UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July
31, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______
to _______.
Commission File No. 333-149235
|
BIONEUTRAL GROUP, INC. |
|
|
(Exact name of registrant as specified in its charter) |
|
Nevada |
|
26-0745273 |
(State or other jurisdiction of
incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
211 Warren St., Newark, New Jersey |
|
07103 |
(Address of principal executive offices) |
|
(Zip Code) |
(Registrant’s
telephone number, including area code)
(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 o No
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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). o Yes o 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. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
o |
|
Accelerated filer |
o |
Non-accelerated filer
(Do not check if a smaller reporting company) |
o |
|
Smaller reporting company |
x |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o
Yes x No
The number of shares of the registrant's
common stock, par value $0.00001 per share, outstanding as of September 5, 2014 was 5,751,790,172 shares.
BIONEUTRAL GROUP, INC.
TABLE OF CONTENTS
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Page
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements. |
3 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
27 |
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Item 4. |
Controls and Procedures. |
41 |
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PART II - OTHER INFORMATION |
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Item 1. |
Legal Proceedings. |
42 |
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Item 1A. |
Risk Factors. |
42 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds. |
42 |
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Item 3. |
Defaults Upon Senior Securities. |
43 |
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Item 4. |
Mine Safety Disclosures. |
43 |
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Item 5. |
Other Information. |
43 |
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Item 6. |
Exhibits. |
43 |
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Signature |
45 |
ITEM 1. FINANCIAL STATEMENTS
BIONEUTRAL GROUP, INC
CONDENSED CONSOLIDATED BALANCE SHEETS
| |
July 31,
2014
| | |
October 31,
2013 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | |
| |
Current Assets | |
| | | |
| | |
Cash | |
$ | 16,358 | | |
$ | 702 | |
Accounts Receivable - Net | |
| 3,452 | | |
| 9,911 | |
Inventory | |
| 12,122 | | |
| 14,493 | |
Total Current Assets | |
| 31,932 | | |
| 25,106 | |
| |
| | | |
| | |
Property and Equipment - Net | |
| 198 | | |
| 357 | |
Intellectual Property - Net | |
| 8,717,955 | | |
| 9,249,498 | |
Other Assets | |
| 2,500 | | |
| 2,500 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 8,752,585 | | |
$ | 9,277,461 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts Payable and Accrued Expense | |
$ | 1,173,486 | | |
$ | 1,087,876 | |
Current Portion of Convertible Notes Payable, net of discount of $408,253 and $91,167 respectively | |
| 576,867 | | |
| 267,716 | |
Current Portion of Convertible Loans from Stockholders | |
| 1,206,994 | | |
| 75,000 | |
Promissory Notes Payable | |
| 155,755 | | |
| - | |
Accrued Compensation | |
| 1,659,075 | | |
| 978,851 | |
Related Party Payables | |
| 59,062 | | |
| 57,508 | |
Derivative Liability | |
| 595,238 | | |
| 129,425 | |
Current Liabilities | |
| 5,426,477 | | |
| 2,596,376 | |
| |
| | | |
| | |
Long Term Liabilities | |
| | | |
| | |
Convertible Loans from Stockholders – net of current portion | |
| 197,863 | | |
| 1,462,291 | |
Total Long Term Liabilities | |
| 197,863 | | |
| 1,462,291 | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 5,624,340 | | |
| 4,058,667 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
Equity: | |
| | | |
| | |
BioNeutral Group, Inc. Stockholders’ Equity | |
| | | |
| | |
Preferred Stock, $.001 par value; 10,000,000 shares authorized, with | |
| | | |
| | |
684,600 designated as follows | |
| | | |
| | |
Convertible Preferred Stock, Series B, $.001 par value; 213,500 | |
| | | |
| | |
shares authorized, 53,491 issued and outstanding at | |
| | | |
| | |
July 31, 2014 and October 31, 2013, respectively. | |
| | | |
| | |
Liquidation Preference $534,910 at July 31, 2014 | |
| | | |
| | |
and October 31, 2013, respectively. | |
| 54 | | |
| 54 | |
Convertible Preferred Stock, Series C, $.001 par value; 100,000 | |
| | | |
| | |
shares authorized, 56,081 issued and outstanding at | |
| | | |
| | |
July 31, 2014 and October 31, 2013, respectively. | |
| | | |
| | |
Liquidation Preference $560,810 at July 31, 2014 | |
| | | |
| | |
and October 31, 2013, respectively. | |
| 56 | | |
| 56 | |
Convertible Preferred Stock, Series D, $.001 par value; 231,100 | |
| | | |
| | |
shares authorized, 128,251 issued and outstanding at | |
| | | |
| | |
July 31, 2014 and October 31, 2013, respectively. | |
| | | |
| | |
Liquidation Preference $1,282,510 at July 31, 2014 | |
| | | |
| | |
and October 31, 2013, respectively. | |
| 128 | | |
| 128 | |
Convertible Preferred Stock, Series E, $.001 par value; 140,000 | |
| | | |
| | |
shares authorized, 0 issued and outstanding at | |
| | | |
| | |
July 31, 2014 and October 31, 2013, respectively. | |
| | | |
| | |
Liquidation Preference $0 at July 31, 2014 and October 31, 2013, respectively | |
| - | | |
| - | |
Convertible
Preferred Stock, Series F, $.001 par value; 51 shares authorized, 51 and 0 issued | |
| | | |
| | |
and outstanding at July 31, 2014 and October
31, 2013, respectively. | |
| - | | |
| - | |
Common Stock, $.00001 Par Value; 17,000,000,000 shares authorized, | |
| | | |
| | |
5,481,790,172 and 252,034,393 issued and outstanding at July 31, 2014 | |
| | | |
| | |
and October 31, 2013, respectively. | |
| 54,818 | | |
| 2,520 | |
Escrow Shares | |
| (10,000 | ) | |
| - | |
Additional Paid-in Capital | |
| 64,192,666 | | |
| 63,402,660 | |
Due from Vinfluence | |
| (136,848 | ) | |
| (136,848 | ) |
Accumulated Deficit | |
| (60,541,242 | ) | |
| (57,889,075 | ) |
Total BioNeutral Group, Inc. Stockholders’ Equity | |
| 3,559,632 | | |
| 5,379,495 | |
| |
| | | |
| | |
Non controlling Interest | |
| (431,446 | ) | |
| (160,760 | ) |
Preferred Stock, $.001 par value; 5,000,000 shares authorized, with 800,000 designated as follows | |
| | | |
| | |
Convertible Preferred Stock, Series A, $.001 par value; 800,000 shares authorized, 59,484 shares issued and outstanding at July 31, 2014 and October 31, 2013, respectively. | |
| | | |
| | |
Liquidation Preference $1,072,361 at July 31, 2014 and October 31, 2013, respectively, | |
| 59 | | |
| 59 | |
Total Non controlling Interest | |
| (431,387 | ) | |
| (160,701 | ) |
| |
| | | |
| | |
Total Equity | |
| 3,128,245 | | |
| 5,218,794 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | |
$ | 8,752,585 | | |
$ | 9,277,461 | |
See Notes to Condensed Consolidated
Financial Statements
BIONEUTRAL GROUP, INC
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited)
| |
Three
Months Ended
July 31, | | |
Nine Months Ended
July 31, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 8,861 | | |
$ | 3,310 | | |
$ | 30,093 | | |
$ | 4,950 | |
| |
| | | |
| | | |
| | | |
| | |
Cost of Revenues | |
| 3,068 | | |
| 1,174 | | |
| 14,022 | | |
| 1,732 | |
| |
| | | |
| | | |
| | | |
| | |
Gross Profit | |
| 5,793 | | |
| 2,136 | | |
| 16,071 | | |
| 3,218 | |
| |
| | | |
| | | |
| | | |
| | |
Operating Expenses | |
| | | |
| | | |
| | | |
| | |
Depreciation and Amortization | |
| 177,234 | | |
| 177,234 | | |
| 531,702 | | |
| 531,702 | |
Salaries | |
| 237,657 | | |
| 266,737 | | |
| 569,343 | | |
| 590,544 | |
Consulting Expense | |
| 91,050 | | |
| 252,417 | | |
| 337,435 | | |
| 472,890 | |
Legal and Accounting Expenses | |
| 191,797 | | |
| 48,740 | | |
| 424,792 | | |
| 316,759 | |
Other Selling, General and Administrative Expenses | |
| 275,595 | | |
| 84,165 | | |
| 626,409 | | |
| 429,271 | |
Total Operating Expenses | |
| 973,333 | | |
| 829,293 | | |
| 2,489,681 | | |
| 2,341,166 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from Operations | |
| (967,540 | ) | |
| (827,157 | ) | |
| (2,473,610 | ) | |
| (2,337,948 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other Income (Expense) | |
| | | |
| | | |
| | | |
| | |
Interest Expense | |
| (275,180 | ) | |
| (34,131 | ) | |
| (913,817 | ) | |
| (100,268 | ) |
Consulting Fee Reimbursement – Vinfluence Settlement | |
| - | | |
| - | | |
| - | | |
| 238,750 | |
Amortization of debt discount | |
| (270,865 | ) | |
| (212,920 | ) | |
| (464,248 | ) | |
| (425,281 | ) |
Change in Fair Value of Derivative Liability | |
| 241,521 | | |
| (29,356 | ) | |
| 928,822 | | |
| 95,250 | |
Total Other Expense | |
| (304,524 | ) | |
| (276,407 | ) | |
| (449,243 | ) | |
| (191,549 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Loss Before Income Taxes | |
| (1,272,064 | ) | |
| (1,103,564 | ) | |
| (2,922,853 | ) | |
| (2,529,497 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for Income Taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss | |
| (1,272,064 | ) | |
| (1,103,564 | ) | |
| (2,922,853 | ) | |
| (2,529,497 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss Attributable to Non-controlling Interest | |
| 107,362 | | |
| 93,095 | | |
| 270,686 | | |
| 213,445 | |
| |
| | | |
| | | |
| | | |
| | |
Net Loss Attributable to BioNeutral Group, Inc. | |
$ | (1,164,702 | ) | |
$ | (1,010,469 | ) | |
$ | (2,652,167 | ) | |
$ | (2,316,052 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net Loss Per Common Share - Basic and Diluted | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.01 | ) | |
$ | (0.02 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted
Average Number of Common Shares outstanding Basic and Diluted Loss per Share | |
| 3,153,678,075 | | |
| 149,565,330 | | |
| 1,642,430,500 | | |
| 135,968,202 | |
See Notes to Condensed Consolidated
Financial Statements
BIONEUTRAL GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| |
For the Nine Months Ended
July 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| |
Net Loss | |
$ | (2,922,853
| ) | |
$ | (2,529,497 | ) |
Adjustments to Reconcile Net Loss To Net Cash Used in Operating Activities | |
| | | |
| | |
Stock Based Compensation | |
| - | | |
| 481,315 | |
Depreciation and Amortization | |
| 531,702 | | |
| 531,702 | |
Issuance of Stock related to professional services | |
| 110,000 | | |
| 20,342 | |
Interest added to promissory notes | |
| 246,800 | | |
| 83,575 | |
Change in fair value of derivative liability | |
| (928,822 | ) | |
| (95,251 | ) |
Amortization of debt discount | |
| 464,248 | | |
| 425,281 | |
Settlement of Consulting Expense – Vinfluence Settlement | |
| - | | |
| (238,750 | ) |
Changes in Operating Assets and Liabilities | |
| | | |
| | |
Accounts receivable | |
| 6,459 | | |
| (1,259 | ) |
Inventory | |
| 2,371 | | |
| (16,679 | ) |
Other Assets | |
| - | | |
| 11,996 | |
Accounts Payable and Accrued Expenses | |
| 1,777,021
| | |
| 706,165 | |
Related Party Payables | |
| 1,554 | | |
| 14,186 | |
| |
| | | |
| | |
NET CASH USED IN OPERATING ACTIVITIES | |
| (711,520 | ) | |
| (606,874 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds from Convertible Promissory Notes | |
| 792,500 | | |
| 614,000 | |
Repayments of Convertible Promissory Notes | |
| (65,324 | ) | |
| - | |
| |
| | | |
| | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 727,176 | | |
| 614,000 | |
| |
| | | |
| | |
NET INCREASE IN CASH | |
| 15,656 | | |
| 7,126 | |
| |
| | | |
| | |
CASH, BEGINNING OF PERIOD | |
| 702 | | |
| 676 | |
| |
| | | |
| | |
CASH, END OF PERIOD | |
$ | 16,358 | | |
$ | 7,802 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |
| | | |
| | |
Cash paid for Interest | |
$ | 22,824 | | |
$ | - | |
Cash paid for Income Taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION | |
| | | |
| | |
Return of shares and re-establishment of accrued compensation | |
$ | (151,013 | ) | |
$ | - | |
Non-cash settlements of Accounts Payable and Accrued Expenses | |
$ | 62,950 | | |
$ | 57,826 | |
Shares issued to escrow as security for transaction fees | |
$ | 10,000 | | |
$ | - | |
Non-cash conversion of promissory note to common stock | |
$ | 849,853
| | |
$ | 223,115 | |
Aggregate fair value of derivative liabilities issued | |
$ | 1,394,635
| | |
$ | 277,957 | |
Non-cash settlement with Vinfluence | |
$ | - | | |
$ | 1,331,999 | |
See Notes to Condensed Consolidated
Financial Statements
BioNeutral Group, Inc.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Nature of Business & Organization
BioNeutral Group, Inc. (the “Company”)
is a specialty chemical corporation seeking to develop and commercialize a novel combinational chemistry-based technology which
it believes, in certain circumstances, may neutralize harmful environmental contaminants, toxins and dangerous micro-organisms
including bacteria, viruses and spores. The Company currently operates its business through its subsidiary, BioNeutral Laboratories
Corporation USA (“BioNeutral Laboratories” or “BioLabs”), a corporation organized in Delaware in 2003.
The Company was incorporated in the State of Nevada on April 10, 2007 under the name “Moonshine Creations, Inc.,” and
changed its name to “BioNeutral Group, Inc.” on December 22, 2008.
On January 30, 2009, the Company entered
into a share exchange agreement (the “Share Exchange Agreement”) with BioNeutral Laboratories pursuant to which it
agreed to issue to the shareholders of BioNeutral Laboratories 45,000,000 shares of our common stock. Upon completion of this transaction,
the former shareholders of BioNeutral Laboratories became the majority stockholders of the Company. Accordingly, the transaction
was accounted for as a reverse merger and recapitalization of BioNeutral Group, Inc.
Note 2 – Liquidity and Financial Condition
The Company's unaudited condensed consolidated
financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. The Company has had no significant revenues
and has generated losses from operations. In order to continue as a going concern and achieve a profitable level of operations,
the Company will need, among other things, additional capital resources and to develop a consistent source of revenues. The ability
of the Company to continue as a going concern is dependent upon its ability to successfully accomplish its strategic plan and/or
recognize revenue from its intangible assets and eventually attain profitable operations. The accompanying unaudited condensed
consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as
a going concern. There can be no assurance the Company will be able to continue as a going concern.
At July 31, 2014, the Company had negative
working capital of $5,394,545. For the nine months ended July 31, 2014 the Company incurred a net loss of $2,922,853 and since
inception has an accumulated deficit of $60,541,242. For the same period in 2013, the Company’s net loss was $2,529,497. The
Company anticipates it will experience a net loss in fiscal 2014 as it continues to pursue markets for the sale and distribution
of its products and development of access to global markets.
The Company had $16,358 of cash at July
31, 2014. Cash used by operations for the nine months ended July 31, 2014 was $711,520. The principal uses of funds
were for consulting services supporting the development of its business plan, legal and accounting fees in connection with being
a public company and daily operations of the business, including rent, travel and laboratory costs.
During the nine months ended July 31,
2014, the Company raised $792,500 of cash from the issuance of convertible debentures to fund operations.
On July 9, 2014
the Company issued a convertible promissory note to JMJ financial in the amount of $250,000 of which it received payments through
the date of this report of $60,000. It expects to receive additional payments from JMJ under the note at various intervals
during the fiscal year 2014.
While the Company
has been able to use proceeds from the issuance of convertible promissory notes to fund a substantial balance of its operating
costs, it does not expect that its funds will be sufficient to meet its anticipated needs through August 1, 2015 and it will need
to raise additional capital during this period to fund the full costs associated with its growth and development.
The Company believes
that it will be able to generate significant sales by the second quarter of fiscal 2015 providing for sufficient cash flows to
supplement its equity financing based on its current plans. If it’s able to execute its plan, the Company can begin
to accumulate cash reserves. There is no assurance however that its funds will be sufficient to meet its anticipated
needs through August 1, 2015, and it may need to raise additional capital during this period to fund the full costs associated
with its growth and development. The Company believes that it will require approximately $2,000,000 in additional capital
to achieve its goals. There can be no assurances that it will be successful in raising additional capital on favorable terms if
at all. If the Company is unable to secure additional capital, it may be required to curtail its business development initiatives,
impair its intellectual property and take additional measures to reduce cost in order to conserve cash.
These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. Accordingly, the accompanying unaudited condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,
which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities
in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not
necessarily purport to represent realizable or settlement values. The unaudited condensed consolidated financial statements do
not include any adjustments that might result from the outcome of this uncertainty.
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”)
for interim financial statements and with Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the
“SEC”). Accordingly, they do not contain all the information and footnotes required by GAAP for annual financial statements.
The condensed consolidated financial statements include the accounts of the Company and its majority owned subsidiary. All significant
intercompany balances and transactions have been eliminated in consolidation. In the opinion of the Company’s management,
the accompanying condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring
accruals) to make the financial position of the Company as of July 31, 2014 and the results of its operations for the three and
nine months ended July 31, 2014 and 2013 and cash flows for the nine months ended July 31, 2014 and 2013 not misleading. The unaudited
condensed consolidated financial statements for the quarterly periods ended July 31, 2014, and 2013 are not necessarily indicative
of the operating results for the full year and it is suggested that these unaudited condensed consolidated financial statements
be read in conjunction with the audited financial statements for the years ended October 31, 2013 and 2012 as contained in
the Form 10-K filed on February 13, 2014.
Revenue recognition
The revenue recorded is presented net
of sales and other taxes collected on behalf of governmental authorities and includes shipping and handling costs, which generally
are included in the list price to the customer. Our policy is to recognize revenue in accordance with SEC Staff Accounting Bulletin
No. 104 based on when (i) persuasive evidence of an arrangement exists, (ii) delivery or performance has occurred, (iii) the fee
is fixed or determinable, and (iv) collectability of the sale is reasonably assured, which is normally the date the product is
shipped.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are stated at the
amount the Company expects to collect. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible
amounts. The Company’s estimate is based on historical collection experience and a review of the current status of trade
accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change.
Accounts receivable are presented net of an allowance for doubtful accounts which was not material at both July 31, 2014 and October
31 2013.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents. For financial statement purposes, investments
in money market funds are considered a cash equivalent and are included in cash and cash equivalents. The Company maintains it
cash and cash equivalents at high credit quality institutions, with balances, at times, in excess of federally insured limits.
As of July 31, 2014, the Company did not exceed the federally insured limits. Management believed that the financial institution
that holds its deposits are financially sound and therefore pose minimal credit risk. At July 31, 2014 and October 31 2013, the
Company did not hold any cash equivalents.
Inventory
Inventories are stated at the lower of
cost determined by the first-in, first-out method or market. In the normal course of business, when a customer places an order,
the Company will place an order for manufacturing with its contract manufacturer. Inventory consists of finished goods and raw
materials, both of which are immaterial and warehoused at our contract manufacturer.
Non-Controlling Interest
A non-controlling interest was created
as a result of the Company’s reorganization and recapitalization with a public shell corporation. The non-controlling interest
arose because the Company’s records indicated that initially 14% of the shareholders of the accounting acquirer in the transaction,
BioLabs, did not participate in the exchange of their shares of common stock of BioLabs for shares of common stock of the Company.
In all material respects, the shares of the Company and the shares of the common stock of BioLabs included in the non-controlling
interest represent different legal instruments conveying mirror ownership claims to the same underlying net assets and operations,
as reflected in these unaudited condensed consolidated financial statements.
Use of Estimates
The preparation of the financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include
valuing equity securities, share based payment arrangements, deferred taxes and related valuation allowances and estimating the
fair value of long-lived assets to assess whether impairment charges may be necessary. Certain of our estimates, could be affected
by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external
factors could have an effect on our estimates that could cause actual results to differ from our estimates. The Company re-evaluates
all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
Fair Value Measurements
The Company adopted
the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as
used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value
measurements.
Certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued
expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these
instruments. The carrying amounts of our long-term credit obligations approximate fair value because the effective yields on these
obligations are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair
value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure
fair value:
Level 1 — quoted
prices in active markets for identical assets or liabilities
Level 2 — quoted
prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs
that are unobservable (for example cash flow modeling inputs based on assumptions)
Financial liabilities measured at fair value on
a recurring basis are summarized below:
| Fair value measurements at July 31, 2014 |
| |
| Total | | |
Quoted prices in
active markets for
observable
identical assets
(Level 1) | |
Significant
other
inputs
(Level 2) | |
|
Significant
unobservable
inputs
(Level 3) |
Derivative liability | |
$ | 595,238 | | |
| |
| |
$ |
595,238 |
The derivative liabilities are measured at fair
value using quoted market prices and estimated volatility factors based on historical quoted market prices for the Company’s
common stock, and are classified within Level 3 of the valuation hierarchy.
