PROPOSAL NO. 5 (page 18, non-relevant paragraphs o

PROPOSAL NO. 5 (page 18, non-relevant paragraphs omitted from my post)

APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION TO INCREASE AUTHORIZED SHARES OF COMMON STOCK FROM 1,000,000,000 TO 2,000,000,000

Our Board of Directors has approved, subject to shareholder approval, an amendment to our Articles of Incorporation (the “Common Shares Increase Amendment”) to increase the number of authorized shares of the Company’s common stock from 1,000,000,000 to 2,000,000,000.

Outstanding Shares and Purpose of the Proposal

Our Articles of Incorporation currently authorizes us to issue a maximum of 1,000,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, $0.001 par value per share. Our issued and outstanding securities, as of July 28, 2014, on a fully diluted basis, are as follows:

•  753,980,394 shares of common stock;
•  1.299 shares of Series D Convertible Preferred Stock convertible into 43,310,896 shares of common stock;
•  750,000 shares of Series C Convertible Preferred Stock convertible into 750,000 shares of common stock;
•  Warrants to purchase an aggregate of 66,775,532 shares of common stock, with a weighted average exercise price of $0.10 per share; and
•  Convertible promissory notes in the aggregate principal amount of $85,000 convertible into 4,724,861 shares of common stock at an average conversion price of $0.018 per share; and
•  Options to purchase 20,442,611 shares of common stock at a weighted average exercise price of $0.07per share.
•  Options to purchase 2,487,500 shares of Series B Convertible Preferred Stock at a weighted average exercise price of $0.61 per share.

(Total shares if all these are exercised:  892,471,794)

The Board believes that the increase in authorized shares of common stock will provide the Company greater flexibility with respect to the Company’s capital structure for purposes including additional equity financings and stock-based acquisitions.

At present, other than in connection with the possible conversion or exercise of securities convertible or exercisable into common stock, as set forth above (each at the option of their respective holders), the Board of Directors has no other plans to issue the additional shares of common stock to be authorized by the Common Shares Increase Amendment. However, it is possible that some of these additional shares could be used in the future for various other purposes without further shareholder approval, except as such approval may be required in particular cases by our charter documents, applicable law or the rules of any stock exchange or other market on which our securities may then be listed. These purposes may include:
•  raising capital
•  providing equity incentives to employees, officers or directors
•  establishing strategic relationships with other companies
•  expanding the Company’s business or product lines through the acquisition of other businesses or products.

We could also use the additional shares of common stock that will become available pursuant to the Common Shares Increase Amendment to oppose a hostile takeover attempt or to delay or prevent changes in control or management of the Company. Although the proposal to increase the authorized common stock has not been prompted by the threat of any hostile takeover attempt (nor is the Board currently aware of any such attempts directed at the Company), nevertheless, shareholders should be aware that the Common Shares Increase Amendment could facilitate future efforts by us to deter or prevent changes in control of the Company, including transactions in which shareholders of the Company might otherwise receive a premium for their shares over then current market prices. However, the Board of Directors has a fiduciary duty to act in the best interests of the Company's shareholders at all times.