by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the
Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice
of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the
Holder with.in 3 business days of receipt by the Company of the Notice of Conversion. Once the Holder has received such shares
of Common Stock, the Holder shall surrender this Note to the Company, executed by the Holder evidencing such Holder's intention
to convert this Note or a specified portion hereof, and accompanied by proper assignment hereof in blank. Accrued, but unpaid interest
shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but
the number of shares issuable shall be rounded to the nearest whole share. In the event the Company experiences a DTC "Chill"
on its shares, the conversion price shall be decreased to 40% instead of 50% while that "Chill" is in effect.
(b)
Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per
annum. Interest shall be paid by the Company in Common Stock ("Interest Shares'"). Holder may, at any time, send in a
Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount
converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of
this Note to the date of such notice.
(c)
During the first 180 days after the Note has been issued, it may be prepaid at 150% of the
face amount plus any accrued interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded
within 3 days of giving notice of redemption of the right to redeem shall be null and void.
(d)
Upon (i) a transfer of all or substantially all of the assets of the Company to any person
in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization or other change or exchange
of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation
or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger
which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification , conversion
or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being
referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in
cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the
Holder, such Holder may convert the un paid principal amount of this Note (together with the amount of accrued but unpaid interest)
into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e)
In case of any Sale Event (not to include a sale of all or substantially all of the Company'
s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made
so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into
the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could
have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such
Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders
of Common Stock is other than cash, the value shall be as deter mined by the Board of Directors of the Company or successor person
or entity acting in good faith.
5.
No provision of this Note shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6.
The Company hereby expressly waives demand and presentment for payment, notice of non-payment,
protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action
to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be
owing hereto
7.
The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and
expenses, which may be incurred by the Holder in collecting any amount due under this Note.
8.
If one or more of the following described "Events of Default" shall occur:
(a)
The Company shall default in the payment of principal or interest on this Note or any other
note issued to the Holder by the Company; or
(b)
Any of the representations or warranties made by the Company herein or in any certificate
or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the
execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading
in any respect; or
(c)
The Company shall fail to perform or observe, in any respect, any covenant, term, provision,
condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d)
The Company shall (1) become insolvent; (2) admit in writing its inability to pay its debts
generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4)
apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property
or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary
petition for bankruptcy relief, all under federal or state laws as applicable; or
(e)
A trustee, liquidator or receiver shall be appointed for the Company or for a substantial
part of its property or business without its consent and shall not be discharged with in sixty (60) days after such appointment;
or
(f)
Any governmental agency or any court of competent jurisdiction at the in- stance of any governmental
agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g)
One or more money judgments, writs or warrants of attachment, or similar process, in excess
of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or
other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than
five (5) days prior to the date of any proposed sale thereunder; or
(h)
The Company shall have defaulted on or breached any term of any other note of similar debt
instrument into which the Company has entered and failed to cure such de fault within the appropriate grace period ; or
(i)
The Company shall have its Common Stock delisted from a market (including the OTCQB marketplace)
or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive
days;
(j)
If a majority of the members of the Board of Directors of the Company on the date hereof are
no longer serving as members of the Board;
(k)
The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein
without restrictive legend within 3 business days of its receipt of a Notice of Conversion; or
(l)
The Company shall not replenish the reserve set forth in Section 12, with- in 3 business days
of the request of the Holder; or
(m)
The Company shall not be "current" in its filings with the Securities and Exchange
Commission; or
(n)
The Company shall lose the ''bid" price for its stock and a market (including the OTCBB
marketplace or other exchange)
Then, or at any time thereafter, unless cured
within 5 days, and in each and every such case, un less such Event of Default shall have been waived in writing by the Holder (which
waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion,
the Holder may consider this Note immediately due and payable, with out presentment, demand, protest or (further) notice of any
kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments
contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce
any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event
of Default, interest shall accrue at a default interest rate of 16% per annum or, if such rate is usurious or not permit ted by
current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall
be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This
penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an in crease
of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the out standing principal due under this Note
shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%.