The following table sets forth a summary of the
changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:
| |
July 31, | | |
October 31, | |
| |
2014 | | |
2013 | |
| |
(unaudited) | | |
| |
| |
| | |
| |
Beginning Balance | |
$ | 129,425 | | |
$ | - | |
Aggregate fair value of derivatives issued | |
| 1,394,635 | | |
| 508,610 | |
Change in fair value of derivatives included in results of operations | |
| (928,822 | ) | |
| (379,185 | ) |
| |
| | | |
| | |
Ending Balance | |
$ | 595,238 | | |
$ | 129,425 | |
Convertible Instruments
The Company
evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives
and Hedging Activities.”
Applicable GAAP
requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of
the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is
not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate
instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
Stock-Based Compensation
The Company recognizes
compensation expense for stock-based compensation in accordance with ASC Topic 718. For employee stock-based awards, the Company
calculates the fair value of the award on the date of grant using the Black-Scholes method for stock options and the quoted price
of its common stock for unrestricted shares; the expense is recognized over the service period for awards expected to vest. For
non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as
employee awards, however, the awards are revalued at the end of each reporting period and the pro rata compensation expense is
adjusted accordingly until such time the nonemployee award is fully vested, at which time the total compensation recognized to
date equals the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award
recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and
to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment
in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of
awards, employee class, and historical experience.
Net income (loss) per share
The Company
utilizes FASB ASC 260, Earnings per Share, to calculate gain or loss per share. Basic gain or loss per share is
computed by dividing the gain or loss available to common stockholders (as the numerator) by the weighted-average number of
shares of common stock outstanding (as the denominator). Diluted gain or loss per share is computed similar to basic gain or
loss per share except that the denominator is increased to include the number of additional shares of common stock that would
have been outstanding if all potential common stock (including common stock equivalents) had all been issued, and if such
additional shares of common stock were dilutive. Under FASB ASC 260, if the additional shares of common stock are not
dilutive, they are not added to the denominator in the calculation. Where there is a loss, the inclusion of additional shares
of common stock is anti-dilutive (since the increased number of shares reduces the per share loss available to common stock
holders). The Company incurred a loss for the three and nine months ended July 31, 2014 and 2013 therefore, common stock
equivalents have been excluded from the calculation of diluted loss per share. At the current range of market trading prices
of the Company’s common stock, the Company does not possess enough authorized stock to convert all of its convertible
instruments to common stock. For the Company to meet all of its obligations upon the receipt of notices of conversion
received from holders of convertible instruments, the Company will may need to increase the authorized limit of common stock.
With respect to the aggregate number of shares issuable to holders of convertible loans, the fair value of the conversion
options are included in derivative liability. Convertible preferred stock and escow shares are clearly and closely related to
the Company’s common stock and therefore do not require liability treatment.
The following table outlines the common
stock equivalents outstanding as of July 31, 2014 and 2013.
| |
7/31/2014 | | |
7/31/2013 | |
Convertible Series A Preferred Stock – Non Controlling Interest | |
| 594,930 | | |
| 594,930 | |
Convertible Series B Preferred Stock | |
| 6,686,375 | | |
| 6,686,375 | |
Convertible Series C Preferred Stock | |
| 7,010,125 | | |
| 7,010,125 | |
Convertible Series D Preferred Stock | |
| 16,031,375 | | |
| 16,031,375 | |
Stock Options | |
| - | | |
| 6,142,809 | |
Warrants | |
| 376,923,077 | | |
| - | |
Escrow shares | |
| 14,285,000 | | |
| - | |
Convertible Loans | |
| 30,776,472,204 | | |
| 344,061,637 | |
| |
| 31,198,003,086 | | |
| 380,527,251 | |
The Convertible
Series A Preferred shares are currently held by the Non-Controlling interests until such time as they are converted into the Company’s
common shares.
Recent Accounting Pronouncements
In
June 2014, the FASB issued ASU 2014-12, Compensation - Stock Compensation.
The amendments in this ASU apply to reporting entities that grant their employees share-based payments in which the terms of the
award provide that a performance target can be achieved after the requisite service period. This ASU is the final version of Proposed
ASU EITF-13D--Compensation--Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide
That a Performance Target Could Be Achieved after the Requisite Service Period, which has been deleted. The
amendments require that a performance target that affects vesting and that could be achieved after the requisite service period
be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards
with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected
in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes
probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s)
for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before
the end of the requisite service period, the remaining unrecognized compensation cost should amount of compensation cost recognized
during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted
to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service
and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the
stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite
service period. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning
after December 15, 2015, and early adoption is permitted. The Company does not expect ASU 2014-12 to have a material impact
on the consolidated financial statements.
In May 2014, the
Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue
from Contracts with Customers. Amendments in this ASU create Topic 606, Revenue from Contracts with Customers, and supersede
the revenue recognition requirements in Topic 605, Revenue Recognition, including most industry-specific revenue recognition guidance
throughout the Industry Topics of the Codification. In addition, the amendments supersede the cost guidance in Subtopic 605-35,
Revenue Recognition—Construction-Type and Production-Type Contracts, and create new Subtopic 340-40, Other Assets and Deferred
Costs—Contracts with Customers. In summary, the core principle of Topic 606 is that an entity recognizes revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. This ASU is the final version of Proposed ASU 2011-230—Revenue Recognition
(Topic 605) and Proposed ASU 2011–250—Revenue Recognition (Topic 605): Codification Amendments, both of which have
been deleted. The amendments in this ASU are effective for the Company for annual reporting periods beginning after December 15,
2016, including interim periods within that reporting period. The Company is currently evaluating the effects of ASU 2014-09 on
the consolidated financial statements.
The FASB has issued
ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward,
a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). U.S. GAAP does not
include explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward,
a similar tax loss, or a tax credit carryforward exists. The amendments in this ASU state that an unrecognized tax benefit, or
a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset
for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net
operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the
tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax
position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use,
the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability
and should not be combined with deferred tax assets. This ASU applies to all entities that have unrecognized tax benefits when
a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. The amendments
in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. For nonpublic
entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15,
2014. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist
at the effective date. Retrospective application is permitted. The adoption of this standard is not expected to have a material
impact on the Company’s results of operations, cash flows or financial position.
Note 4 – Escrow Shares
On April 28, 2014, the Company entered
into a Securities Purchase Agreement with Adar Bays, LLC (“Adar Bays”), a Florida Limited Liability Company for the
sale and issuance of an 8% convertible promissory note in the principal amount of $77,500 due April 28, 2015 (the “AB Note”).
In addition to the AB Note, the Company and Adar Bays entered into a back end funding arrangement with respect to a second 8% convertible
promissory note due April 28, 2015 for $77,500 in consideration for a note receivable issued by Adar Bays to the Company in the
amount of $77,500 (the “Back End Notes”). In connection with the Back End Notes, the Company and Adar Bays entered
into a Breakup Fee Agreement, which grants a right to the Company to cancel the Back End Notes, prior to November 1, 2014, for
a fee of $10,000. To secure the payment of the $10,000 breakup fee, the Company issued 14,285,000 shares of its common stock to
an attorney escrow. Should the Company decide to perform on the Back End Notes the shares of stock will be returned to the Company
from the attorney escrow. The 14,285,000 shares issued to attorney escrow were issued at $.0007 per share commensurate with the
trading price of the Company’s common stock when the Back End Notes were issued.
Note 5 – Intellectual Property
The Company has several patent applications
pending regarding proprietary chemical formulations that the Company believes are capable of neutralizing noxious chemicals and
eliminating harmful microbes. The Company capitalized the costs of acquired technology, know-how and trade secrets and identifiable
costs incurred to develop, file and defend the Company’s Intellectual Property and new patent or provisional patent applications
(collectively “Intellectual Property”) in accordance with FASB ASC 350. Periodic gross carrying amounts and related
accumulated amortization were as follows:
| |
| 7/31/2014 | | |
| 10/31/2013 | |
Gross Carrying Amount | |
$ | 15,256,688 | | |
$ | 15,256,688 | |
Accumulated Amortization | |
| (6,538,733 | ) | |
| (6,007,190 | ) |
Net Carrying Amount | |
$ | 8,717,955 | | |
$ | 9,249,498 | |
The Company follows
FASB ASC 350-30-35 and amortizes the costs of its Intellectual Property over the shorter of its specific useful life, or 20 years.
The Company is amortizing its Intellectual Property over 20 years, with no anticipated residual value. Amortization
expense for the three months ended July 31, 2014 and 2013 was $177,181 and $177,181, respectively. Amortization expense
for the nine months ended July 31, 2014 and 2013 was $531,543 and $531,543, respectively.
Estimated amortization expense is
as follows
10/31/2014 (Remaining) | |
| 177,181 | |
10/31/2015 | |
| 708,723 | |
10/31/2016 | |
| 708,723 | |
10/31/2017 | |
| 708,723 | |
10/31/2018 | |
| 708,723 | |
The Intellectual Property is evaluated
annually for recoverability pursuant to FASB ASC 350-30-35-14 and related guidance in ASC 360-10-35-17 thru 35-35. An impairment
loss is recognized if the asset is determined not to be recoverable and its carrying amount exceeds its fair value. We have reviewed
long-lived assets and certain identifiable intangibles to be held and used for impairment whenever events or changes in circumstances
have indicated that the carrying amount of its assets might not be recoverable and have appropriately recorded the adjustment.
Based on our review there were no indicators during the quarter ended July 31, 2014 that would cause impairment of intellectual
property.
Note 6 - Related Party Payables
During the three months ended July 31,
2014 and 2013, the Company recorded interest of $518 and $518, respectively, and during the nine months ended July 31, 2014 and
2013, the Company recorded interest of $1,554 and $1,554, respectively, on promissory notes entered into with former members of
the Board of Directors who resigned their positions with the Company on January 29, 2009.
Note 7 - Stock Based Compensation
The Company issues shares of its common
stock to employees and non-employees as compensation for services provided. Stock based compensation related to employees is accounted
for in accordance with FASB ASC 718-10 and ASC 505-50 for non-employees. All shares issued during fiscal years 2013 and 2012 were
fully vested upon grant of the shares or no later than the respective year end dates.
Employees and Board Members
Measurement of compensation cost related
to shares of common stock issued to employees is based on the grant date fair value of the shares. Fair value was determined through
the use of quoted prices in the trading market for the Company’s shares (OTCBB) or arms-length exchanges of shares for cash
in private transactions, in periods that quoted market prices were not available.
On April 11, 2014
the Company canceled 787,500 shares of its restricted common stock which had been issued to employees for compensation of $78,750
incurred in fiscal 2013. Upon return of the shares, the Company credited $78,750 to Accrued Compensation.
On December 11,
2013 the Company canceled 1,705,152 shares of its S-8 registered common stock which had been issued to an employee for compensation
and out of pocket expenses incurred in fiscal 2013 of $72,263. Upon return of the shares, the Company credited $72,263 to Accrued
Compensation.
Note 8 - Stockholder’s Equity (and Non-Controlling
Interest)
Common Stock
On April 21, 2014,
the Company filed a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of Management’s
plan to increase the number of authorized shares of common stock from four billion (4,000,000,000) to eight billion (8,000,000,000)
shares with the Secretary of State of Nevada. At a meeting held on April 2, 2014, and in conjunction with a unanimous consent of
the Board on April 17, 2014, the Board authorized management to increase the number of shares authorized to eight billion shares
(8,000,000,000). The additional four billion (4,000,000,000) shares of Common Stock so authorized will be available for issuance
by the Board for stock splits or stock dividends, acquisitions, raising additional capital, stock options or other corporate purposes.
The additional shares of Common Stock could be used for potential strategic transactions, including, among other things, acquisitions,
strategic partnerships, joint ventures, restructurings, business combinations and investments, although there are no immediate
plans to do so. Assurances cannot be provided that any such transactions will be consummated on favorable terms or at all, that
they will enhance stockholder value or that they will not adversely affect the Company's business or the trading price of the Common
Stock. The purposes for increasing the authorized shares include providing available shares for (i) the exercise of all outstanding
options; (ii) the conversion of outstanding convertible promissory notes and deferred compensation agreements; (iii) the conversion
of the Series A, B, C and D Convertible Preferred Stock; (iv) future issuances of stock options pursuant to employees; and (v)
issuances to satisfy conversions of future convertible debt or convertible preferred stock. The Company mailed the Notice of Stockholder
Action by Written Consent to the Stockholders on May 5, 2014. The authorized share increase will become effective on the date that
the Company files the Certificate of Amendment to the Amended Certificate of Incorporation of the Company (the "Amendment")
with the Secretary of State of the State of Nevada. The Company filed the Amendment with the Secretary of State of the State of
Nevada on May 6, 2014. On May 6, 2014, the Company filed with the SEC a definitive Schedule 14C Information Statement thereby confirming
the effectiveness of the preliminary Schedule 14C Information Statement filed on April 21, 2014.
On June 19, 2014,
the Company filed a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of Management’s
plan to increase the number of authorized shares of common stock from eight billion (8,000,000,000) to seventeen billion (17,000,000,000)
shares with the Secretary of State of Nevada. At a meeting held on June 17, 2014, the Company received unanimous consent by the
Board and by the holder of Series F Preferred Stock, no par value per share (the “Series F Preferred”), and authorized
management to increase the number of shares authorized to seventeen billion shares (17,000,000,000). The additional nine billion
(9,000,000,000) shares of Common Stock so authorized will be available for issuance by the Board for stock splits or stock dividends,
acquisitions, raising additional capital, stock options or other corporate purposes. The additional shares of Common Stock could
be used for potential strategic transactions, including, among other things, acquisitions, strategic partnerships, joint ventures,
restructurings, business combinations and investments, although there are no immediate plans to do so. Assurances cannot be provided
that any such transactions will be consummated on favorable terms or at all, that they will enhance stockholder value or that
they will not adversely affect the Company's business or the trading price of the Common Stock. The purposes for increasing the
authorized shares include providing available shares for (i) the exercise of all outstanding options; (ii) the conversion of outstanding
convertible promissory notes and deferred compensation agreements; (iii) the conversion of the Series A, B, C and D Convertible
Preferred Stock; (iv) future issuances of stock options pursuant to employees; and (v) issuances to satisfy conversions of future
convertible debt or convertible preferred stock. The Company mailed the Notice of Stockholder Action by Written Consent to the
Stockholders on July 2, 2014. The authorized share increase became effective on July 9, 2014 when the Company filed the Certificate
of Amendment to the Amended Certificate of Incorporation of the Company (the "Amendment") with the Secretary of State
of the State of Nevada. On July 1, 2014, the Company filed with the SEC a definitive Schedule 14C Information Statement thereby
confirming the effectiveness of the preliminary Schedule 14C Information Statement filed on June 19, 2014.
On July 23, 2014, the
Company filed a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of Management’s
plan to increase the number of authorized shares of common stock from seventeen billion (17,000,000,000) to thirty seven billion
(37,000,000,000) shares with the Secretary of State of Nevada. At a meeting held on July 21, 2014, the Company received unanimous
consent by the Board and by the holder of Series F Preferred Stock, no par value per share (the “Series F Preferred”),
and authorized management to increase the number of shares authorized to thirty seven billion (37,000,000,000) shares. The additional
twenty billion (20,000,000,000) shares of Common Stock so authorized would have been available for issuance by the Board for stock
splits or stock dividends, acquisitions, raising additional capital, stock options or other corporate purposes. The additional
shares of Common Stock have been used for potential strategic transactions, including, among other things, acquisitions, strategic
partnerships, joint ventures, restructurings, business combinations and investments, although there are were immediate plans to
do so. Assurances cannot be provided that any such transactions would have been consummated on favorable terms or at all, that
they would have enhanced stockholder value or that they would not have adversely affected the Company's business or the trading
price of the Common Stock. The authorized share increase was withdrawn when the Company filed a Schedule 14C Information Statement
with the SEC on August 18, 2014 to notify the stockholders of the Company of Management’s plan to amend the Company’s
Articles of Incorporation, as amended, to effectuate a 1,000-to-1 reverse split of the Company’s Common Stock, par value
$.00001 per share. The Company currently has not effectuated the increase in the authorization of its common stock from 17,000,000,000
to 37,000,000,000 or the 1,000 to 1 reverse split. At the current range of market trading prices of the Company’s common
stock, the Company does not possess enough authorized stock to convert all of its convertible instruments to common stock. For
the Company to meet all of its obligations upon the receipt of notices of conversion received from noteholders, the Company will
may need to increase the authorized limit of common stock.
On November 13,
2013, the Company issued 24,000,000 shares of its common stock to reduce certain outstanding accounts payable in the amount of
$31,200. The shares were valued at $.0013 representing the trading price of the Company’s common stock on November 12, 2013.
The shares were issued pursuant to Settlement Agreement and Stipulation (the “Settlement Agreement”) between the Company
and ASC Recap LLC (“ASC”) on September 20, 2013. Pursuant to the Settlement Agreement; ASC acquired accrued and outstanding
accounts payable of the Company in the aggregate amount of $266,298 (the “Accounts Payable Claims”). Pursuant to the
entry of by the Superior Court of New Jersey, Essex County Law Division ordering a Stipulation of Dismissal on October 31, 2013
in settlement of the Accounts Payable Claims, the Company may issue and deliver to ASC shares of its Common Stock in one or more
tranches as necessary to generate proceeds to satisfy the Accounts Payable Claims. In addition, on November 12, 2013, the Company
issued a non interest bearing convertible promissory note in the amount of $15,000 due on May 31, 2014 to ASC to reimburse ASC
for legal fees incurred in connection with the Settlement Agreement. On February 27, 2014 as agreed upon by the Company and ASC,
the November 12, 2013 non interest bearing convertible promissory note issued to ASC was cancelled and no further obligation was
due to ASC from the Company for reimbursement of legal fees incurred by ASC in connection with the Settlement Agreement.
On March 6, 2014,
the Company issued 25,000,000 shares of its common stock to reduce certain outstanding accounts payable in the amount of $15,875.
The shares were valued at $0.0008 representing the approximate trading price of the Company’s common stock at the time of
the issuance. The shares were issued pursuant to the Settlement Agreement with ASC Recap LLC.
On March 18, 2014,
the Company issued 25,000,000 shares of its common stock to reduce certain outstanding accounts payable in the amount of $15,875.
The shares were valued at $0.0009 representing the approximate trading price of the Company’s common stock at the time of
the issuance. The shares were issued pursuant to the Settlement Agreement with ASC Recap LLC.
During the nine
months ended July 31, 2014, the Company issued 136,000,000 shares of its restricted common stock to a consulting firm for marketing
fees of $65,000. The shares were issued at prevailing market prices of the Company’s common stock at the time of issuance.
On November 21,
2013, the Company issued 1,000,000 shares of its common stock to Randy McNeil pursuant to a stock purchase agreement with Mr. McNeil
on September 12, 2013 for $5,000. The purchase price per share of the common stock of $0.005 represents a negotiated per share
price which approximated the prevailing per share closing prices at the time the parties reached an agreement of terms.
On November 21,
2013, the Company issued 1,466,278 shares of its common stock to Bernie Casamento pursuant to a stock purchase agreement with Mr.
Casamento on August 16, 2013 for $10,000. The purchase price per share of the common stock was $0.0068 which was equal to the average
closing trading price of the Company’s common stock for the five (5) preceding days of the closing on August 16, 2013.
On November 21,
2013, the Company issued 1,466,278 shares of its common stock to Bob Rutherford pursuant to a stock purchase agreement with Mr.
Rutherford entered into on August 16, 2013 for $10,000. The purchase price per share of the common stock was $0.0068 which is equal
to the average closing trading price of the Company’s common stock for the five (5) preceding days of the closing on August
16, 2013.
On November 13,
2013, the Company issued 24,000,000 common shares to reduce certain outstanding accounts payable in the amount of $10,500. The
Company incurred finance charges of $20,700 in connection with the issuance of the shares. The shares were valued at $0.0013 representing
the approximate trading price of the Company’s common stock at the time of the issuance. The shares were issued pursuant
to the Settlement Agreement with ASC Recap LLC.
During the nine
months ended July 31, 2014, the Company issued 96,478,175 shares of its common stock to Southridge Partners II for payment of $40,000
of fees related to an Equity Purchase Agreement entered into with Southridge Partners II in December 2012. The shares were issued
at prevailing market prices of the Company’s common stock at the time of issuance.
On April 29, 2014
the Company issued 14,285,000 shares of its common stock to an attorney escrow in connection with a Breakup Fee Agreement and a
corresponding fee of $10,000 with Adar Bays which grants a right to the Company to cancel the certain promissory notes with Adar
Bays, prior to November 1, 2014. The shares were issued at $0.0007 commensurate with prevailing market prices of the Company’s
common stock at the time of issuance.
On May 22, 2014,
the Company issued 10,000,000 shares of its restricted common stock to a consulting firm for marketing fees of $5,000. The shares
were valued and issued at a negotiated per share price of $0.0005, a share price which approximated the prevailing per share closing
prices at the time the parties reached an agreement of terms.
