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Management believes that the principal amount owing to the vendor of approximately $0.07 million, which is the basis for the legal action, has been properly reflected in the Company’s financial statements, but is in the process of determining whether any additional loss contingencies need to be recorded. The Company is working to amend its quarterly report on Form 10-Q for the quarter ended November 30, 2015 to provide the required disclosures.

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ITEM 1. LEGAL PROCEEDINGS

On November 21, 2014, on the 17 th Judicial Circuit Court in and Broward County, Florida, a Contract and Indebtedness lawsuit was filed by TCA Global Credit Master Fund, L.P. against the Company. It commenced an action against the Company to recover an aggregate dollar amount of $395,623.04.

On April 5, 2016, an agreement was reached whereby a third party purchased the note for $400,000 and is to pay the original note holder over a 10 month period. The Company will issue shares to the third party at market price on date of issuance of which 65% will be paid to the original note holder. Upon satisfaction of the $400,000 note, the original note holder will vacate the lawsuit. The Company has accrued an additional $219,762 for a total of $615,385 for the liability.

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