If the Holder shall commence an action or proceeding
to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such
action, the Holder shall be reimbursed by the Company for its attorneys' fees and other costs and expenses incurred in the investigation,
preparation and prosecution of such action or proceeding.
9.
In case any provision of this Note is held by a court of competent jurisdiction to be excessive
in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is
enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not
in any way be affected or impaired thereby.
10.
Neither this Note nor any term hereof may be amended, waived, dis- charged or terminated other
than by a written instrument signed by the Company and the Holder.
11.
The Company represents that it is not a "shell" issuer and has never been a "shell'>
issuer or that if it previously has been a "shell" issuer that at least 12 months have passed since the Company has reported
form 10 type information indicating it is no longer a "shell issuer. Further. The Company will instruct its counsel to either
(i) write a 144- 3(a(9) opinion to al low for salability of the conversion shares or (ii) accept such opinion from Holder's counsel.
12.
The Company shall issue irrevocable transfer agent instructions reserving 400,000,000 shares
of its Common Stock for conversions under this Note (the "Share Reserve"). The reserve shall be replenished as needed
to allow for conversions of this Note. Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled.
The Company shall pay all costs associated with issuing and delivering the shares.
13.
The Company will give the Holder direct notice of any corporate actions, including but not
limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under
law.
14.
This Note shall be governed by and construed in accordance with the laws of New York applicable
to contracts made and wholly to be performed within the State of New York and shall be binding upon the successors and assigns
of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and
venue in the courts of the State of New York. This Agreement may be executed in counterparts, and the facsimile transmission of
an executed counterpart to this Agreement shall be effective as an original.
IN WITNESS WHEREOF, the
Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: June 12, 2014
NYXIO TECHNOLOGIES CORP
By: /s/ Giorgio Johnson
Giorgio Johnson, Chief Executive Officer
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in
order to Convert the Note)
The undersigned hereby irrevocably elects to
convert $ ________________ of the above Note into________ Shares of Common Stock of Nyxio Technologies Corp. ("Shares")
according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion:
Applicable Conversion
Signature:
[Print Name of Holder and Title of Signer
Address:
SSN or EIN:
Shares are to be registered in the following
name:
Name:
Address:
Tel:
Fax:
SSN or EIN:
Shares are to be sent or delivered to the following
account:
Account Name:
Address:
CERTIFICATIONS
I, Giorgio Johnson, certify that;
| 1. |
|
I have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2014 of Nyxio Technologies Corp. (the “registrant”); |
| 2. |
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. |
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. |
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a. |
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b. |
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c. |
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. |
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. |
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. |
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b. |
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August 21, 2014
/s/ Giorgio Johnson
By: Giorgio Johnson
Title: Chief Executive Officer
CERTIFICATIONS
I, Giorgio
Johnson, certify that;
| 1. |
|
I
have reviewed this quarterly report on Form 10-Q for the quarter ended June 30, 2014 of Nyxio Technologies Corp. (the “registrant”); |
| 2. |
|
Based on my
knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
| 3. |
|
Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. |
|
The registrant’s other certifying officer and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have: |
| a. |
|
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared; |
| b. |
|
Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles; |
| c. |
|
Evaluated the effectiveness of the registrant’s disclosure
controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and |
| d. |
|
Disclosed in this report any change in the registrant’s internal
control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and |
| 5. |
|
The registrant’s other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a. |
|
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and |
| b. |
|
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: August
21, 2014
/s/ Giorgio
Johnson
By: Giorgio
Johnson
Title: Chief
Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
In connection with the quarterly Report of
Nyxio Technologies Corp. (the “Company”) on Form 10-Q for the quarter ended June 30, 2014 filed with the Securities
and Exchange Commission (the “Report”), I, Giorgio Johnson, Chief Executive Officer and Chief Financial Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that:
| 1. | The Report fully complies with the requirements of Section 13(a)
of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material
respects, the consolidated financial condition of the Company as of the dates presented and the consolidated result of operations
of the Company for the periods presented. |
| By: |
/s/ Giorgio Johnson |
| Name: |
Giorgio Johnson |
| Title: |
Principal Executive Officer, Principal Financial Officer and Director |
| Date: |
August 21, 2014 |
This certification has been furnished solely pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
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