On July 30, 2014,
the Company issued 50,000,000 shares of its restricted common stock to James Casserly for settlement of accrued and unpaid interest
of $4,500 pursuant to a conversion notice received by the Company from Mr. Casserly on July 21, 2014. The shares were valued and
issued at $0.00009 pursuant to the terms of his conversion privilege; a share price which was equal to 50% the preceding 10 day
average closing trading price of the Company’s common stock.
During the nine
months ended July 31, 2014, the Company issued 711,066,822 shares of common stock to JMJ Financial to settle loan proceeds in the
collective amount of $142,515
During the nine
months ended July 31, 2014, the Company issued 198,072,984 shares of common stock to Asher Enterprises to convert short-term convertible
promissory notes in the aggregate amount of $65,450.
During the nine
months ended July 31, 2014, the Company issued 3,159,776,861 shares of common stock to GEL Properties to settle loan proceeds in
the amount of $532,601.
During the nine
months ended July 31, 2014, the Company issued 153,271,319 shares of common stock to Magna Group to convert short-term convertible
promissory notes in the aggregate of $78,164.
On July 28, 2014,
the Company received a notice of conversion from Darling Capital LLC, and pursuant to the notice issued 465,365,714 shares of common
stock in partial settlement of $18,615 of the outstanding convertible loan balance.
On July 21, 2014,
the Company received a notice of conversion from WHC Capital, LLC, and pursuant to the notice issued 160,000,000 shares of common
stock in partial settlement of $8,000 of the outstanding convertible loan balance.
Non-Controlling Interest
In connection with
the reverse acquisition disclosed in Note 1, initially approximately 14% of BioLabs’ common shareholders did not participate
in the exchange of their shares of BioLabs’ common stock for shares of common stock of the Company. Those shareholders are
recognized as a non-controlling interest in the Company’s condensed consolidated financial statements in accordance with
FASB ACS 805-40-25-2. The assets, liabilities and operations underlying the shares of BioLabs’ and the Company are identical.
However, the shares representing ownership of the Company reflect the combined entity after the Share Exchange transaction, while
BioLabs’ shares included in the non-controlling interest held by the non-controlling interest represent ownership of that
legal entity.
Non-Controlling Interest at October 31, 2010 | |
$ | 570,301 | |
Non-Controlling Interest Converted | |
| (25 | ) |
Non-Controlling interest Share of Net Loss for the Year ended October 31, 2011 | |
| (241,693 | ) |
Non-Controlling Interest at October 31, 2011 | |
| 328,583 | |
Non-Controlling interest Share of Net Loss for the Year ended October 31, 2012 | |
| (219,981 | ) |
Non-Controlling Interest at October 31, 2012 | |
| 108,602 | |
Non-Controlling interest Share of Net Loss for the Year ended October 31, 2013 | |
| (269,303 | ) |
Non-Controlling Interest at October 31, 2013 | |
| (160,701 | ) |
Non-Controlling interest Share of Net Loss for the nine months ended July 31, 2014 | |
| (270,686
| ) |
Non-Controlling Interest at July 31, 2014 | |
$ | (431,387
| ) |
The Series A Preferred Stock is not
recognized in the Non-Controlling Interest. If the 59,484 shares of preferred stock were fully converted into shares of BioLabs
common stock and Preferred Shareholders did not elect to exchange those shares for Company common stock, the Non-Controlling interest
would be 8.44% as of July 31, 2014 and October 31, 2013.
Note 9 – Convertible Notes
Payable
| |
July 31, 2014 | | |
October 31, 2013 | |
| |
(Unaudited) | | |
| |
Adar Bays, LLC | |
$ | 79,003 | | |
$ | - | |
Asher Enterprises, Inc. | |
| - | | |
| 108,090 | |
Ben Hanafin | |
| 2,500 | | |
| - | |
Darling Capital LLC | |
| 15,546 | | |
| - | |
DH Technical Consulting LLC | |
| 29,218 | | |
| - | |
GEL Properties LLC | |
| 123,933 | | |
| - | |
Hanover Holdings LLC | |
| 38,348 | | |
| - | |
James Casserly | |
| - | | |
| 26,236 | |
JMJ Financial | |
| 110,001 | | |
| 111,960 | |
John Sikora | |
| 120,711 | | |
| - | |
KBM Worldwide Inc. | |
| 75,204 | | |
| - | |
LG Capital Funding LLC | |
| 35,928 | | |
| - | |
Randy McNeil | |
| 17,648 | | |
| 15,518 | |
Ray Dunning | |
| 193,132 | | |
| 97,079 | |
Robert Machinist | |
| 25,000 | | |
| - | |
Typenex Co-Investment, LLC | |
| 49,953 | | |
| - | |
WHC Capital, LLC | |
| 68,995 | | |
| - | |
| |
| | | |
| | |
Total Convertible Notes Payable | |
| 985,120 | | |
| 358,883 | |
Debt Discount | |
| (408,253 | ) | |
| (91,167 | ) |
Convertible Notes Payable Net of Debt Discount | |
$ | 576,867 | | |
$ | 267,716 | |
Adar Bays, LLC
On April 28, 2014,
the Company entered into a Securities Purchase Agreement with Adar Bays, LLC, a Florida Limited Liability Company for the sale
and issuance of an 8% convertible promissory note in the principal amount of $77,500 (the “Note”). The Company received
payments in the amounts of $38,750 on April 29, 2014 and $38,750 on May 8, 2014. The principal balance of the Note is convertible
into common stock, $0.00001 par value, of the Company, at the election of the Holder, beginning at any time after the requisite
Rule 144 period. The conversion price of the Note shall be equal to 55% multiplied by the market price (as defined in the Note).
The Note matures on April 28, 2015. Interest on the Note accrues at a rate of 8% per annum. The loan balance including accrued
interest was $79,003 at July 31, 2014.
Asher Enterprises, Inc.
As of October 31, 2013, the Company had
two convertible notes outstanding with Asher Enterprises, Inc., a Delaware Corporation (the “Holder”) with aggregate
principal and accrued interest of $108,090. The principal balance of the Notes are convertible into common stock, $0.00001 par
value, of the Company, at the election of the Holder, beginning 180 days after the issuance of the Notes. The conversion price
of the Notes shall be equal to 51% multiplied by the market price (as defined in the Notes). The Notes matures on February 6, 2014
and July 17, 2014 respectively. The Company has the right to prepay the principal and interest at a premium depending on the date
that it is prepaid. Interest on the Notes accrues at a rate of 8% per annum. The Notes contain customary default provisions, including
provisions for potential acceleration of the Notes, a default premium, and default interest of 22%.
During the nine months ended July 31,
2014, the Company received several notices of conversion from Asher, and pursuant to those notices issued 198,072,984 shares of
common stock in partial settlement of $65,540 of the outstanding convertible loan balance.
On April 10, 2014,
the Company made a cash payment to Asher Enterprises, Inc. in the amount of $65,324 to satisfy in full, the remaining 8% convertible
promissory note issued by the Company to Asher Enterprises, Inc.
Ben Hanafin
On January 2, 2014, the Company issued
a convertible promissory note (the “Hanafin Note”) to Ben Hanafin, a member of the Company’s Board of Directors,
in the amount of $2,500. The Hanafin Note is due on January 2, 2015, and bears interest at 18% per annum. Mr. Hanafin has the right
to convert the principal and interest into the Company’s common stock at a conversion price equal to 50% of the average closing
price of the Company’s common stock for the 10 preceding days of the Maturity Date of January 2, 2015. The loan balance was
$2,500 at July 31, 2014.
Darling Capital, LLC
On July 21, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with Darling Capital, LLC, (“Darling”)
for the sale and issuance of a 15% convertible promissory note in the principal amount of $12,500 (the “Note”). The
principal balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder,
at any time during the period beginning on January 21, 2014 and ending on the maturity date of February 21, 2015. The conversion
price of the Note shall be equal to 60% from the lowest closing bid price for the thirty days prior to the day that the Company
receives requests for conversion. The Note matures on February 21, 2015. Interest on the Note accrues at a rate of 15% per annum.
As of July 31, 2014, the Company received $9,000 proceeds from the Darling note. The remaining $3,500 was received in August 2014.
On July 21 2014,
the Company issued a convertible promissory note to Darling in the amount of $25,000, which bears interest at 18% per annum. Darling
is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal
face amount of the convertible promissory note then outstanding into shares of the Company's common stock without restrictive
legend of any nature, at a conversion price for each share of Common Stock equal to 60% of the lowest closing bid price for the
thirty days prior to the day that the Company receives requests for conversion. The convertible promissory note was issued in
connection with the direct settlement by Darling with James Casserly, a convertible notes holder of the Company. On July 28, 2014,
the Company received a notice of conversion from Darling, and pursuant to the notice issued 465,365,714 shares of common stock
in partial settlement of $18,615 of the outstanding convertible loan balance.
The balance outstanding
including accrued interest at July 31, 2014 was $15,546.
DH Technical Consulting, LLC
On May 1, 2014,
the Company issued a convertible promissory note to DH Technical Consulting LLC in consideration of outstanding consulting fees
of $28,640, due on May 1, 2015 (the “Maturity Date”). DH Technical Consulting LLC is entitled, at his option, on the
Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into shares of the Company's
common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the
average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
GEL Properties LLC
During the nine months ended July 31,
2014, the Company issued five convertible promissory notes to GEL Properties, LLC (“GEL”) in the aggregate amount of
$135,000, due on various dates through March 19, 2015, all of which bears interest at 6% per annum. GEL is entitled, at its option,
at any time after the requisite rule 144 holding period, to convert all or any amount of the principal face amount of these Notes
then outstanding into shares of the Company's common stock without restrictive legend of any nature, at a conversion price for
each share of Common Stock equal to 55% (1 note) and 65% (4 notes) of the lowest closing bid price of the Common Stock for any
of the five trading days, including the day upon which the upon which the notice of conversion is received by the Company.
During the nine months ended July 31,
2014, the Company issued an additional ten (10) convertible promissory notes to GEL in the aggregate amount of $515,074, due on
various dates through April 29, 2015, eight (8) of which bears interest at 6% and two (2) at 8% per annum. GEL is entitled, at
its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal face amount
of these Notes then outstanding into shares of the Company's common stock without restrictive legend of any nature, at a conversion
price for each share of Common Stock equal to 65% (8 notes) and 55% (2 notes) of the lowest closing bid price of the Common Stock.
These Notes were issued in connection the direct settlement by GEL with certain convertible notes holders of the Company.
During the nine months ended July 31,
2014 the Company received several notices of conversion from GEL, and pursuant to those notices issued an aggregate amount of 3,159,776,861
shares of common stock to settle loan proceeds in the amount of $532,601.
The balance outstanding
including accrued interest at July 31, 2014 was $123,933.
Hanover Holdings LLC
On February 11,
2014, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Hanover Holdings I,
LLC, (the “Holder”) for the sale and issuance of a 12% convertible promissory note in the principal amount of $36,500
(the “Note”). The principal balance of the Note is convertible into common stock, $0.00001 par value, of the Company,
at the election of the Holder, at any time during the period beginning on February 11, 2014 and ending on the maturity date of
February 11, 2015. The conversion price of the Note shall be equal to 45% from the lowest trading price in the five days prior
to the day that the Company receives requests for conversion. The Note matures on February 11, 2015. Interest on the Note accrues
at a rate of 12% per annum. The loan balance including accrued interest was $38,348 at July 31, 2014.
James Casserly
On July 16, 2013, the Company issued
a convertible promissory note (the “Casserly Note”) to James Casserly in the amount of $25,000. The Casserly Note was
due on July 15, 2014, and bore interest at 18% per annum. Mr. Casserly had the right to convert the principal and interest into
the Company’s common stock at a conversion price equal to 50% of the average closing price of the Company’s common
stock for the 10 preceding days of the Maturity Date of July 15, 2014. On July 21, 2014, Mr. Casserly assigned the principal portion
of the Casserly Note of $25,000 to Darling Capital LLC, and on July 15, 2014 issued a conversion notice to the Company for the
amount of accrued and unpaid interest of $4,500. In exchange for the conversion notice the Company issued 50,000,000 shares of
its common stock to Mr. Casserly at 50% the preceding 10 day average closing trading price of the Company’s common stock
of $0.0009.The balance outstanding including accrued interest at July 31, 2014 was $0.
JMJ Financial
On December 12,
2012, BioNeutral Group, Inc. (the “Company”) issued a promissory note (the “JMJ Note”) in the principal
amount of $250,000 to JMJ Financial (“JMJ”), of which $215,000 has been received through the date of this report including
$55,000 received during the nine months ended July 31, 2014. On July 9, 2914 the Company issued a convertible promissory note
in the principal amount of $250,000 to JMJ (the “July JMJ Note”), and pursuant to the issuance of the July JMJ Note,
JMJ cancelled the JMJ Note and the remaining, unissued principal amount of $35,000 of the JMJ Note. The maturity date of the July
JMJ Note is two years from the date of each payment. The July JMJ Note is interest free if repaid within 90 days and if not paid
within 90 days it bears interest at 10%. The principal and any accrued interest are convertible into the Company’s common
stock at the lower of $.0002 per share of 60% of the lowest trade price in the 25 days prior to conversion. JMJ has piggyback
registration rights with respect to the shares into which the JMJ Note is convertible. During the nine months ended July 31, 2014
the Company received eleven notices of conversion from JMJ for the JMJ Note, and pursuant to those notices issued 711,066,822
shares of common stock to settle loan proceeds in the collective amount of $142,515. On July 9, 2014 the Company received $60,000
of the July JMJ Note. At July 31, 2014 the JMJ aggregate loan balance including accrued interest was $110,001.
John Sikora
During the
nine months ended July 31, 2014, the Company issued convertible promissory notes in consideration for outstanding consulting
fees payable to John Sikora in the aggregate amount of $111,000, due on August 1, 2014 and September 20, 2014 (the
“Maturity Date”), which bear interest at 18% per annum. Mr. Sikora is entitled, at his option, on the Maturity
Date, to convert all or any amount of the principal face amount of this note then outstanding into shares of the Company's
common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 50% of
the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date. The balance outstanding
including accrued interest was $120,711 at July 31, 2014 and is currently in default.
KBM Worldwide Inc.
On March 26, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with KBM Worldwide, Inc., a Delaware Corporation (the
“Holder”) for the sale and issuance of an 8% convertible promissory note in the principal amount of $53,000 (the “Note”).
The Purchase Agreement became effective on April 8, 2014 when the transaction closed. The principal balance of the Note is convertible
into common stock, $0.00001 par value, of the Company, at the election of the Holder, beginning 180 days after the issuance of
the Note. The conversion price of the Note shall be equal to 50% multiplied by the market price (as defined in the Note). The Note
matures on January 2, 2015. The Company has the right to prepay the principal and interest at a premium depending on the date that
it is prepaid. Interest on the Note accrues at a rate of 8% per annum. The Note contains customary default provisions, including
provisions for potential acceleration of the Note, a default premium, and default interest of 22%.
On June 11, 2014,
the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with KBM Worldwide, Inc., a Delaware
Corporation (the “Holder”) for the sale and issuance of an 8% convertible promissory note in the principal amount
of $20,500 (the “Note”). The principal balance of the Note is convertible into common stock, $0.00001 par value, of
the Company, at the election of the Holder, beginning 180 days after the issuance of the Note. The conversion price of the Note
shall be equal to 50% multiplied by the market price (as defined in the Note). The Note matures on March 13, 2015. The Company
has the right to prepay the principal and interest at a premium depending on the date that it is prepaid. Interest on the Note
accrues at a rate of 8% per annum. The Note contains customary default provisions, including provisions for potential acceleration
of the Note, a default premium, and default interest of 22%.
The balance outstanding including accrued
interest was $74,204 at July 31, 2014.
LG Capital Funding LLC
On April 2, 2014,
the Company issued a convertible promissory note to LG Capital Funding, LLC (“LG”) in the amount of $35,000, due on
April 2, 2015, which bears interest at 8% per annum. LG 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 without restrictive
legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the lowest closing bid price of the
Common Stock for the prior fifteen days, including the date of receipt of the notice of conversion. The balance outstanding including
accrued interest was $35,928 at July 31, 2014.
Randy McNeil
On August 19, 2013,
the Company entered into and issued a convertible promissory note (the “McNeil Note”) to Randy McNeil in the amount
of $15,000. The McNeil Note is due on August 18, 2014, and bears interest at 18% per annum. Mr. McNeil has the right to convert
the principal and interest into the Company’s common stock at a conversion price equal to 50% of the average closing price
of the Company’s common stock for the 10 preceding days of the Maturity Date of August 18, 2014. The balance outstanding
including accrued interest at July 31, 2014 was $17,648.
Ray Dunning
At October 31, 2013, the aggregate Ray
Dunning Convertible Loan balance was $97,079 including accrued interest of $2,679. These loans bear interest at 8% per annum. Mr.
Dunning has the right to convert the principal and interest into the Company’s common stock at a conversion price equal to
$.08 the average closing price of the Company’s common stock for the 10 preceding days of January 31, 2013.
During the nine months ended July 31,
2014, Mr. Dunning agreed to transfer the carrying value of his convertible notes including accrued interest to GEL in consideration
for $97,919. On July 18 2014, Mr. Dunning assigned the principal portion of the convertible promissory note due on January 15,
2015 of $51,500 to WHC Capital LLC.
On January 15, 2014 and February 1, 2014,
the Company issued a convertible promissory notes to Ray Dunning in consideration of cash in the amount of $51,500 , due on January
15, 2015 (the “Maturity Date”) and in consideration of outstanding consulting fees of $114,725, due on February 1,
2015 (the “Maturity Date”); $23,600 due on May 1, 2015, $23,600 due on June 1, 2015 and $23,600 due on July 1, 2015,
all of which bear interest at 8% per annum. Mr. Dunning is entitled, at his option, on the Maturity Date, to convert all or any
amount of the principal face amount of this note then outstanding into shares of the Company's common stock without restrictive
legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the average closing bid price of the
Common Stock for the 10 preceding days of the Maturity Date.
The balance outstanding including accrued
interest at July 31, 2014 was $193,132.
Robert Machinist
On November 5, 2013,
the Company issued a convertible promissory note (the “Machinist Note”) to Robert Machinist, a member of the Company’s
Board of Directors, in the amount of $25,000. The Machinist Note is due on November 4, 2014, and bears interest at 18% per annum.
Mr. Machinist has the right to convert the principal and interest into the Company’s common stock at a conversion price equal
to 50% of the average closing price of the Company’s common stock for the 10 preceding days of the Maturity Date of November
4, 2014.
Typenex Co-Investment, LLC
On
May 21, 2014, the Company entered into a securities purchase agreement with Typenex Co-Investment, LLC, (“Typenex”)
for the sale and issuance of a secured convertible promissory note in the principal amount of $335,000 and any interest, fees,
charges. (the “Typenex Note”). The Typenex Note carries an Original Issue Discount (“OID”) of $30,000.
In addition, the Company agreed to pay $5,000 to Typenex to cover Typenex’s legal fees, accounting costs, due diligence,
monitoring and other transaction costs incurred in connection with the Typenex Note. Interest is payable on the Typenex Note at
10% per annum. The Typenex Note is exercisable in eleven (11) tranches (each, a “Tranche”), consisting of (i) an initial
Tranche in an amount equal to $49,000 and any interest, costs, fees or charges accrued thereon or added thereto under the terms
of the Typenex Note and the other transaction documents (“Tranche #1”), which was funded to the Company on May 28,
2014, and (ii) ten (10) additional Tranches, the first nine (9) of which are in the amount of $27,500, plus any interest, costs,
fees or charges accrued thereon or added thereto under the terms of the Typenex Note and the other transaction documents, and
the last of which is in the amount of $38,500, plus any interest, costs, fees or charges accrued thereon or added thereto under
the terms of the Typenex Note. The conversion price for each Tranche conversion into shares of the Company’s common stock
shall be the lesser of (i) the Lender Conversion Price of $.0015, and (ii) 65% of the average of the three (3) lowest VWAPs (volume
weighed average price) in the twenty (20) trading days immediately preceding the applicable conversion, provided that if at any
time the average of the three (3) lowest VWAPs in the twenty (20) trading days immediately preceding any date of measurement is
below $0.0005, then in such event the then-current conversion factor shall be reduced by 5% for all future conversions (e.g.,
65% to 60%). The Tranches are payable thirteen months after payment to the Company. The Company granted a security agreement to
Typenex in connection with the Securities Purchase Agreement which provides Typenex with a security interest in those certain
Tranches or “Investor Notes” comprised of Tranche #1, Tranche #2, Tranche #3, Tranche #4, Tranche #5, Tranche #6,
Tranche #7, Tranche #8, and Tranche #9) issued by Secured Party in favor of Debtor on May 21, 2014, in the initial principal amounts
of $25,000 each, that certain Tranche #10 issued by Secured Party in favor of Debtor on May 21, 2014, in the initial principal
amount of $35,000, and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions
to and proceeds thereof. The Company did not grant a security interest in the general assets of the Company to Typenex. Under
and concurrently with the securities purchase agreement with Typenex, the Company also issued to Typenex a warrant to purchase
the number of shares equal to $167,500 divided by the higher of:
(i) the closing price of the common stock on the issue date; and (ii) the VWAP (as defined below) of the common stock for the
trading day that is two (2) trading days prior to the exercise date. The Typenex warrant may also be exercised by cashless exercise.
The balance outstanding including accrued interest was $49,953 at July 31, 2014. The fair value of the warrant was deminimus at
the date of issuance.
WHC Capital, LLC
On July 11, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with WHC Capital, LLC, (the “Holder”) for
the sale and issuance of a 12% convertible promissory note in the principal amount of $25,000 (the “Note”). The principal
balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder, at any
time during the period beginning on January 11, 2015 and ending on the maturity date of July 11, 2015. The conversion price of
the Note shall be equal to 50% from the lowest intra-day trading price during the ten days prior to the day that the Company receives
requests for conversion. The Note matures on February 11, 2015. Interest on the Note accrues at a rate of 12% per annum.
On July 18, 2014,
the Company issued a convertible promissory note to WHC Capital, LLC in the amount of $51,500, due on July 18, 2015, which bears
interest at 18% per annum. WHC Capital, LLC is entitled, at its option, at any time after the requisite rule 144 holding period,
to convert all or any amount of the principal face amount of the convertible promissory note then outstanding into shares of the
Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to
50% of the lowest intra-day trading price during the ten days prior to the day that the Company receives requests for conversion.
The convertible promissory note was issued in connection the direct settlement by WHC Capital, LLC with Ray Dunning, a convertible
notes holder of the Company. On July 21, 2014, the Company received a notice of conversion from WHC Capital, LLC, and pursuant
to the notice issued 160,000,000 shares of common stock in partial settlement of $8,000 of the outstanding convertible loan balance.
The balance outstanding including accrued
interest at July 31, 2014 was $68,995.
Note 10 – Convertible Loans from Stockholders
| |
July 31, 2014 | | |
October 31, 2013 | |
| |
(Unaudited) | | |
| | |
Michael Francis | |
$ | 578,169 | | |
$ | 610,851 | |
Capara Investments | |
| 902,831 | | |
| 851,440 | |
Herb Kozlov | |
| - | | |
| 75,000 | |
| |
| | | |
| | |
Total Convertible Notes Payable | |
| 1,481,000 | | |
| 1,537,291 | |
Debt Discount | |
| (76,143 | ) | |
| (75,000 | ) |
Convertible Notes Payable Net of Debt Discount | |
$ | 1,404,857 | | |
$ | 1,402,291 | |
Michael D. Francis
On July 1, 2013, the Company entered
into a promissory note modification agreement (the “Francis Modification”) with Michael D. Francis, a shareholder of
the Company in the amount of $560,918. At October 31, 2013, the Francis Modification balance was $610,858 including
accrued interest of $59,851. These Francis Modification bears interest at 18% per annum, and Mr. Francis has the right to convert
the principal and interest into the Company’s common stock at a conversion price equal to $.005 per share which is equal
to the average closing trading price of the Company’s common stock for the 5 preceding days of July 1, 2013.
On April 11, 2014, Mr. Francis entered
into a Debt Purchase Agreement with GEL (the “Francis GEL Purchase”) in the amount of $560,918 representing the principal
portion of the Francis Modification. The Francis GEL Purchase provides for four installment closings, and during the nine months
ended July 31, 2014, Mr. Francis closed on two installments by assigning principal including accrued interest to GEL in consideration
for $289,275.
On April 2, 2014,
the Company issued a convertible promissory note in the amount of $97,010 due on April 1, 2015 (the “Maturity Date”)
representing accrued and unpaid interest on the Francis Modification through April 2, 2014. The convertible promissory note bears
interest at 18% per annum. Mr. Francis is entitled, at his option, on the Maturity Date, to convert all or any amount of the principal
face amount of this note then outstanding into shares of the Company's common stock without restrictive legend of any nature,
at a conversion price for each share of Common Stock equal to 50% of the average closing bid price of the Common Stock for the
10 preceding days of the Maturity Date.
After consideration of the GEL Purchase closings in the amount of $289,275, and the convertible
promissory note issued by the Company on April 2, 2014 in the amount of 97,010, the principal balance and accrued and unpaid interest
of the Francis Modification at July 31, 2014 was $293, 567.
On April 17, 2014, the Company issued
a convertible promissory note to Michael Francis in the amount of $70,000, due on April 16, 2015 (the “Maturity Date”),
which bears interest at 18% per annum. Mr. Francis is entitled, at his option, on the Maturity Date, to convert all or any amount
of the principal face amount of this note then outstanding into shares of the Company's common stock without restrictive legend
of any nature, at a conversion price for each share of Common Stock equal to 50% of the average closing bid price of the Common
Stock for the 10 preceding days of the Maturity Date.
On May 7, 2014,
the Company issued a convertible promissory note to Michael Francis in the amount of $63,000, due on April 16, 2015 (the “Maturity
Date”), which bears interest at 18% per annum. Mr. Francis is entitled, at his option, on the Maturity Date, to convert
all or any amount of the principal face amount of this note then outstanding into shares of the Company's common stock without
restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the average closing bid
price of the Common Stock for the 10 preceding days of the Maturity Date.
On November 4, 2013, the Company issued
a convertible promissory note to Michael Francis in the amount of $25,000 in consideration for a cash payment. The convertible
promissory note is due on November 3, 2014 (the “Maturity Date”), and bears interest at 18% per annum. Mr. Francis
is entitled, at his option, on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding
into shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common
Stock equal to 50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
The aggregate balance outstanding including
accrued interest at July 31, 2014 was $578,169.
Capara Investments
The Company issued
seven unsecured promissory notes to Capara Investments, (“Capara”) from November 13, 2009 to October 24, 2011 in the
aggregate of principal amount of $655,000 (the “Capara Notes”). Each of the Capara Notes bears an 8% annual interest
rate, is due and payable in cash on the fifth anniversary of the date of issuance, and upon consummation of a “Qualified
Financing” (as defined in each of the Capara Notes), will automatically be exchanged for, solely at our election, either
(i) securities on the same terms and conditions as those received by investors in such Qualified Financing based on an assumed
exchange rate reflecting the pricing used in such financing or (ii) shares of our common stock equal to the quotient obtained
by dividing (x) the then outstanding principal amount of the Capara Note by (y) the lower of (i) $0.69 and (ii) the Fair Market
Value (as defined in the Capara Notes) of one share of our common stock as of the date of such exchange of one share of our common
stock as of the date of such exchange). On each three (3) month anniversary of the issuance of each Capara Note,
all accrued and unpaid interest shall be added to the unpaid principal amount of such note. Each of the Capara Notes
defines “Qualified Financing” as an investment in securities of the Company (including
any financing that includes convertible indebtedness and/or warrants) occurring after the date of issuance of the Capara Note
by an investor that is not an affiliate of our company in which we receive net proceeds greater than $500,000 (including any additional
investment by the holder of the Capara Note or by the holder of any other 8% exchangeable promissory note) in the Qualified Financing.
The sole member of Capara Investments, Raj Pamani, is a former member of our Board and a shareholder of the Company. On July 31,
2014 the aggregate balance of principal and accrued and unpaid interest on the Capara Notes is $902,831. The aggregate current
portion of principal and accrued and unpaid interest for maturities occurring in fiscal 2014 and 2015 on the Capara Notes is $704,969.
The aggregate long-term portion of principal and accrued interest for maturities occurring after July 31, 2015 is $197,863.
Herb Kozlov
On November 11,
2013, the Company issued a Promissory Note to Herb Kozlov, a shareholder of the Company (the “Kozlov Note”), for the
satisfaction of a promissory note issued by the Company to Mr. Kozlov on December 6, 2010. Pursuant to the Kozlov Note, the Company
promises to pay $75,000 plus any accrued and unpaid interest on June 1, 2014. Interest will accrue at the rate of fourteen (14%)
per annum. Mr. Kozlov will have the right to receive payment of the Kozlov Note in shares of common stock of the Company at the
lower of $.03 per share, or the closing price of such shares on the day proceeding the date when the notice of full or partial
conversion is tendered. On February 28, 2014 Mr. Kozlov assigned his note to Magna Group, LLC.
Derivative
Financial Instrument
The Company evaluates
and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, Derivatives and Hedging
which requires issuers of financial statements to make a determination as to whether (1) an embedded conversion meets the definition
of a derivative in its entirety and (2) the derivative would qualify for a scope exception to derivative accounting, which includes
evaluating whether the embedded derivative would be considered indexed to the issuer’s own stock.
ASC 815 generally
provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account
for them as separate derivatives in the event such derivatives would not be classified in stockholders’ equity if they were
free standing. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b)
the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value
under other applicable US GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with
the same terms as the embedded derivative instrument would be considered a derivative instrument subject to the requirements of
ASC 815. ASC 815 also provides for an exception to this rule if a debt host instrument is deemed to be a conventional debt instrument.
The
Company evaluated the conversion option embedded in its Convertible notes in accordance with the provisions of ASC 815 and determined
that on the conversion date, the conversion option will have all of the characteristics of a derivative in its entirety and does
not qualify for an exception to the derivative accounting rules. Specifically, because the exercise price of the conversion option
is not fixed at any time during the term of the note. Accordingly, the embedded conversion options in the Convertible notes are
classified as derivative liabilities at the conversion dates and are marked to market through earnings at the end of each reporting
period. The fair value of the conversion option was determined using the Black Scholes valuation model which approximated the
binomial lattice options pricing model. The gross proceeds of Convertible notes issued during the nine months ended July 31, 2014
were recorded net of a discount of $1,394,635 related to the derivative liability. The debt discount will be charged to amortization
of debt discount ratably over the term of the Convertible notes. The Company recorded an amortization of the debt discount in
the amount of $270,865 and $464,248 for the three and nine months ended July 31, 2014 and 2013 and $212,920 and $425,281 for three
and nine months ended July 31, 2013, respectively.
Note 11 – Notes Payable
On May 12, 2014,
the Company issued a promissory note to Reed Smith LLP in the amount of $152,414, which bears interest at 6% per annum. The Company
is obligated to make payments under this note in full in two installments. The first installment shall be in the amount of $50,000
of principal plus all accrued interest, and shall be due on December 31, 2014, without any requirement of demand or notice from
Reed Smith LLP. The second installment shall be in the amount of $152,414 of principal plus all accrued interest (less any payments
of principal previously made by the Company), and shall be due on June 1, 2015. The promissory note securitizes $152,414 of legal
expenses incurred from 2007 through 2011, of which $136,848 had previously been recorded and classified on the Company’s
balance sheet in “Accounts Payable and Accrued Expense” and $15,566 represents a reconciliation of outstanding legal
invoices payable to Reed Smith LLP, which were not previously recorded by the Company. The balance outstanding including accrued
interest was $155,755 at July 31, 2014.
Note 12 – Commitments & Contingencies
Litigation
On September 13, 2013, the Company received
a claim for arbitration from James Crane, a former Chief Financial Officer of the Company. Mr. Crane asserts claims against the
Company for breach of contract, fraud, negligence, negligent misrepresentation, unjust enrichment and deceptive business practices
related to unpaid fees and damages in the amount of $371,804 pursuant to a consulting agreement between Mr. Crane and the Company.
The Company has retained counsel and is defending the matter. On July 22, 2014, the American Arbitration Association awarded Mr.
Crane $55,264 which was accrued by the Company during the period ended July 31, 2014
On November 26, 2012, the Company
filed a complaint against Raj Pamani, a shareholder and former director of the Company in the Superior Court of New Jersey Essex
County: Chancery Division (“the Complaint”). Included also as defendants were several entities to which in 2009
the Company awarded approximately 13 million shares of its common stock in consideration for consulting contracts which the Company
has concluded were fraudulently induced and were later deemed to be worthless (the “Defendant Entities”). By
causing the Company to enter into the contracts to its detriment in favor of Mr. Pamani’s and the Defendant Entities self-enrichment,
the Company seeks to recover damages incurred from the actions of Mr. Pamani and the Defendant Entities as a result of self-dealing,
breach of fiduciary duty, breach of loyalty and fraud. On March 21, 2014 the Superior Court of New Jersey Essex County: Chancery
Division entered an order for final judgment in favor of BioNeutral. The final judgment demands the reimbursement to be made by
the Defendant to BioNeutral of an aggregate amount of $412,900 payments caused by the Defendant Entities. Also contained within
the final judgment with respect to the 13 million shares of its common stock in consideration for fraudulently induced consultant
contracts, the Defendant Entities must return to BioNeutral any unsold stock certificates, and also, the Pamani Defendants must
reimburse BioNeutral for any stock sold to innocent third parties in an amount to be determined by a further submission to the
Court by BioNeutral.
On October 1, 2009,
the SEC issued a formal order of investigation to the Company regarding possible securities laws violations by the Company and
other persons. The investigation concerns the process by which the Company became a publicly traded entity, trading
in the Company’s shares, and disclosure and promotion of developments in the Company’s business. The SEC
has requested that the Company deliver certain documents to the SEC. The Company has, and will continue to fully cooperate
with the SEC with respect to its investigation.
The Company has
incurred, and expects to continue to incur, significant costs in responding to such investigation. Any adverse findings
by the SEC in connection with such investigation could have a material adverse impact on the Company's business, including the
Company's ability to continue to operate as a publicly traded company.
In
April 2005, the Company filed in the US Patent and Trademark Office (the “USPTO”) an application for the registration
of the trademarks BioNeutral™, Ogiene® and Ygiene™, based on
its intent to use each of these marks in commerce. In April 2006, the USPTO issued notices of allowance signifying that
each of these trademarks was entitled to registration after timely submission of statements of use, including evidence that such
trademarks have been properly used in commerce. From June through November of 2008, however, the Company’s applications
for each of these trademarks were declared abandoned by the USPTO, since the Company inadvertently failed to timely file the appropriate
statements of use with respect to each trademark within the six-month period from the date the USPTO issued the respective notices
of allowance. In July 2009, the Company again submitted applications for each of these trademarks as well as the Company’s
tagline SCIENCE TO SAVE LIVES & PROTECT THE ENVIRONMENT™; however, the Company learned that PURE Bioscience,
a company focused on the development and commercialization of bioscience products, had filed application for the registration of
the trademarks BioNeutral™ and Ygiene™ prior to the Company’s resubmission of its applications. Subsequently
in 2011, the Company received trademark registration from the USPTO for Ygiene™, Ogiene™ and
the Company’s tagline SCIENCE TO SAVE LIVES & PROTECT THE ENVIRONMENT™. The Company intends to pursue with
the Trademark Trial and Appeal Board an opposition to PURE Bioscience's application with respect to BioNeutral™. The Company
cannot assure you that it will be successful with such opposition on a timely basis, if at all. In May 2011, the Company received
notice that PURE Bioscience filed a petition with the USPTO for cancellation of the Company’s Ygiene™ registration.
On November 14, 2013 the USPTO issued an order for dismissal of PURE Bioscience’s petition to for cancellation of the Company’s
Ygiene™ registration.
Other than the foregoing,
the Company is not a party to, and none of the Company’s property is the subject of, any pending legal proceedings other
than routine litigation that is incidental to the Company’s business.
Other Contingencies
Approximately 6 million shares issued
in the Share Exchange were issued by the then transfer agent to stockholders of BioLabs for whom the Company does not have records
as having consented to the Share Exchange. The Company currently holds approximately 91% of the outstanding interests in its subsidiary,
BioLabs. The Company did not receive consents to the Share Exchange from all common and preferred shareholders of BioLabs, and
the Company has accounted for those shareholders who did not sign consents as holders of the remaining 9% outstanding interests
in BioLabs. The Share Exchange consents did not specify the number of shares of BioLabs common stock to be exchanged by the consenting
shareholder and did not affirmatively make the representation and warranties to be made by our stockholders as set forth in the
Share Exchange. In light of such omissions, there can be no assurances that a shareholder will not challenge the validity of its
consent and request a rescission offer in respect of shares of common stock issued to such person. There can also be no assurances
that in light of the content of such Shareholder consent, the Company had a basis for a valid private placement of its common stock
issued in the Share Exchange, which if such were the case, may negatively affect our status as a publicly traded company.
In addition, the Company believes that
the shareholders who consented to the Share Exchange and were issued shares of Company common stock but failed to deliver the stock
certificates representing their shares of common stock and Series A Preferred Stock of BioLabs may claim they also have an ownership
interest in BioLabs. Although the Company would challenge any such claims, it cannot assure investors that it would prevail, in
which case the Company’s percentage ownership interest in BioLabs would decrease.
Note 13 - Subsequent Events
Subsequent events have been evaluated
through the date the financial statements were issued. All appropriate subsequent event disclosure, if any, have been made in the
notes to the condensed consolidated financial statements.
On
August 18, 2014, the Company filed a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company
of Management’s plan to amend the Company’s Articles of Incorporation, as amended, to effectuate a 1,000-to-1
reverse split of the Company’s Common Stock, par value $.00001 per share (the “Reverse Split”).
At a meeting held on July 21, 2014, the Company received unanimous consent by the Board of Directors of the Company (the
“Board”) and on July 31, 2014 by the holder of the Series F Preferred Stock, no par value per share (the “Series
F Preferred”) to amend the Company’s Articles of Incorporation, as amended, to effectuate
the Reverse Split. The Board is effectuating the Reverse Split, with the Series F Stockholder with the primary intent of increasing
the market price of the Company’s Common Stock to make the Common Stock more attractive to a broader range of institutional
and other investors. The Reverse Split will affect all holders of the Company’s Common Stock uniformly and will
not affect any stockholder’s percentage ownership interest in the Company, except that as described below in “Fractional
Shares,” record holders of Common Stock otherwise entitled to a fractional share as a result of the Reverse Split will be
rounded up to the next whole number. In addition, the Reverse Split will not affect any stockholder’s proportionate voting
power (subject to the treatment of fractional shares). The Company currently has not effectuated the Reverse Split.
On August 20, 2014
the Company received a notice of conversion from JMJ Financial and pursuant to the notice issued 270,000,000 shares of common
stock to settle loan proceeds in the amount of $15,660.
The convertible promissory notes in consideration for outstanding consulting
fees payable to John Sikora in the aggregate amount of $111,000, due on August 1, 2014 and September 20, 2014 are currently in
default for nonpayment.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis
of the condensed consolidated financial condition and results of operations of BioNeutral Group, Inc. (the “Company,”
“we” or “us”) should be read in conjunction with the condensed consolidated financial statements and notes
thereto appearing elsewhere herein. In the following discussions, most percentages and dollar amounts have been rounded
to aid presentation, and accordingly, all amounts are approximations.
Forward-Looking Information
This Quarterly Report on Form 10-Q contains
forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
All statements other than statements
of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through
our use of words such as “may,” “will,” “can,” “anticipate,” “assume,”
“should,” “indicate,” “would,” “believe,” “contemplate,” “expect,”
“seek,” “estimate,” “continue,” “plan,” “point to,” “project,”
“predict,” “could,” “intend,” “target,” “potential,” and other similar
words and expressions of the future. These forward-looking statements may not be realized due to a variety of factors, including,
without limitation:
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our inability to raise capital; |
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our failure to obtain the necessary regulatory approvals for our products; |
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the results of the current Securities and Exchange Commission (the "SEC") investigation of our Company; |
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the inability to obtain or retain customer acceptance of our products; |
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the failure of the market for our products to develop; |
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our inability to protect our intellectual property; |
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our inability to manage any growth; |
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the effects of competition from a wide variety of local, regional, national and other providers of products similar to our products; |
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changes in laws and regulations, including tax and securities laws and regulations and laws and regulations promulgated by the U.S. Environmental Protection Agency (the "EPA"), the U.S. Food & Drug Administration (the "FDA") and the U.S. Federal Trade Commission. |
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changes in accounting policies, rules and practices; |
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changes in technology or products, which may be more difficult or costly, or less effective than anticipated; and |
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the other factors listed under “Risk Factors” in the Company’s Form 10-K for the fiscal year ended October 31, 2013 and other filings with the SEC. |
All forward-looking statements are expressly
qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements,
which speak only as of the date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference into
this report. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking
statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and
projections in good faith and we believe they have a reasonable basis. However, we cannot assure you that our expectations,
beliefs or projections will result or be achieved or accomplished.
Recent Developments
Subsequent to October 31, 2013 the Company
received notices of conversion from several note holders and pursuant to those notices issued 5,167,552,700 shares of common stock
to settle loan proceeds in the aggregate amount of $865,513.
On August 18, 2014, the Company filed
a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of Management’s plan to amend
the Company’s Articles of Incorporation, as amended, to effectuate a 1,000-to-1 reverse split of the Company’s Common
Stock, par value $.00001 per share (the “Reverse Split”). At a meeting held on July 21, 2014, the Company received
unanimous consent by the Board of Directors of the Company (the “Board”) and on July 31, 2014 by the holder of the
Series F Preferred Stock, no par value per share (the “Series F Preferred”) to amend the Company’s Articles of
Incorporation, as amended, to effectuate the Reverse Split. The Board is effectuating the Reverse Split, with the Series F Stockholder
with the primary intent of increasing the market price of the Company’s Common Stock to make the Common Stock more attractive
to a broader range of institutional and other investors. Accordingly, for these and other reasons discussed below,
the Company believes that effecting the Reverse Split is in the Company’s and the Company’s stockholders’ best
interests. The Board believes that an increased stock price may encourage investor interest and improve the marketability of the
Common Stock to a broader range of investors, and thus enhance liquidity. Because of the trading volatility often associated
with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit
them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their
customers. Additionally, because brokers' commissions on lower-priced stocks generally represent a higher percentage
of the stock price than commissions on higher-priced stocks, the current share price of the Common Stock can result in an individual
stockholder paying transaction costs that represent a higher percentage of total share value than would be the case if the share
price of the Common Stock were substantially higher. This factor may also limit the willingness of institutions to purchase
the Common Stock. The Board of Directors believes that the anticipated higher market price resulting from the Reverse
Split could enable institutional investors and brokerage firms with such policies and practices to invest in the Common Stock.
The Reverse Split will affect all holders of the Company’s Common Stock uniformly and will not affect any stockholder’s
percentage ownership interest in the Company, except that as described below in “Fractional Shares,” record holders
of Common Stock otherwise entitled to a fractional share as a result of the Reverse Split will be rounded up to the next whole
number. In addition, the Reverse Split will not affect any stockholder’s proportionate voting power (subject to the treatment
of fractional shares). After the Reverse Split, the Company’s Common Stock will have new Committee on Uniform Securities
Identification Procedures (CUSIP) numbers, which is a number used to identify the Company’s equity securities, and stock
certificates with the older CUSIP numbers will need to be exchanged for stock certificates with the new CUSIP numbers by following
the procedures described below. After the Reverse Split, the Company will continue to be subject to the periodic reporting and
other requirements of the Exchange Act. The Common Stock will continue to be quoted on the OTC Pink, subject to any decision of
the Company’s Board of Directors to list the Company’s securities on a stock exchange. The Reverse Split will not change
the number of authorized shares of the Common Stock under the Company’s Articles. Because the number of issued and outstanding
shares of Common Stock will decrease, the number of shares of Common Stock remaining available for issuance will increase. Under
the Articles, as amended, the Company’s authorized capital stock currently consists of 17,000,000,000 shares of Common Stock.
The Company mailed the Notice of Stockholder Action by Written Consent to the Stockholders on September 3, 2014. The authorized
share increase will become effective on the date that the Company files the Certificate of Amendment to the Amended Certificate
of Incorporation of the Company (the "Amendment") with the Secretary of State of the State of Nevada. The Company filed
the Amendment with the Secretary of State of the State of Nevada on May 6, 2014. On May 6, 2014, the Company filed with the SEC
a definitive Schedule 14C Information Statement thereby confirming the effectiveness of the preliminary Schedule 14C Information
Statement filed on August 18, 2014. The Company currently has not effectuated the Reverse Split.
On July 30, 2014,
the Company issued 50,000,000 shares of its restricted common stock to James Casserly for settlement of accrued and unpaid interest
of $4,500 pursuant to a conversion notice received by the Company from Mr. Casserly on July 21, 2014. The shares were valued and
issued at $0.00009 pursuant to the terms of his conversion privilege; a share price which was equal to 50% the preceding 10 day
average closing trading price of the Company’s common stock.
On
July 23, 2014, the Company filed a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of
Management’s plan to increase the number of authorized shares of common stock from seventeen billion (17,000,000,000) to
thirty seven billion (37,000,000,000) shares with the Secretary of State of Nevada. At a meeting
held on July 21, 2014, the Company received unanimous consent by the Board and by the holder
of Series F Preferred Stock, no par value per share (the “Series F Preferred”), and authorized management to increase
the number of shares authorized to thirty seven billion (37,000,000,000) shares. The additional
twenty billion (20,000,000,000) shares of Common Stock so authorized would have been available for issuance by the Board for stock
splits or stock dividends, acquisitions, raising additional capital, stock options or other corporate purposes. The additional
shares of Common Stock could be used for potential strategic transactions, including, among other things, acquisitions, strategic
partnerships, joint ventures, restructurings, business combinations and investments, although there are no immediate plans to
do so. Assurances cannot be provided that any such transactions will be consummated on favorable terms or at all, that they will
enhance stockholder value or that they will not adversely affect the Company's business or the trading price of the Common Stock.
The authorized share increase was withdrawn when the Company filed a Schedule 14C Information Statement with the SEC on August
18, 2014 to notify the stockholders of the Company of Management’s plan to amend the Company’s Articles of
Incorporation, as amended, to effectuate a 1,000-to-1 reverse split of the Company’s Common Stock, par value $.00001 per
share. The Company currently has not effectuated the increase in the authorization of its common stock from 17,000,000,000 to
37,000,000,000. At the current range of market trading prices of the Company’s common stock, the Company does not possess
enough authorized stock to convert all of its convertible instruments to common stock. For the Company to meet all of its obligations
upon the receipt of notices of conversion received from noteholders, the Company will need to increase the authorized limit
of common stock.
On July 22, 2014, the American Arbitration
Association awarded Mr. Crane $55,264.
On July 21, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with Darling Capital, LLC, (“Darling”)
for the sale and issuance of a 15% convertible promissory note in the principal amount of $12,500 (the “Note”). The
principal balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder,
at any time during the period beginning on January 21, 2014 and ending on the maturity date of February 21, 2015. The conversion
price of the Note shall be equal to 60% from the lowest closing bid price for the thirty days prior to the day that the Company
receives requests for conversion. The Note matures on February 21, 2015. Interest on the Note accrues at a rate of 15% per annum.
As of July 31, 2014, the Company received $9,000 proceeds from the Darling note. The remaining $3,500 was received in August 2014.
On July 21 2014, the Company issued a
convertible promissory note to Darling in the amount of $25,000, which bears interest at 18% per annum. Darling is entitled, at
its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal face amount
of the convertible promissory note then outstanding into shares of the Company's common stock without restrictive legend of any
nature, at a conversion price for each share of Common Stock equal to 60% of the lowest closing bid price for the thirty days prior
to the day that the Company receives requests for conversion. The convertible promissory note was issued in connection the direct
settlement by Darling with James Casserly, a convertible notes holder of the Company. On July 28, 2014, the Company received a
notice of conversion from Darling, and pursuant to the notice issued 465,364,714 shares of common stock in partial settlement of
$18,615 of the outstanding convertible loan balance.
On July 18, 2014, the Company issued
a convertible promissory note to WHC Capital, LLC in the amount of $51,500, due on July 18, 2015, which bears interest at 18% per
annum. WHC Capital, LLC is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or
any amount of the principal face amount of the convertible promissory note then outstanding into shares of the Company's common
stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the lowest
intra-day trading price during the ten days prior to the day that the Company receives requests for conversion. The convertible
promissory note was issued in connection the direct settlement by WHC Capital, LLC with Ray Dunning, a convertible notes holder
of the Company. On July 21, 2014, the Company received a notice of conversion from WHC Capital, LLC, and pursuant to the notice
issued 160,000,000 shares of common stock in partial settlement of $8,000 of the outstanding convertible loan balance.
On July 11, 2014,
the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with WHC Capital, LLC, (the “Holder”)
for the sale and issuance of a 12% convertible promissory note in the principal amount of $25,000 (the “Note”). The
principal balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder,
at any time during the period beginning on January 11, 2015 and ending on the maturity date of July 11, 2015. The conversion price
of the Note shall be equal to 50% from the lowest intra-day trading price during the ten days prior to the day that the Company
receives requests for conversion. The Note matures on February 11, 2015. Interest on the Note accrues at a rate of 12% per annum.
On June 11, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with KBM Worldwide, Inc., a Delaware Corporation (the
“Holder”) for the sale and issuance of an 8% convertible promissory note in the principal amount of $20,500 (the “Note”).
The principal balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the
Holder, beginning 180 days after the issuance of the Note. The conversion price of the Note shall be equal to 50% multiplied by
the market price (as defined in the Note). The Note matures on March 13, 2015. The Company has the right to prepay the principal
and interest at a premium depending on the date that it is prepaid. Interest on the Note accrues at a rate of 8% per annum. The
Note contains customary default provisions, including provisions for potential acceleration of the Note, a default premium, and
default interest of 22%.
On July 9, 2014 the Company entered into
a convertible promissory note in the principal amount of $250,000 to JMJ Financial (the “July JMJ Note”), and pursuant
to the issuance of the July JMJ Note, JMJ cancelled the remaining, unissued principal of $35,000 of the December 12, 2012 convertible
promissory note due to JMJ Financial. The maturity date of the July JMJ Note is two years from the date of each payment. The July
JMJ Note is interest free if repaid within 90 days and if not paid within 90 days it bears interest at 10%. The principal and any
accrued interest are convertible into the Company’s common stock at the lower of $.0002 per share of 60% of the lowest trade
price in the 25 days prior to conversion. JMJ Financial has piggyback registration rights with respect to the shares into which
the July JMJ Note is convertible. On July 9, 2014 the Company received $60,000 of the July JMJ Note.
On June 19, 2014,
the Company filed a Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of Management’s
plan to increase the number of authorized shares of common stock from eight billion (8,000,000,000) to seventeen billion (17,000,000,000)
shares with the Secretary of State of Nevada. At a meeting held on June 17, 2014, the Company received unanimous consent by the
Board and by the holder of Series F Preferred Stock, no par value per share (the “Series F Preferred”), and authorized
management to increase the number of shares authorized to seventeen billion shares (17,000,000,000). The additional nine billion
(9,000,000,000) shares of Common Stock so authorized will be available for issuance by the Board for stock splits or stock dividends,
acquisitions, raising additional capital, stock options or other corporate purposes. The additional shares of Common Stock could
be used for potential strategic transactions, including, among other things, acquisitions, strategic partnerships, joint ventures,
restructurings, business combinations and investments, although there are no immediate plans to do so. Assurances cannot be provided
that any such transactions will be consummated on favorable terms or at all, that they will enhance stockholder value or that they
will not adversely affect the Company's business or the trading price of the Common Stock. The purposes for increasing the authorized
shares include providing available shares for (i) the exercise of all outstanding options; (ii) the conversion of outstanding convertible
promissory notes and deferred compensation agreements; (iii) the conversion of the Series A, B, C and D Convertible Preferred Stock;
(iv) future issuances of stock options pursuant to employees; and (v) issuances to satisfy conversions of future convertible debt
or convertible preferred stock. The Company mailed the Notice of Stockholder Action by Written Consent to the Stockholders on July
2, 2014. The authorized share increase became effective on July 9, 2014 when the Company filed the Certificate of Amendment to
the Amended Certificate of Incorporation of the Company (the "Amendment") with the Secretary of State of the State of
Nevada. On July 1, 2014, the Company filed with the SEC a definitive Schedule 14C Information Statement thereby confirming the
effectiveness of the preliminary Schedule 14C Information Statement filed on June 19, 2014.
On May 22, 2014,
the Company issued 10,000,000 shares of its restricted common stock to a consulting firm for marketing fees of $5,000. The shares
were valued and issued at a negotiated per share price of $0.0005, a share price which approximated the prevailing per share closing
prices at the time the parties reached an agreement of terms.
On
May 21, 2014, the Company entered into a securities purchase agreement with Typenex Co-Investment, LLC, (“Typenex”)
for the sale and issuance of a secured convertible promissory note in the principal amount of $335,000 and any interest, fees,
charges. (the “Typenex Note”). The Typenex Note carries an OID of $30,000.00. In addition, the Company agreed to pay
$5,000 to Typenex to cover Typenex’s legal fees, accounting costs, due diligence, monitoring and other transaction costs
incurred in connection with the Typenex Note. Interest is payable on the Typenex Note at 10% per annum. The Typenex Note is exercisable
in eleven (11) tranches (each, a “Tranche”), consisting of (i) an initial Tranche in an amount equal to $49,000 and
any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Typenex Note and the other transaction
documents (“Tranche #1”), which was funded to the Company on May 28, 2014, and (ii) ten (10) additional Tranches, the
first nine (9) of which are in the amount of $27,500, plus any interest, costs, fees or charges accrued thereon or added thereto
under the terms of the Typenex Note and the other transaction documents, and the last of which is in the amount of $38,500, plus
any interest, costs, fees or charges accrued thereon or added thereto under the terms of the Typenex Note. The conversion price
for each Tranche conversion into shares of the Company’s common stock shall be the lesser of (i) the Lender Conversion Price
of $.0015, and (ii) 65% of the average of the three (3) lowest VWAPs (volume weighed average price) in the twenty (20) trading
days immediately preceding the applicable conversion, provided that if at any time the average of the three (3) lowest VWAPs in
the twenty (20) trading days immediately preceding any date of measurement is below $0.0005, then in such event the then-current
conversion factor shall be reduced by 5% for all future conversions (e.g., 65% to 60%). The Tranches are payable thirteen months
after payment to the Company. The Company granted a security agreement to Typenex in connection with the Securities Purchase Agreement
which provides Typenex with a security interest in those certain Tranches or “Investor Notes” comprised of Tranche
#1, Tranche #2, Tranche #3, Tranche #4, Tranche #5, Tranche #6, Tranche #7, Tranche #8, and Tranche #9) issued by Secured Party
in favor of Debtor on May 21, 2014, in the initial principal amounts of $25,000 each, that certain Tranche #10 issued by Secured
Party in favor of Debtor on May 21, 2014, in the initial principal amount of $35,000, and any and all claims, rights and interests
in any of the above and all substitutions for, additions and accessions to and proceeds thereof. The Company did not grant a security
interest in the general assets of the Company to Typenex. Under and concurrently with the securities purchase agreement with Typenex,
we also issued to Typenex a warrant to purchase the number of shares equal to $167,500 divided by the higher
of: (i) the closing price of the common stock on the issue date; and (ii) the VWAP (as defined below) of the common stock for the
trading day that is two (2) trading days prior to the exercise date. The Typenex warrant may also be exercised by cashless exercise.
On May 12, 2014, the Company issued a
promissory note to Reed Smith LLP in the amount of $152,414, which bears interest at 6% per annum. The Company is obligated make
payments under this note in full in two installments. The first installment shall be in the amount of $50,000 of principal plus
all accrued interest, and shall be due on December 31, 2014, without any requirement of demand or notice from Reed Smith LLP. The
second installment shall be in the amount of $152,414 of principal plus all accrued interest (less any payments of principal previously
made by the Company), and shall be due on June 1, 2015. The promissory note securitizes $152,414 of legal expenses incurred from
2007 through 2011, of which $136,848 had previously been recorded and classified on the Company’s balance sheet in “Accounts
Payable and Accrued Expense” and $15,566 represents a reconciliation of outstanding legal invoices payable to Reed Smith
LLP which were not previously recorded by the Company.
On
May 7, 2014, the Company issued a convertible promissory note to Michael Francis, a shareholder of the Company, in the amount
of $63,000, due on May 6, 2015 (the “Maturity Date”), which bears interest at 18% per annum. Mr. Francis is entitled,
at his option, on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into
shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common
Stock equal to 50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On May 6,
2014, the Company filed with the SEC a definitive Schedule 14C Information Statement thereby confirming the effectiveness of the
preliminary Schedule 14C Information Statement filed on April 21, 2014 described below.
On May 1, 2014, the Company issued a
convertible promissory note to DH Technical Consulting LLC in consideration of outstanding consulting fees of $28,640, due on May
1, 2015 (the “Maturity Date”). DH Technical Consulting LLC is entitled, at his option, on the Maturity Date, to convert
all or any amount of the principal face amount of this note then outstanding into shares of the Company's common stock without
restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the average closing bid
price of the Common Stock for the 10 preceding days of the Maturity Date.
On April 29, 2014, the Company issued
a convertible promissory note to GEL Properties, LLC (“GEL”) in the amount of $134,400, due on April 28, 2015, which
bears interest at 8% per annum. GEL is entitled, at its option, at any time after the requisite rule 144 holding period, to convert
all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock without
restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 55% of the lowest closing bid price
of the Common Stock. In connection with the issuance of the convertible promissory note to GEL, GEL purchased the principal amount
of $128,000 plus accrued and unpaid interest of $6,400 for a total of $134,400 of a $560,918 promissory note issued to Mr. Francis
on July 1, 2013.
On April 28, 2014,
the Company entered into a Securities Purchase Agreement with Adar Bays, LLC, a Florida Limited Liability Company for the sale
and issuance of an 8% convertible promissory note in the principal amount of $77,500 (the “Note”). The Company received
payments in the amounts of $38,750 on April 29, 2014 and $38,750 on May 8, 2014. The principal balance of the Note is convertible
into common stock, $0.00001 par value, of the Company, at the election of the Holder, beginning at any time after the requisite
Rule 144 period. The conversion price of the Note shall be equal to 55% multiplied by the market price (as defined in the Note).
The Note matures on April 28, 2015. Interest on the Note accrues at a rate of 8% per annum.
On April 22, 2014, the Company submitted
a withdrawal to the Securities and Exchange Commission of the S-1 Registration Statement originally filed February 21, 2013.
On April 21, 2014, the Company filed
a preliminary Schedule 14C Information Statement with the SEC to notify the stockholders of the Company of Management’s plan
to increase the number of authorized shares of common stock from four billion (4,000,000,000) to eight billion (8,000,000,000)
shares. The Board of Directors and a majority vote of the stockholders authorized management to increase the number of shares authorized
to eight billion shares. The additional four billion (4,000,000,000) shares of Common Stock so authorized will be available for
issuance by the Board for stock splits or stock dividends, acquisitions, raising additional capital, stock options or other corporate
purposes. The additional shares of Common Stock could be used for potential strategic transactions, including, among other things,
acquisitions, strategic partnerships, joint ventures, restructurings, business combinations and investments, although there are
no immediate plans to do so. Assurances cannot be provided that any such transactions will be consummated on favorable terms or
at all, that they will enhance stockholder value or that they will not adversely affect the Company's business or the trading price
of the Common Stock. The purposes for increasing the authorized shares include providing available shares for (i) the exercise
of all outstanding options; (ii) the conversion of outstanding convertible promissory notes and deferred compensation agreements;
(iii) the conversion of the Series A, B, C and D Convertible Preferred Stock; (iv) future issuances of stock options to employees;
and (v) issuances to satisfy conversions of future convertible debt or convertible preferred stock. We mailed the Notice of Stockholder
Action by Written Consent to the Stockholders on May 5, 2014. The authorized share increase will become effective on the date that
we file the Certificate of Amendment to the Amended Certificate of Incorporation of the Company (the "Amendment") with
the Secretary of State of the State of Nevada. We filed the Amendment with the Secretary of State of the State of Nevada on May
6, 2014.
On April 17, 2014, the Company issued
a convertible promissory note to Michael Francis, a shareholder of the Company, in the amount of $70,000, due on April 16, 2015
(the “Maturity Date”), which bears interest at 18% per annum. Mr. Francis is entitled, at his option, on the Maturity
Date, to convert all or any amount of the principal face amount of this note then outstanding into shares of the Company's common
stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 50% of the average
closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On April 11, 2014, the Company issued
a convertible promissory note to GEL Properties, LLC (“GEL”) in the amount of $154,875, due on April 11, 2015, which
bears interest at 8% per annum. GEL is entitled, at its option, at any time after the requisite rule 144 holding period, to convert
all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock without
restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 55% of the lowest closing bid price
of the Common Stock for any of the five trading days, including the day upon which the upon which the notice of conversion is received
by the Company. In connection with the issuance of the convertible promissory note to GEL, GEL purchased the principal amount of
$147,500 plus accrued and unpaid interest of $7,375 for a total of $154,875 of a $560,918 promissory note issued to Mr. Francis
on July 1, 2013.
On April 10, 2014, the Company made a
cash payment to Asher Enterprises, Inc. in the amount of $65,324 to satisfy in full an 8% convertible promissory note issued by
the Company to Asher Enterprises, Inc. on October 15, 2013 in the principal amount of $42,500 plus accrued and unpaid interest
and a prepayment penalty.
On April 2, 2014, the Company issued
a convertible promissory note to Michael Francis, a shareholder of the Company, in the amount of $97,009 representing accrued and
unpaid interest earned on a promissory note issued in the amount of $560,918 on July 1 2013. The convertible promissory note is
due on April 1, 2015 (the “Maturity Date”), and bears interest at 18% per annum. Mr. Francis is entitled, at his option,
on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into shares of the
Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to
50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On April 2, 2014, the Company issued
a convertible promissory note to LG Capital Funding, LLC (“LG”) in the amount of $35,000, due on April 2, 2015, which
bears interest at 8% per annum. LG 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 without restrictive legend of any
nature, at a conversion price for each share of Common Stock equal to 50% of the lowest closing bid price of the Common Stock for
the prior fifteen days, including the date of receipt of the notice of conversion.
On March 26, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with Asher Enterprises, Inc., a Delaware Corporation
(the “Holder”) for the sale and issuance of an 8% convertible promissory note in the principal amount of $53,000 (the
“Note”). The Purchase Agreement became effective on April 8, 2014 when the transaction closed. The principal balance
of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder, beginning 180
days after the issuance of the Note. The conversion price of the Note shall be equal to 51% multiplied by the market price (as
defined in the Note). The Note matures on January 2, 2015. The Company has the right to prepay the principal and interest at a
premium depending on the date that it is prepaid. Interest on the Note accrues at a rate of 8% per annum. The Note contains customary
default provisions, including provisions for potential acceleration of the Note, a default premium, and default interest of 22%.
On March 21, 2014 the Superior Court
of New Jersey Essex County: Chancery Division entered an order for final judgment in favor of BioNeutral. The final judgment demands
the reimbursement to be made by the Defendant to BioNeutral of an aggregate amount of $412,900 payments caused by the Defendant
Entities. Also contained within the final judgment with respect to the 13 million shares of its common stock in consideration for
fraudulently induced consultant contracts, the Defendant Entities must return to BioNeutral any unsold stock certificates, and
also, the Pamani Defendants must reimburse BioNeutral for any stock sold to innocent third parties in an amount to be determined
by a further submission to the Court by BioNeutral.
On March 20, 2014, the Company issued
a convertible promissory note in consideration for outstanding consulting fees payable to John Sikora in the amount of $21,000,
due on September 20, 2014 (the “Maturity Date”), which bears interest at 18% per annum. Mr. Sikora is entitled, at
his option, on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into
shares of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock
equal to 50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On March 19, 2014, the Company issued
a convertible promissory note to GEL in the amount of $15,657, due on March 19, 2015, which bears interest at 6% per annum. GEL
is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at
a conversion price for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock for any of the
five trading days, including the day upon which the upon which the notice of conversion is received by the Company . In connection
with the issuance of the convertible promissory note to GEL, GEL purchased a promissory note issued to JJS Consulting on August
31, 2013 from the Company in the amount of $15,000 plus accrued and unpaid interest.
On March
19, 2014, the Company issued a convertible promissory note to GEL in the amount of $15,960, due on March 19, 2015, which bears
interest at 6% per annum. GEL is entitled, at its option, at any time after the requisite rule 144 holding period, to convert
all or any amount of the principal face amount of this Note then outstanding into shares of the Company's
common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal to 55% of the
lowest closing bid price of the Common Stock for any of the five trading days, including the day upon which the upon which the
notice of conversion is received by the Company . In connection with the issuance of the convertible promissory note to GEL, GEL
purchased a promissory note issued to DH Technical Consulting, LLC on May 31, 2013 from the Company in the amount of $15,000 plus
accrued and unpaid interest.
On March 19, 2014, the Company issued
a convertible promissory note to GEL in the amount of $52,191, due on March 19, 2015, which bears interest at 6% per annum. GEL
is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at
a conversion price for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock for any of the
five trading days, including the day upon which the upon which the notice of conversion is received by the Company . In connection
with the issuance of the convertible promissory note to GEL, GEL purchased a promissory note issued to Ray Dunning on August 31,
2013 from the Company in the amount of $50,000 plus accrued and unpaid interest.
On March 19, 2014, the Company issued
a convertible promissory note to GEL in the amount of $40,000, due on March 19, 2015, which bears interest at 6% per annum. GEL
is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at
a conversion price for each share of Common Stock equal to 55% of the lowest closing bid price of the Common Stock for any of the
five trading days, including the day upon which the upon which the notice of conversion is received by the Company.
On February 11, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with Hanover Holdings I, LLC, (the “Holder”)
for the sale and issuance of a 12% convertible promissory note in the principal amount of $36,500 (the “Note”). The
principal balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder,
at any time during the period beginning on February 11, 2014 and ending on the maturity date of February 11, 2015. The conversion
price of the Note shall be equal to 45% from the lowest trading price in the five days prior to the day that the Company receives
requests for conversion. The Note matures on February 11, 2015. Interest on the Note accrues at a rate of 12% per annum.
On February 28, 2014, the Company entered
into a Securities Purchase Agreement (the “Purchase Agreement”) with Magna Group, LLC, (the “Holder”) for
the sale and issuance of a 12% convertible promissory note in the principal amount of $78,164 (the “Note”). The principal
balance of the Note is convertible into common stock, $0.00001 par value, of the Company, at the election of the Holder, at any
time during the period beginning on February 28, 2014 and ending on the maturity date of February 28, 2015The conversion price
of the Note shall be equal to 45% From the lowest trading price in the five days prior to the day that Magna Group, LLC requests
conversion. The Note matures on February 28, 2015. Interest on the Note accrues at a rate of 12% per annum. In connection with
the issuance of the Note, Magna purchased a promissory note issued to Herb Kozlov on November 11, 2013 from the Company in the
amount of $75,000 plus accrued and unpaid interest.
On February 10, 2014, the Company issued
a convertible promissory note to GEL in the amount of $44,071, due on January 14, 2015, which bears interest at 6% per annum. GEL
is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at
a conversion price for each share of Common Stock equal to 65% of the lowest closing bid price of the Common Stock. In connection
with the issuance of the convertible promissory note to GEL, GEL purchased a promissory note issued to JJS Consulting June 30,
2013 from the Company in the amount of $42,000 plus accrued and unpaid interest. During the nine months ended July 31, 2014 the
Company received three notices of conversion from GEL, and pursuant to those notices issued 50,535,288 shares of common stock to
settle the loan.
On February 10, 2014, the Company issued
a convertible promissory note to GEL in the amount of $25,000, due on February 10, 2015, which bears interest at 6% per annum.
GEL is entitled, at its option, at any time after the requisite rule 144 holding period, to convert all or any amount of the principal
face amount of this Note then outstanding into shares of the Company's common stock without restrictive legend of any nature, at
a conversion price for each share of Common Stock equal to 65% of the lowest closing bid price of the Common Stock for any of the
five trading days, including the day upon which the upon which the notice of conversion is received by the Company.
On February 1, 2014, the Company issued
a convertible promissory note in consideration for outstanding consulting fees payable to John Sikora in the amount of $20,000,
due on August 1, 2014 (the “Maturity Date”), which bears interest at 18% per annum. Mr. Sikora is entitled, at his
option, on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into shares
of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal
to 50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On February 1, 2014, the Company issued
a convertible promissory note in consideration for outstanding consulting fees payable to John Sikora in the amount of $70,000,
due on August 1, 2014 (the “Maturity Date”), which bears interest at 18% per annum. Mr. Sikora is entitled, at his
option, on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into shares
of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal
to 50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On February 1, 2014, the Company issued
a convertible promissory note in consideration of outstanding consulting fees payable to Ray Dunning in the amount of $114,725
, due on January 1, 2015 (the “Maturity Date”), which bears interest at 8% per annum. Mr. Dunning is entitled, at his
option, on the Maturity Date, to convert all or any amount of the principal face amount of this note then outstanding into shares
of the Company's common stock without restrictive legend of any nature, at a conversion price for each share of Common Stock equal
to 50% of the average closing bid price of the Common Stock for the 10 preceding days of the Maturity Date.
On January 15, 2014, the Company issued
a convertible promissory note to Ray Dunning in the amount of $51,500, due on February 1, 2015 (the “Maturity Date”),
which bears interest at 8% per annum. Mr. Dunning is entitled, at his option, on the Maturity Date, to convert all or any amount
of the principal face amount of this note then outstanding into shares of the Company's common stock without restrictive legend
of any nature, at a conversion price for each share of Common Stock equal to 50% of the average closing bid price of the Common
Stock for the 10 preceding days of the Maturity Date.
Company Overview
We are a life science specialty technology
corporation that has developed a novel combinational chemistry-based technology which we believe can, in certain circumstances,
neutralize harmful environmental contaminants, toxins and dangerous micro-organisms including bacteria, viruses and spores. We
are focused on developing and commercializing two classes of product formulations: (1) antimicrobials, which are formulations designed
to kill certain harmful microscopic living organisms, and (2) bioneutralizer, which are formulations designed to destroy certain
agents that are noxious and harmful to health and/or the environment. We have not marketed any of our products and have
not generated any meaningful product revenue to date.
We currently are focused on the commercialization
of two classes of product formulations, antimicrobials and bioneutralizer. We refer to our antimicrobial formulations
as our Ygiene™ products and our bioneutralizer formulations as our Ogiene® products. Our
Ygiene™ products have been developed to kill certain harmful microbes, including virulent gram and bacteria (which
cause staph infections), viruses, yeast, mold, fungi, spores and/or certain bioterrorism agents, such as anthrax. Our
Ogiene® products have been developed to eliminate or reduce odors of many
chemicals such as hydrogen sulfide, formaldehyde and ammonia, and to reduce certain greenhouse gases such as carbon dioxide and
sulfur dioxide.
The marketing and sale in the United
States and foreign countries of some of our current products and the products we may develop in the future are and may be subject
to U.S. and foreign governmental regulations, respectively, which vary substantially from country to country. The marketing
and sale of our Ygiene™ products in the United States, is subject to
EPA registration and in some cases, FDA clearance, and we cannot market and sell any of such products in the United States until
such registration or clearance is obtained. We do not believe the marketing sale of our Ogiene™ products
are subject to EPA registration or FDA clearance. We have not had significant sales of our Ygiene™ or
Ogiene® products to date. We currently are focusing our efforts
and resources on obtaining the registrations, clearances and approvals necessary to market and sell our Ygiene™
products in the United States; however, we cannot assure you that we will be have the financial resources to do so or that such
registrations, clearances and approvals will be obtained on a timely basis, if at all.
Plan of Operation
Our strategic plan
for our fiscal year ended October 31, 2014 is focused on leveraging developments in the United States for our Ygiene™ professional
disinfectant product and continuing our work within the regulatory process of the U.S. for EPA registration of additional variations
of Ygiene™. Our Ygiene™ professional disinfectant product and multipurpose cleaner and disinfectant product were registered
and approved with the US EPA on February 28, 2011. Subsequently, we have registered Ygiene™ in 32 US states for sale and
distribution. Our Ygiene™ was registered with the German Bundesanstalt für Arbeitsschutz und Arbeitsmedizin, a German
government sanctioned institute for safety and health, on January 5, 2010 and November 30, 2009, respectively. As a result of such
registrations, we are permitted to sell such Ygiene™ based products in Germany, although we have not sold any of our products
in Germany and currently do not have adequate resources to attempt to make any such sales or to have our products manufactured
for sale. We believe these registrations present us with a strong and dynamic platform for accessing well developed global markets
for commercial use of our Ygiene™ professional disinfectant product and multipurpose cleaner and disinfectant product.
Currently, we are
focusing our efforts on the development and commercialization of Ygiene ™ formulation for the markets of Healthcare and Life
Sciences and Industrial Applications. We’ve developed our Ogiene™ products to potentially eliminate or reduce odors
of many chemicals such as hydrogen sulfide, formaldehyde and ammonia, and to reduce certain greenhouse gases such as carbon dioxide
and sulfur dioxide. Our Ogiene™ formulations are designed to interact with the functional organic or inorganic groups of
harmful gases and reduce or eliminate them.
We believe that
our products can offer a superior solution that addresses needs not currently being met in the marketplace for combating bacteria,
viral and spore based threats. We further believe that our products can provide a distinct advantage when distinguishing them from
those that are currently in use in our targeted markets. In addition, our core product is flexible and adaptable for multiple applications.
Industry or use specific modifications made by our professional scientist allow our products to be readily customized to the demands
of multiple unique markets.
We are emphasizing
these strategic advantages as part of our brand development efforts to overcome competitive barriers to entry in markets that are
driven by large, established organizations. The markets for our Ogiene™ and Ygiene™ products and each of their potential
channels are highly competitive. We have a number of competitors that vary in size and scope and breadth of products offered. Such
competitors include some of the largest corporations in the world, and we believe substantially all of our competitors have greater
financial resources than we do, including in the areas of sales, marketing, and branding and product development. We expect to
face additional competition from other competitors in the future.
Within healthcare
and life sciences, most of our customer’s perform trial testing of our products prior to purchasing which can significantly
lengthen the selling cycle. To date our marketing efforts have led to manytrials of our products. Our products have been ordered
within the segments of university laboratory medical research, pharmaceutical manufacturing and veterinarian care.
Within the industrial
marketplace our products are trial tested as well prior to purchasing thereby lengthening the selling cycle in most cases. We
are working with independent selling groups to represent our products primarily being offered for mold remediation contractors
Based on the progress
as noted above, we are generally pleased with the market reception of our products. Though the sales cycle has proved to be slower
than originally planned for, management is generally encouraged by the current selling momentum and anticipates increases of new
customers. We intend to expand our efforts to sell our products by offering them for sale through distribution. Recently we announced
our new relationship with Quip Laboratories, a leading sales distribution company of biosafety products in the laboratory and
biomedical research segments. We have other such relationships under consideration, and plan to vigorously pursue others to add
to selling capacity.
Because Ogiene™
and Ygiene™ are new formulations enhanced from our initial base formulas, our success will depend, in part, upon our ability
to achieve market share at the expense of existing, established and future products in our relevant target markets. Even if our
Ogiene™ and Ygiene™ formulations may have technological competitive advantages over competing products, we or potential
distributors, will need to invest significant resources in order to attempt to displace traditional technologies sold by what are
in many cases well-known international industry leaders. Alternatively, we may pursue strategies in selective markets of encouraging
existing competitors to incorporate our products into their existing brands, thereby reducing the proportion of end-use revenues
that would accrue to us. To the extent that we were to grant any existing competitor exclusivity to any field and/or territory,
we would risk having our technology marketed in a manner that may be less than optimal for us. We recognize that innovative marketing
methods may be required in order to establish our products, and that such methods may not be successful.
Results of Operations
Comparison of Results of Operations
for the three months ended July 31, 2014 and for the three months ended July 31, 2013.
Revenues:
During the three months ended July 31, 2014 the Company generated revenues of $8,861 as compared to revenues of $3,310
for the three months ended July 31, 2013. Our efforts have been focused on sales and marketing of our non-regulated Ogiene™ product
line as well the sale of our Ygiene™ formulation in acute and long-term healthcare and industrial markets where pathogenic
spores are present. We are carrying forward our commercialization strategy begun in 2013 by developing relationships with selling
organizations and distributors.
Within healthcare
and life sciences, most of our customer’s perform trial testing of our products prior to purchasing which can significantly
lengthen the selling cycle. To date our marketing efforts have led to many trials of our products. Our products have been ordered
within the segments of university laboratory medical research, pharmaceutical manufacturing and veterinarian care.
Within the industrial
marketplace our products are trial tested as well prior to purchasing thereby lengthening the selling cycle in most cases. We
signed independent selling groups to represent our products and we have approximately representatives throughout the United States
marketing our products In addition, we established a relationship with an Ohio based distributor of medical products.
Based on the progress
as noted above, we are generally pleased with the market reception of our products. Though the sales cycle has proved to be slower
than originally planned for, management is generally encouraged by the current selling momentum and anticipates increases of new
customers. We intend to expand our efforts to sell our products by offering them for sale through distribution. Recently we announced
our new relationship with Quip Laboratories, a leading sales distribution company of biosafety products in the laboratory and biomedical
research segments. We have other such relationships under consideration, and plan to vigorously pursue others to add to selling
capacity.
Operating
Expenses: Operating expenses were $973,333 the three months ended July 31, 2014 and $829,293 for the three
months ended July 31, 2013 for a 17% increase of $144,040. Our operating expenses consist of compensation of our executive and
scientific staff, consulting expenses supporting development of, and regulatory approvals for, our products, legal and accounting
services, and non-cash amortization of our intellectual property.
Amortization and
depreciation expense was $177,234 for three months ended July 31, 2014 and 2013.
Salaries expense
for the three months ended July 31, 2014 was $237,657, an decrease of 11% over amounts for the three months ended July 31, 2013,
which were $266,737. Overall compensation was lower in the three months ended July 31, 2014 as the Company had less sales personnel
in 2014.
Consulting fee expenses
were $91,050 for the three months ended July 31, 2014 as compared to $252,417 for the three months ended July 31, 2013 for a 64%
decrease of $161,367. The decrease primarily reflects the overall reduction of sales consultants in 2014 to pivot the
commercialization strategy in 2014 to engaging with distributors and private label contracts that require less involvement from
the Company.
Total legal and
accounting expenses for the three months ended July 31, 2014 were $191,797, an increase of $143,057 over amounts for the three
months ended July 31, 2013 which were $48,740, reflecting legal fees associated with the James Crane matter.
Other Selling, General
and Administrative Expenses for the three months ended July 31, 2014 were $275,595, an increase of $191,430 over amounts for the
three months ended July 31, 2013 which were $84,165. The increase primarily reflects increases in investor relations expenses and
the settlement award to Mr. Crane in the amount of $55,264.
Other Income and
Expense for the three months ended July 31, 2014 were $304,524, a 10% increase of $28,117 over amounts for the three months ended
July 31, 2013 which were $276,407. The decrease is primarily due to an increase in interest expense of $241,049 reflecting
additional convertible note borrowing and derivative liability expenses incurred in connection with issuing variable priced convertible
securities at amounts greater than fair value for the three months ended July 31, 2014, an increase of the amortization of debt
discount of $57,945, offset by a reduction in the change in fair value of derivative liability of 270,877.
Net Loss: We
experienced a net loss from operations before consideration of our Non-Controlling interest of $1,272,064 for the three months
ended July 31, 2014. The discussion of operating expenses identifies the elements of the net loss. For the same period
in 2013, our net loss was $1,103,564. We anticipate we will experience a net loss in fiscal 2014 as we continue to pursue
regulatory approvals and further identify markets for the sale and distribution of our products.
Comparison of Results of Operations for the nine months
ended July 31, 2014 and for the nine months ended July 31, 2013.
Revenues:
During the nine months ended July 31, 2014 the Company generated revenues of $30,093 as compared to revenues of $4,950
for the nine months ended July 31, 2013. Our efforts have been focused on sales and marketing of our non-regulated Ogiene™ product
line as well the sale of our Ygiene™ formulation in acute and long-term healthcare and industrial markets where pathogenic
spores are present. We are carrying forward our commercialization strategy begun in 2013 by developing relationships with selling
organizations and distributors.
Within healthcare
and life sciences, most of our customer’s perform trial testing of our products prior to purchasing which can significantly
lengthen the selling cycle. To date our marketing efforts have led to many trials of our products. Our products have been ordered
within the segments of university laboratory medical research, pharmaceutical manufacturing and veterinarian care.
Within the industrial
marketplace our products are trial tested as well prior to purchasing thereby lengthening the selling cycle in most cases. We
signed independent selling groups to represent our products and we have approximately representatives throughout the United States
marketing our products. In addition, we established a relationship with an Ohio based distributor of medical products.
Based on the progress
as noted above, we are generally pleased with the market reception of our products. Though the sales cycle has proved to be slower
than originally planned for, management is generally encouraged by the current selling momentum and anticipates increases of new
customers. We intend to expand our efforts to sell our products by offering them for sale through distribution. Recently we announced
our new relationship with Quip Laboratories, a leading sales distribution company of biosafety products in the laboratory and biomedical
research segments. We have other such relationships under consideration, and plan to vigorously pursue others to add to selling
capacity.
Operating Expenses: Operating
expenses were $2,489,681 the nine months ended July 31, 2014 and $2,341,166 for the nine months ended July 31, 2013 for an increase
of $148,515. Our operating expenses consist of compensation of our executive and scientific staff, consulting expenses supporting
development of, and regulatory approvals for, our products, legal and accounting services, and non-cash amortization of our intellectual
property.
Amortization and
depreciation expense was $531,702 for nine months ended July 31, 2014 and 2013.
Salaries expense for the nine months ended July
31, 2014 was $569,343, a decrease of 4% over amounts for the nine months ended July 31, 2013, which were $590,544. Overall compensation
was lower in the nine months ended July 31, 2014 as the Company had less sales personnel in 2014.
Consulting fee expenses
were $337,435 for the nine months ended July 31, 2014 as compared to $472,890 for the nine months ended July 31, 2013 for a 29%
decrease of $135,455. The decrease primarily reflects the overall reduction of sales consultants in 2014 to pivot the
commercialization strategy in 2014 to engaging with distributors and private label contracts that require less involvement from
the Company.
Total legal and
accounting expenses for the nine months ended July 31, 2014 were $424,792, a increase of $108,033 over amounts for the nine months
ended July 31, 2013 which were $316,759, reflecting an increase in legal fees associated with the Pamani and James Crane matters,
and increases to audit and tax preparation fees.
Other Selling, General
and Administrative Expenses for the nine months ended July 31, 2014 were $626,409, an increase of $197,138 over amounts for the
nine months ended July 31, 2013 which were $429,271. The increase primarily reflects increases in investor relations expenses and
the settlement award to Mr. Crane in the amount of $55,264.
Other Income and
Expense for the nine months ended July 31, 2014 was $449,243, a 135% increase of 257,694 over amounts for the nine months ended
July 31, 2013 which were $191,549. The increase is primarily due to an increase in interest expense of $813,549 reflecting
additional convertible note borrowing and derivative liability expenses incurred in connection with issuing variable priced convertible
securities at amounts greater than fair value for the nine months ended July 31, 2014, an increase of the amortization of debt
discount of $38,967, and offset by an increase in the change in fair value of derivative liability of $833,572.
Net Loss: We
experienced a net loss from operations before consideration of our Non-Controlling interest of $2,922,853 for the nine months
ended July 31, 2014. The discussion of operating expenses identifies the elements of the net loss. For the same period
in 2013, our net loss was $2,529,497, which was offset by a $238,750 credit of consulting expense and $95,250 decrease in fair
value of derivative liability. We anticipate we will experience a net loss in fiscal 2014 as we continue to pursue
regulatory approvals and further identify markets for the sale and distribution of our products.
Analysis of Impairment
In conjunction with
our 2013 audit, we performed our annual impairment testing during January 2014. In this analysis, we determined that the current
carrying value of our Intellectual Property was $9,249,498.
We computed the
Intellectual Property value by using an undiscounted cash model. In our undiscounted cash flow analysis, we prepared a five year
forecast of our expected earnings to derive an explicit stream of expected free cash flows through October 31, 2018. We developed
our revenue and direct variable costs forecast based on a variety of factors including our current and anticipated sales pipeline
of prospects currently known to the Company, and those which the Company believes will be generated through current and future
relationships with distributors, knowledge of our business and industry, general economic conditions in the marketplace and expectations
of market opportunity with respect to the specific types of advertising services we provide. Our operating expenses are generally
fixed and predictable; however, we increased our budgeted operating expenses by an amount that we believe is approximately equal
to theoretical lease costs we would incur had our parent company not provided us with facilities that are not a component of operating
costs in our goodwill reporting unit. After having determined the amount of our explicit year cash flows, we assumed that the Company
would experience a long-term growth rate in free cash flows of 2% per annum thereafter. We then multiplied our cash flows by a
marginal federal and state tax rate of 40% to derive our after-tax yearly cash flows. The Intellectual Property values we derived
using the above exceeded the carrying value of our Intellectual Property of $9,249,498.
Liquidity and Capital Resources
The Company had $16,358 of cash at July
31, 2014. Cash used by operations for the nine months ended July 31, 2014 was $711,520. The principal uses of funds
were for consulting services supporting the development of our business plan, legal and accounting fees in connection with being
a public company and daily operations of the business, including rent, travel and laboratory costs.
During the nine months ended July 31,
2014, the Company raised $792,500 of cash from the issuance of convertible debentures to fund operations.
On July 9, 2014
the Company issued a convertible promissory note to JMJ financial in the amount of $190,000 of which it received payments through
the date of this report of $60,000. It expects to receive additional payments from JMJ under the note at various intervals
during the fiscal year 2014.
While the Company has been able to use proceeds from the issuance of convertible promissory notes
to fund a substantial balance of its operating costs, it does not expect that its funds will be sufficient to meet its anticipated
needs through August 1, 2015 and it will need to raise additional capital during fiscal 2014 to fund the full costs associated
with its growth and development.
The Company believes
that it will be able to generate significant sales by the second quarter of 2015 providing for sufficient cash flows to supplement
its equity financing based on its current plans. If it’s able to execute its plan, the Company can begin to accumulate
cash reserves. There is no assurance however that its funds will be sufficient to meet its anticipated needs through
its fiscal year 2014, and it may need to raise additional capital during fiscal 2014 to fund the full costs associated with its
growth and development. The Company believes that it will require approximately $2,000,000 in additional capital to achieve
its goals. There can be no assurances that it will be successful in raising additional capital on favorable terms if at all. If
the Company is unable to secure additional capital, it may be required to curtail its business development initiatives, impair
its intellectual property and take additional measures to reduce cost in order to conserve cash.
These conditions raise substantial doubt
about the Company’s ability to continue as a going concern. Accordingly, the accompanying unaudited condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,
which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities
in the normal course of business. The carrying amounts of assets and liabilities presented in the financial statements do not necessarily
purport to represent realizable or settlement values. The unaudited condensed financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet
arrangements.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls
and procedures
As of the end of
the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive
officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e)
of the Exchange Act). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure
controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is: (1) accumulated and communicated to our management, including our chief executive officer and
chief financial officer, as appropriate to allow timely decisions regarding required disclosure; and (2) recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and forms.
Changes in Internal Controls over
Financial Reporting
During the nine months ended July
31, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably
likely to materially affect our internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 13, 2013, the Company received
a claim for arbitration from James Crane, a former Chief Financial Officer of the Company in 2009. Mr. Crane asserts claims against
the Company for breach of contract, fraud, negligence, negligent misrepresentation, unjust enrichment and deceptive business practices
related to unpaid fees and damages in the amount of $371,804 pursuant consulting agreement between Mr. Crane the Company. The Company
has retained counsel and is defending the matter. On July 22, 2014, the American Arbitration Association awarded Mr. Crane $55,264.
On November 26, 2012, the Company
filed a complaint against Raj Pamani, a shareholder and former director of the Company in the Superior Court of New Jersey Essex
County: Chancery Division (“the Complaint”). Included also as defendants were several entities to which in 2009
the Company awarded approximately 13 million shares of its common stock in consideration for consulting contracts which the Company
has concluded were fraudulently induced and were later deemed to be worthless (the “Defendant Entities”). By
causing the Company to enter into the contracts to its detriment in favor of Mr. Pamani’s and the Defendant Entities self-enrichment,
the Company seeks to recover damages incurred from the actions of Mr. Pamani and the Defendant Entities as a result of self-dealing,
breach of fiduciary duty, breach of loyalty and fraud. On March 21, 2014 the Superior Court of New Jersey Essex County: Chancery
Division entered an order for final judgment in favor of BioNeutral. The final judgment demands the reimbursement to be made by
the Defendant to BioNeutral of an aggregate amount of $412,900 payments caused by the Defendant Entities. Also contained within
the final judgment with respect to the 13 million shares of its common stock in consideration for fraudulently induced consultant
contracts, the Defendant Entities must return to BioNeutral any unsold stock certificates, and also, the Pamani Defendants must
reimburse BioNeutral for any stock sold to innocent third parties in an amount to be determined by a further submission to the
Court by BioNeutral.
ITEM 1A. RISK FACTORS
Not Applicable.
ITEM 2. UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On May 22, 2014,
the Company issued 10,000,000 shares of its restricted common stock to a consulting firm for marketing fees of $5,000. The shares
were valued and issued at a negotiated per share price of $.0005, a share price which approximated the prevailing per share closing
prices at the time the parties reached an agreement of terms.
During the nine
months ended July 31, 2014, the Company issued 96,478,175 shares of its common stock to Southridge Partners II for payment of $40,000
of fees related to an Equity Purchase Agreement entered into with Southridge Partners II in December 2012. The shares were issued
at prevailing market prices of the Company’s common stock at the time of issuance.
On April 29, 2014
the Company issued 14,285,000 shares of its common stock to attorney escrow in connection with a Breakup Fee Agreement and a corresponding
fee of $10,000 with Adar Bays which grants a right to the Company to cancel the certain promissory notes with Adar Bays, prior
to November 1, 2014. The shares were issued at $0.0007 commensurate with prevailing market prices of the Company’s common
stock at the time of issuance.
During the nine months ended July 31, 2014, the Company issued 136,000,000 shares of its restricted
common stock to a consulting firm for marketing fees of $65,000. The shares were issued at prevailing market prices of the Company’s
common stock at the time of issuance.
On November 21,
2013, the Company issued 1,000,000 shares of its common stock to Randy McNeil pursuant a stock purchase agreement with Mr. McNeil
on September 12, 2013 for $5,000. The purchase price per share of the common stock is $.005 which was equal to the closing trading
price of the Company’s common stock on September 10, 2013.
On November 21,
2013, the Company issued 1,466,276 shares of its common stock to Bernie Casamento pursuant to a stock purchase agreement with Mr.
Casamento on August 16, 2013 for $10,000. The purchase price per share of the common stock was $.0068 which is equal to the average
closing trading price of the Company’s common stock for the five (5) preceding days of the closing on August 16, 2013.
On November 21,
2013, the Company issued 1,466,276 shares of its common stock to Bob Rutherford pursuant to a stock purchase agreement with Mr.
Rutherford on August 16, 2013 for $10,000. The purchase price per share of the common stock was $.0068 which is equal to the average
closing trading price of the Company’s common stock for the five (5) preceding days of the closing on August 16, 2013.
All of such shares
were issued pursuant to an exemption from registration under the Securities Act by virtue of Section 4(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. MINE SAFETY DISCLOUSURES
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS
The following exhibits are filed with this Quarterly Report
on Form 10-Q:
Exhibit No. |
|
Description |
3.1 |
|
Articles of Incorporation of BioNeutral Group, Inc. (1) |
|
|
|
3.2 |
|
Amendment to Articles of Incorporation of BioNeutral Group, Inc. (2) |
|
|
|
3.3 |
|
Bylaws of BioNeutral Group, Inc. (formerly known as Moonshine Creations, Inc.) (1) |
|
|
|
10.64 |
|
Securities purchase agreement with Magna Group, LLC on February 28, 2014 for $78,164.38. (3) |
|
|
|
10.65 |
|
Convertible promissory note with Hanover Holdings I, LLC on February 11, 2014 for $36,500. (3) |
|
|
|
10.66 |
|
Convertible promissory note with GEL Properties on March 19, 2014 for $40,000. (3) |
|
|
|
10.67 |
|
Convertible promissory note with GEL Properties on March 19, 2014 for $52,191.78. (3) |
|
|
|
10.68 |
|
Convertible promissory note with GEL Properties on March 19, 2014 for $15,960. (3) |
10.69 |
|
Convertible promissory note with GEL Properties on March 19, 2014 for $15,657.53. (3) |
|
|
|
10.70 |
|
Securities Purchase Agreement with Asher Enterprises, Inc. on March 26, 2014 for $53,000. (3) |
|
|
|
10.71 |
|
Convertible promissory note with LG Capital Funding, LLC on April 2, 2014 for $35,000. (3) |
|
|
|
10.72 |
|
Convertible promissory note with GEL Properties on April 11, 2014 for $154,875.00. (3) |
|
|
|
10.73 |
|
Convertible promissory note with Michael Francis on April 17, 2014 for $70,000.00. (3) |
|
|
|
10.74 |
|
Securities purchase agreement with Adar Bays, LLC on April 28, 2014 for $77,500.00. (3) |
|
|
|
10.75 |
|
Promissory note issued to Reed Smith LLP on May 12, 2014 for $152,414.00. (3) |
|
|
|
10.76 |
|
Convertible promissory note with Michael Francis on May 7, 2014 for $63,000.00. (3) |
|
|
|
10.77 |
|
Securities purchase agreement with Typenex Co-Investment, LLC on May 21, 2014 for $335,000.00. (3) |
|
|
|
10.78 |
|
Settlement Agreement and Stipulation with ASC Recap LLC on September 20, 2013.* |
|
|
|
10.79 |
|
Convertible promissory note with ASC Recap on November 12, 2013 for $15,000.* |
|
|
|
10.80 |
|
Securities purchase agreement with WHC Capital, LLC on July 18, 2014 for $25,000. * |
|
|
|
10.81 |
|
Securities transfer agreement with Darling Capital, LLC on July 21, 2014 for $25,000. * |
|
|
|
10.82 |
|
Convertible promissory note with Darling Capital, LLC on July 21, 2014 for $12,500. * |
|
|
|
10.83 |
|
Convertible promissory note with WHC Capital on July 11, 2014 for $51,500.* |
|
|
|
10.84 |
|
Convertible promissory note with Ray Dunning on May 1, 2014 for $70,000.00.* |
|
|
|
10.85 |
|
Convertible promissory note with DH Technical
Consulting on May 1, 2014 for $28,640.00.* |
|
|
|
31.1 |
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
|
|
|
32.1 |
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
________________________
(1) Incorporated
by reference to BioNeutral Group, Inc.'s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on
February 14, 2008.
(2) Incorporated
by reference to BioNeutral Group, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on February
5, 2009.
(3) Incorporated
by reference to BioNeutral Group, Inc.'s Current Report on Form 8-K filed with the Securities and Exchange Commission on April
18, 2013.
(4) Incorporated by reference to
BioNeutral Group, Inc.'s Current Report on Form 10-Q filed with the Securities and Exchange Commission on June 20, 2014.
* Filed herewith.
SIGNATURE
Pursuant to the requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
BIONEUTRAL GROUP, INC. |
|
|
|
September
22, 2014 |
By: |
/s/
Mark Lowenthal |
|
|
Mark Lowenthal |
|
|
Chief Executive Officer
(Principal Executive Officer, Principal Financial
Officer and Principal Accounting Officer) |
45
Exhibit
10.78
SETTLEMENT
AGREEMENT AND STIPULATION
THIS
SETTLEMENT AGREEMENT and Stipulation dated as of September 20, 2013 by and
between
ASC Recap LLC ("ASC"), a limited liability company formed under the laws of the State of Connecticut, with offices in
Fairfield County, Connecticut, and Bioneutral Group, Inc., a corporation incorporated under the laws of Nevada, with offices in
Newark, New Jersey ("COMPANY").
BACKGROUND:
WHEREAS,
there are bona fide outstanding Claims against the Company in the principal amount of not less than $266,298.17; and
WHEREAS,
these liabilities are past due; and
WHEREAS,
ASC acquired such liabilities on the terms and conditions set forth in the annexed Claim Purchase Agreement(s), subject however
to the agreement of the Company and compliance with the provisions hereof; and
WHEREAS,
ASC and the Company desire to resolve, settle, and compromise among other things the liabilities as more particularly set forth
on Schedule A annexed hereto (hereinafter collectively referred to as the "Claims").
NOW,
THEREFORE, the parties hereto agree as follows:
1. Defined
Terms. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings
to be equally applicable to both the singular and plural forms of the terms defined):
"AGREEMENT"
shall have the meaning specified in the preamble hereof.
"CLAIM
AMOUNT" shall mean $266,298.17.
"COMMON
STOCK" shall mean the Company's common stock, $0.00001 par value per share, and any shares of any other class of common stock
whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and
assets (upon liquidation of the Company).
"COURT"
shall mean the Superior Court of the State of New Jersey.
"DISCOUNT"
shall mean twenty five (20%) percent.
"DTC"
shall have the meaning specified in Section 3b.
"DWAC"
shall have the meaning specified in Section 3b.
"FAST"
shall have the meaning specified in Section 3b.
"GROSS
PROCEEDS" shall mean proceeds from sales of Settlement Shares by ASC. "LEGAL FEES" shall have the meaning specified
in Section 3a.
"NET
PROCEEDS" shall mean Gross Proceeds less all brokerage, clearing and delivery related fees and charges associated with the
generation of such Gross Proceeds, including but not limited to, commission and execution fees, ticket and deposit fees, DTC and
Non-DTC, transfer agent and clearing agent fees.
"PRINCIPAL
MARKET" shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the Over the Counter Bulletin Board, OTCXD, the
American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
"REMITTANCE
AMOUNT" shall mean NET
PROCEEDS multiplied by one minus the Discount ((1 – 0.20)
or 0.80);
"SELLER"
shall mean any individual or entity listed on Schedule A, who originally owned the Claims.
"SETTLEMENT
SHARES" shall have the meaning specified in Section 3a.
"TRADING
DAY" shall mean any day during which the Principal Market shall be open for business.
"TRANSFER
AGENT" shall mean the transfer agent for the Common Stock (and to any substitute or replacement transfer agent for the Common
Stock upon the Company's appointment of any such substitute or replacement transfer agent).
2. Fairness
Hearing. Upon the execution hereof, Company and ASC agree, pursuant to Section 3(a) (10) of the Securities Act of 1933 (the
"Act") , to promptly submit the terms and conditions of this Agreement to the Court for a hearing on the fairness of
such terms and conditions, and the issuance exempt from registration of the Settlement Shares. This Agreement shall become binding
upon the parties only upon entry of an order by the Court substantially in the form annexed hereto as Exhibit A (the "Order").
3. Settlement
Shares. a. Following entry of an Order by the Court in accordance with Paragraph 2 herein and the delivery by ASC and Company
of the Stipulation of Dismissal (as defined below), in settlement of the Claims, the Company shall issue and deliver to ASC shares
of its Common Stock (the "Settlement Shares") in one or more tranches as necessary,and subject to adjustment and ownership
limitations as set forth below, sufficient to generate proceeds such that the aggregate Remittance Amount equals the Claim Amount.
In addition, upon the execution of this Agreement, the Company shall issue to ASC a convertible promissory note in the amount
of $15,000.00, maturing six (6) months from the date of issuance, to cover legal expenses (the "Legal Fee"). The Note
shall have no registration rights, and shall be convertible into the common stock of the Company at 75% of the lowest closing
bid price during the twenty (20) Trading Days prior to conversion.
b. No
later than the fifth Trading Day following the date that the Court enters the Order, time being of the essence, Company shall:
(i) cause its legal counsel to issue an opinion to Company's transfer agent, in form and substance reasonably acceptable to ASC
and such transfer agent, that the shares of Common Stock to be issued as the Initial Issuance and any additional issuance are
legally issued, fully paid and non-assessable, are exempt from registration under the Securities Act, may be issued without restrictive
legend, and may be resold by ASC without restriction pursuant to the Court Order; and (ii) issue the Settlement Shares, in tranches
as necessary, by physical delivery, or as Direct Registration Systems (DRS) shares to ASC's account with The Depository Trust
Company (DTC) or through the Fast Automated Securities Transfer (FAST) Program of DTC's Deposit/Withdrawal Agent Commission (DWAC)
system, without any legends or restriction on transfer pursuant to the Court Order. The date upon which the first tranche of the
Settlement Shares has been received into ASC's account and are available for sale by ASC shall be referred to as the "Issuance
Date".
c. The
Company shall deliver to ASC, through the initial tranche and any required additional tranches, that number of Settlement Shares
the proceeds of sales of which generate an aggregate Remittance Amount equal to the Claim Amount. Following the sale and settlement
of each tranche of Settlement Shares issued by the Company to ASC, ASC shall cause to be disbursed the Remittance Amount associated
with such tranche to Sellers in accordance with the Claim Purchase Agreements. To the extent that the Company issues Settlement
Shares in excess of that necessary to satisfy the aggregate Claim Amount, ASC shall return any excess Settlement Shares to Company
for retirement to treasury stock. The parties reasonably estimate that the fair market value of the Settlement Shares and all
other amounts received or to be received by ASC is equal to approximately $330,000.00. The parties acknowledge that the number
of Settlement Shares to be issued pursuant to this Agreement is indeterminable as of the date of its execution, and could well
exceed the current existing number of shares outstanding as of the date of its execution.
d. Notwithstanding
anything to the contrary contained herein, the Settlement Shares beneficially owned by ASC at any given time shall not exceed
the number of such shares that, when aggregated with all other shares of Company then beneficially owned by ASC, or deemed beneficially
owned by ASC, would result in ASC owning more than 9.99% of all of such Common Stock as would be outstanding on such date, as
determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. In compliance therewith,
the Company agrees to deliver the Initial Issuance and any additional issuances in one or more tranches.
4. Necessary
Action. At all times after the execution of this Agreement and entry of the Order by the Court, each party hereto agrees to
take or cause to be taken all such necessary action including, without limitation, the execution and delivery of such further
instruments and documents, as may be reasonably requested by any party for such purposes or otherwise necessary to effect and
complete the transactions contemplated hereby.
5. Releases.
Upon receipt of all of the Settlement Shares required to be delivered hereby, in consideration of the terms and conditions
of this Agreement, and except for the obligations, representations and covenants arising or made hereunder or a breach hereof,
the parties hereby release, acquit and forever discharge the other and each, every and all of their current and past officers,
directors, shareholders, affiliated corporations, subsidiaries, agents, employees, representatives, attorneys, predecessors, successors
and assigns (the "Released Parties"), of and from any and all claims, damages, cause of action, suits and costs, of
whatever nature, character or description, whether known or unknown, anticipated or unanticipated, which the parties may now have
or may hereafter have or claim to have against each other with respect to the Claims. Nothing contained herein shall be deemed
to negate or affect ASC's right and title to any securities heretofore or hereafter issued to it by Company or any subsidiary
of Company.
6. Representations.
Company hereby represents, warrants and covenants to ASC as follows:
a. There
are 200,000,000 shares of Common Stock of the Company authorized, of which 164,616,730 Shares of Common Stock are issued and outstanding
as of September 10, 2013;
b. The
shares of Common Stock to be issued pursuant to the Order are duly authorized, and when issued will be duly and validly issued,
fully paid and non-assessable, free and clear of all liens, encumbrances and preemptive and similar rights to subscribe for or
purchase securities;
c. Upon
Court approval of this Stipulation and entry of the Order, the shares will be exempt from registration under the Securities Act
and issuable without any restrictive legend;
d. The
Company has reserved from its duly authorized capital stock a number of shares of Common Stock at least equal to the number of
shares that could be issued pursuant to the terms of the Order;
e. If
at any time it appears reasonably likely that there may be insufficient authorized shares to fully comply with the Order, Company
shall promptly increase its authorized shares to ensure its ability to timely comply with the Order;
f. The
execution of this Agreement and performance of the Order by Company and ASC will not (1) conflict with, violate or cause a breach
or default under any agreements between Company and any creditor (or any affiliate thereof) related to the account receivables
comprising the Claims, or (2) require any waiver, consent, or other action of the Company or any creditor, or their respective
affiliates, that has not already been obtained;
g. Without
limitation, the Company hereby waives any provision in any agreement related to the account receivables comprising the Claims
requiring payments to be applied in a certain order, manner, or fashion, or providing for exclusive jurisdiction in any court
other than this Court;
h.
The Company has all necessary power and authority to execute, deliver and perform all of its obligations under this Agreement;
i. The
execution, delivery and performance of this Agreement by Company has been duly authorized by all requisite action on the part
of Company (including a majority of its independent directors), and this Agreement has been duly executed and delivered by Company;
j. Company
did not enter into the transaction giving rise to the Claims in contemplation of any sale or distribution of Company's common
stock or other securities;
k. There
has been no modification, compromise, forbearance, or waiver entered into or given by the Company with respect to the Claims.
There is no action based on the Claims by the Company that is currently pending in any court or other legal venue, and no judgments
based upon the Claims have been previously entered in any legal proceeding;
l. There
are no taxes due, payable or withholdable as an incident of Seller's provision of goods and services, and no taxes will be due,
payable or withholdable as a result of settlement of the Claims;
m. Except
as set forth on Exhibit 6 (m), no Seller within the past ninety (90) days has been directly or indirectly through one or more
intermediaries in control, controlled by, or under common control with, the Company and is not an affiliate of the Company as
defined in Rule 144 promulgated under the Act;
n. To
the best of the Company's knowledge, no Seller is, directly or indirectly, utilizing any of the proceeds received from ASC for
selling the Claims to provide any consideration to or invest in any manner in the Company or any affiliate of the Company;
o. Company
has not received any notice (oral or written) from the SEC or Principal Market regarding a halt, limitation or suspension of trading
in the Common Stock; and
P. No
Seller will, directly or indirectly, receive any consideration from or be compensated in any manner by, the Company, or any affiliate
of the Company, in exchange for or in consideration of selling the Claims.
q. Company
acknowledges that ASC or its affiliates may from time to time, hold outstanding securities of the Company, including securities
which may be convertible in shares of the Company's common stock at a floating conversion rate tied to the current market price
for the stock. The number of shares of Common Stock issuable pursuant to this Agreement may increase substantially in certain
circumstances, including, but not necessarily limited to the circumstance wherein the trading price of the Common Stock declines
during the Valuation Period. The Company's executive officers and directors have studied and fully understand the nature of the
transaction contemplated by this Agreement and recognize that they
have a potential dilutive effect. The board of directors of the Company has concluded in its good faith business judgment that
such transaction is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the
Settlement Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
ASC
hereby represents, warrants and covenants to Company as follows:
a. It
is the owner of the Claims;
b. It
is a limited liability company duly filed and in good standing under the laws of Connecticut, and
c. The
execution, delivery and performance of this Stipulation by ASC has been duly authorized by all requisite action on the part of
ASC, and this Stipulation has been duly executed and delivered by ASC.
7. Continuing
Jurisdiction.
Simultaneously with the execution of this Agreement,the
attorneys representing the parties hereto will execute a stipulation of dismissal substantially in the form annexed hereto as
Exhibit B (the "Stipulation of Dismissal").Notwithstanding the Stipulation, in order to enable the Court to grant specific
enforcement or other equitable relief in connection with this Agreement, (a) the parties consent to the continuing jurisdiction
of the Court for purposes of enforcing this Agreement, and (b) each party to this Agreement expressly waives any contention that
there is an adequate remedy at law or any like doctrine that might otherwise preclude injunctive relief to enforce this Agreement.
8. Conditions
Precedent/ Default.
a. If
Company shall default in promptly delivering the Settlement Shares to ASC in the form and mode of delivery as required by Section
3 herein;
b.
If the Order shall not have been entered by the Court on or prior to November 30„ 2013;
c. If
the Company shall fail to comply with the Covenants set forth in Paragraph 14 hereof;
d. If
Bankruptcy, dissolution, receivership, reorganization, insolvency or liquidation proceedings or other proceedings for relief under
any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company; or if the trading of the
Common Stock shall have been halted, limited, or suspended by the SEC or on the Principal Market; or trading in securities generally
on the Principal Market shall have been suspended or limited; or, minimum prices shall been established for securities traded
on the Principal Market or eligible for delivery via DTC or DWAC; or the Common Stock is no longer eligible for book transfer
delivery via DTC or DWAC; or there shall have been any material adverse change (i) in the Company's finances or operations, or
(ii) in the financial markets such that, in the reasonable judgment of the ASC, makes it impracticable or inadvisable to trade
the Settlement Shares; and such suspension, limitation or other action is not cured within ten (10) trading days;then the Company
shall be deemed in default of the Agreement and Order and this Agreement shall be null and void, unless otherwise agreed by written
agreement of the parties.
9. Information.
Company and ASC each represent that prior to the execution of this Agreement, they have fully informed themselves of its terms,
contents, conditions and effects, and that no promise or representation of any kind has been made to them except as expressly
stated in this Agreement.
10. Ownership
and Authority. Company and ASC represent and warrant that they have not sold, assigned, transferred, conveyed or otherwise
disposed of any or all of any claim, demand, right, or cause of action, relating to any matter which is covered by this Agreement,
that each is the sole owner of such claim, demand, right or cause of action, and each has the power and authority and has been
duly authorized to enter into and perform this Agreement and that this Agreement is the binding obligation of each, enforceable
in accordance with its terms.
11. No
Admission. This Agreement is contractual and it has been entered into in order to compromise disputed claims and to avoid
the uncertainty and expense of the litigation. This Agreement and each of its provisions in any orders of the Court relating to
it shall not be offered or received in evidence in any action, proceeding or otherwise used as an admission or concession as to
the merits of the Action or the liability of any nature on the part of any of the parties hereto except to enforce its terms.
12. Binding
Nature. This Agreement shall be binding on all parties executing this Agreement and their respective successors, assigns and
heirs.
13. Authority
to Bind. Each party to this Agreement represents and warrants that. the execution, delivery and performance of this Agreement
and the consummation of the transactions provided in this Agreement have been duly authorized by all necessary action of the
respective entity and that the person executing this Agreement on its behalf has the full capacity to bind that entity. Each party
further represents and warrants that it has been represented by independent counsel of its choice in connection with the negotiation
and execution of this Agreement, and that counsel has reviewed this Agreement.
14. Covenants.
a. For
so long as ASC or any of its affiliates holds any shares of Common Stock, neither Company nor any of its affiliates shall, without
the prior written consent of ASC (which may not be unreasonably withheld), vote any shares of Common Stock owned or controlled
by it (unless voting in favor of a proposal approved by a majority of Company's Board of Directors), or solicit any proxies or
seek to advise or influence any person with respect to any voting securities of Company; in favor of (1) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving Company or any of its subsidiaries, (2) a sale or transfer
of a material amount of assets of Company or any of its subsidiaries, (3) any change in the present board of directors or management
of Company, including any plans or proposals to change the number of term of directors or to fill any existing vacancies on the
board, (4) any material change in the present capitalization or dividend policy of Company, (5) any other material change in Company's
business or corporate structure,
(6) a change in Company's charter, bylaws or instruments corresponding thereto (7) causing a class of securities of Defendant
to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system
of a registered national securities association, (8) causing a class of equity securities of Company to become eligible for termination
of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended, (9) terminating its Transfer
Agent (10) taking any action which would impede the purposes and objects of this Settlement Agreement or (11) taking any action,
intention, plan or arrangement similar to any of those enumerated above. The provisions of this paragraph may not be modified
or waived without further order of the Court.
b. Immediately
upon the signing of the Settlement Order by the Court, the Company shall cause to be filed a Form 8-K with the Securities and
Exchange Commission disclosing the settlement. The Company shall file such additional SEC filings as may be required in respect
of the transactions.
15. Indemnification.
Company shall indemnify, defend and hold ASC and its affiliates harmless with respect to all obligations of Company
arising from or incident or related to this Agreement, including, without limitation, any claim or action brought
derivatively or directly by the Seller or shareholders of Company.
16. Legal
Effect. The parties to this Agreement represent that each of them has been advised as to the terms and legal effect of this
Agreement and the Order provided for herein, and that the settlement and compromise stated herein is final and conclusive forthwith,
subject to the conditions stated herein, and each attorney represents that his or her client has freely consented to and authorized
this Agreement after have been so advised.
17. Waiver
of Defense. Each party hereto waives a statement of decision, and the right to appeal from the Order after its entry. Company
further waives any defense based on the rule against splitting causes of action. The prevailing party in any motion to enforce
the Order shall be awarded its reasonably attorney fees and expenses in connection with such motion. Except as expressly set forth
herein, each party shall bear its own attorneys' fees, expenses and costs.
18. Signatures.
This Agreement may be signed in counterparts and the Agreement, together with its counterpart signature pages, shall be
deemed valid and binding on each party when duly executed by all parties. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement thereof. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter hereof.
19. Choice
of Law, Etc. Notwithstanding the place where this Agreement may be executed by either of the parties, or any other factor,
all terms and provisions hereof shall be governed by and construed in accordance with the laws of the State of New Jersey, applicable
to agreements made and to be fully performed in that State and without regard to the principles of conflicts of laws thereof.
Any action brought to enforce, or otherwise arising out of this Agreement shall be brought only in State Court sitting in Essex
County, New Jersey.
20. Exclusivity
For a period of thirty (30) days from the date of the execution of this Agreement, (a) Company and its representatives shall not
directly or indirectly discuss, negotiate or consider any proposal, plan or offer from any other party relating to any liabilities,
or any financial transaction having an effect or result similar to the transactions contemplated hereby, and (b) ASC shall have
the exclusive right to negotiate and execute definitive documentation embodying the terms set forth herein and other mutually
acceptable terms.
21. Inconsistency.
In the event of any inconsistency between the terms of this Agreement and any other document executed in connection herewith,
the terms of this Agreement shall control to the extent necessary to resolve such inconsistency.
22. NOTICES.
Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(a) the
date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission,
(b) the
seventh business day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or
(c) the
second business day after mailing by domestic or international express courier, with delivery costs and fees prepaid,
in
each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as
such party may designate by ten (10) days' advance written notice similarly given to each of the other parties hereto):
Company: |
|
|
|
|
Bioneutral
Group, Inc. |
|
Attn:
Chief Executive Officer |
|
Telephone
No.: (856) 332-7808 |
|
E-mail
: tom.cbionetral.com |
|
|
Mobile: 856.332.7808 |
|
with
a copy to:
|
Norman
I. Klein, Esq. |
|
|
Carlet, Garrison,
Klein and Zaretsky |
|
|
1135
Clifton Ave. |
|
|
Clifton,
NJ 07013 |
|
|
Telephone
No.: (973) 777-6200 ext. 130 |
|
|
Telecopier
No.: (973) 777-0412 |
|
|
E-mail:
nklein@cgkesqs.com |
|
|
|
|
|
ASC
Recap LLC |
|
|
|
|
|
90
Grove Street |
|
|
Ridgefield
CT 06877 |
|
|
Telephone
No.: 203-431-8300 |
|
|
E-mail |
|
|
|
|
|
and |
|
|
|
|
|
Krieger
& Prager LLP |
|
|
39
Broadway |
|
|
Suite
920 |
|
|
New
York, NY 10006 |
|
|
Attn:
Samuel M. Krieger, Esq. |
|
|
Telephone
No.: (212) 363-2900 |
|
|
Telecopier
No.: (212) 363-2999 |
|
|
E-mail
: sk@kplawfirm.com |
Signature.
This Agreement may be executed in counterparts and by facsimile, portable document format or other electronic means, each of
which shall constitute an original and all of which when taken together shall constitute one document.
IN
WITNESS WHEREOF, the parties have duly executed this Settlement Agreement and Stipulation as of the date first indicated above.
|
ASC
RECAP LLC |
|
|
|
By: |
/s/
STEPHEN HICKS |
|
|
Name:
STEPHEN HICKS |
|
|
Tittle
: MANAGER |
|
|
|
|
BIONEUTRAL
GROUP, INC. |
|
|
|
By: |
/s/
MARK LOWENTHAL |
|
|
Name:
MARK LOWENTHAL |
|
|
Tittle
: Chief Executive Officer |
SCHEDULE
A
CLAIMS
Seller | |
Nature of Claim | |
Amount | |
DH Technical Consulting, LLC | |
Contract Consulting Fees | |
$ | 17,850.00 | |
Thomas Thornton | |
Invoices Deferred Salary | |
| 4,800.03 | |
Gersten Savage LLP | |
Invoices Attorneys' Fees | |
| 7,200.00 | |
DL Piper (US) LLP | |
Invoices Consulting Fees | |
| 112,500.00 | |
DH Technical Consulting, LLC | |
Invoices Consulting Fees | |
| 20,000.00 | |
CT Partners | |
| |
| 103,948.14 | |
| |
Total | |
$ | 266,298.17 | |
Exhibit
6 (m)
Affiliates
Exhibit
10.79
NEITHER
THIS SECURITY NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE SECURITIES ARE RESTRICTED
AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION
OR SAFE HARBOR THEREFROM.
No. ______________ |
|
US $15,000.00 |
BIONEUTRAL
GROUP, INC.
PROMISSORY
NOTE DUE MAY 31, 2014
THIS
Note is a duly authorized issuance of up to $15,000.00 of BIONEUTRAL GROUP, INC., a Nevada corporation (the "Company")
designated as its Note.
FOR
VALUE RECEIVED, the Company promises to pay to ASC RECAP LLC, the registered holder hereof (the "Holder"), the
principal sum of fifteen thousand and 00/100 Dollars (US $15,000.00) on May 31, 2014 (the "Maturity Date"). The principal
of this Note is payable in United States dollars, at the address last appearing on the Note Register of the Company as designated
in writing by the Holder. The Company will pay the outstanding principal amount of this Note in cash on the Maturity Date to the
registered holder of this Note. The forwarding of such wire transfer shall constitute a payment 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 plus any
amounts so deducted.
This
Note is subject to the following additional provisions:
1. The
Note is exchangeable for an equal aggregate principal amount of Note 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.
2. The
Holder of this Note is entitled any time after the Maturity Date, subject to the following provisions, to convert all or a portion
of the principal amount of this Note into shares of Common Stock at a conversion price for each share of Common Stock equal to
the Current Market Price multiplied by seventy five percent (75%) (the "Conversion Price"). "Current Market Price"
means the lowest closing bid price for the Common Stock as reported by Bloomberg, LP or, if not so reported, as reported on the
over-the-counter market, for the twenty (20) trading days ending on the trading day immediately before the relevant Conversion
Date (as defined below). The amount of shares issuable pursuant to a conversion shall equal the principal amount (or portion thereof)
of the Note to be converted, divided by the Conversion Price.
Conversion
shall be effectuated by surrendering the Note to the Company, accompanied by or preceded by facsimile or other delivery to
the Company of the form of conversion notice attached hereto as Exhibit A, executed by the Holder evidencing such Holder's
intention to convert a specified portion hereof. No fractional shares of Common Stock 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. The date
on which notice of conversion is given (the "Conversion Date") shall be deemed to be the date on which the Holder
faxes or otherwise delivers the conversion notice ("Notice of Conversion"), substantially in the form annexed
hereto as Exhibit A, duly executed, to the Company. Facsimile delivery of the Notice of Conversion shall be accepted by the
Company at facsimile number ( )________________ ATTN: Chief Financial Officer. Certificates representing
Common Stock upon conversion will be delivered within three (3) business days from the Conversion Date. ("Delivery
Date")
The
Company understands that a delay in the issuance of the Shares of Common Stock beyond the Delivery Date (as defined in this Section)
could result in economic loss to the Holder. As compensation to the Holder for such loss, the Company agrees to pay late payments
to the Holder for late issuance of Shares upon Conversion, unless the delay is due to causes beyond the reasonable control of
the Company or the Transfer Agent, in accordance with the following schedule (where "No. Business Days Late" refers
to the number of business days which is beyond three (3)) business days
after the Delivery Date):1
No. Business Days Late | | |
Late Payment For Each $10,000
of Note Principal or Interest
Amount Being Converted | |
| | |
| |
| 1 | | |
$ | 100 | |
| 2 | | |
$ | 200 | |
| 3 | | |
$ | 300 | |
| 4 | | |
$ | 400 | |
| 5 | | |
$ | 500 | |
| 6 | | |
$ | 600 | |
| 7 | | |
$ | 700 | |
| 8 | | |
$ | 800 | |
| 9 | | |
$ | 900 | |
| 10 | | |
$ | 1,000 | |
| >10 | | |
$ | 1,000
+ $200 for each Business | |
| | | |
| Day Late beyond 10 days | |
The
Company shall pay any payments incurred under this Section in immediately available funds upon demand as the Holder's remedy for
such delay. Furthermore, in addition to any other remedies which may be available to the Holder, in the event that the Company
fails for any reason to effect delivery of such shares of Common Stock by close of business on the Delivery Date, unless such
failure is due to causes beyond the Company's reasonable control or that of its Transfer Agent, the Holder will be entitled to
revoke the relevant Notice of Conversion by delivering a notice to such effect to the Company, whereupon the Company and the Holder
shall each be restored to their respective positions immediately prior to delivery of such Notice of Conversion; provided, however,
that an amount equal to any payments contemplated by this Section which have accrued through the date of such revocation notice
shall remain due and owing to the Converting Holder notwithstanding such revocation.
If,
by the relevant Delivery Date, the Company fails, unless such failure is due to causes beyond the Company's reasonable control
or that of its Transfer Agent, for any reason to deliver the Shares to be issued upon conversion of the Note and after such Delivery
Date, the Holder of the Note being converted (a "Converting Holder") purchases, in an arm's-length open market transaction
or otherwise, shares of Common Stock (the "Covering Shares") in order to make delivery in satisfaction of a sale of
Common Stock by the Converting Holder (the "Sold Shares"), which delivery such Converting Holder anticipated to make
using the Shares to be issued upon such conversion (a "Buy-In"), the Converting Holder shall have the right, to require
the Company to pay to the Converting Holder, in addition to and not in lieu of the amounts due hereunder (but in addition to all
other amounts contemplated in other provisions of the Transaction Agreements, and not in lieu of any such other amounts), the
Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the amount equal to the excess, if any,
of (x) the Converting Holder's total purchase price (including brokerage commissions, if any) for the Covering Shares over (y)
the net proceeds (after brokerage commissions, if any) received by the Converting Holder from the sale of the Sold Shares. The
Company shall pay the Buy-In Adjustment Amount to the Company in immediately available funds immediately upon demand by the Converting
Holder. By way of illustration and not in limitation of the foregoing, if the Converting Holder purchases shares of Common Stock
having a total purchase price (including brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of Common
Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required to pay to the Converting
Holder will be $1,000.
In
lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Company's Transfer
Agent is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer program, upon request
of the Holder and its compliance with the provisions contained in this paragraph, so long as the certificates therefore do not
bear a legend and the Holder thereof is not obligated to return such certificate for the placement of a legend thereon, the Company
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 system.
The
Holder of the Note shall be entitled to exercise its conversion privilege with respect to the Note notwithstanding the commencement
of any case under 11 U.S.C. §101 et seq. (the "Bankruptcy Code"). In the event the Company is a debtor
under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under
11 U.S.C. §362 in respect of such holder's conversion privilege. The Company hereby waives, to the fullest extent permitted,
any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of the Note.
3. This
Note has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged
only in compliance with the Securities Act of 1933, as amended (the "Act"), and other applicable state and foreign securities
laws. In the event of any proposed transfer of this Note, the Company may require, prior to issuance of a new Note in the name
of such other person, that it receive reasonable transfer documentation including legal opinions that the issuance of the Note
in such other name does not and will not cause a violation of the Act or any applicable state or foreign securities laws. 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 Note Register as the owner hereof for the purpose of receiving payment as herein provided
and for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected
by notice to the contrary.
4. No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct obligation of
the Company.
5. The
Holder of the Note, by acceptance hereof, agrees that this Note is being acquired for investment and that such Holder will not
offer, sell or otherwise dispose of this Note or the shares of Common Stock issuable upon conversion thereof except under circumstances
which will not result in a violation of the Act or any applicable state Blue Sky or foreign laws or similar laws relating to the
sale of securities.
6. This
Note shall be governed by and construed in accordance with the laws of the State of New York. Each of the parties consents to
the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State
of New York sitting in the City of New York in connection with any dispute arising under this Note and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such
proceeding in such jurisdictions. Each of the parties hereby waives the right to a trial by jury in connection with any dispute
arising under this Note.
7. The
following shall constitute an "Event of Default":
|
a. |
The Company shall default in the payment of principal and interest on this Note and same shall continue for a period of five (5) days; or |
| b. | Any of the representations or warranties made by the Company
herein, in any certificate or financial or other written statements heretofore or hereafter furnished by the Company in connection
with the execution and delivery of this Note shall be false or misleading in any material respect at the time made; or |
| | |
| c. | The Company shall fail to perform or observe, in any material
respect, any other covenant, term, provision, condition, agreement or obligation of any Note and such failure shall continue uncured
for a period of thirty (30) days after written notice from the Holder of such failure; or |
| | |
| d. | The Company fails to authorize or to cause its Transfer Agent
to issue shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms
of this Note, fails to transfer or to cause its Transfer Agent to transfer any certificate for shares of Common Stock issued to
the Holder upon conversion of this Note and when required by this Note, and such transfer is otherwise lawful, or fails to remove
any restrictive legend on any certificate or fails to cause its Transfer Agent to remove such restricted legend, in each case where
such removal is lawful, as and when required by this Note, the Agreement, and any such failure shall continue uncured for ten (10)
business days; or |
| | |
| e. | The Company shall (1) admit in writing its inability to pay
its debts generally as they mature; (2) make an assignment for the benefit of creditors or commence proceedings for its dissolution;
or (3) 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; or |
| | |
| f. | 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 within sixty (60)
days after such appointment; or |
| | |
| g. | Any governmental agency or any court of competent jurisdiction
at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties
or assets of the Company and shall not be dismissed within sixty (60) days thereafter; or |
| | |
| h. | Any
money judgment, writ or warrant of attachment, or similar process in excess of Two Hundred
Thousand ($200,000) Dollars 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 sixty
(60) days or in any event later than five (5) days prior to the date of any proposed
sale thereunder; or |
| i. | Bankruptcy, reorganization, insolvency or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against
the Company and, if instituted against the Company, shall not be dismissed within sixty (60) days after such institution or the
Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations
of, or default in answering a petition filed in any such proceeding; or |
| | |
| j. | The Company shall have its Common Stock suspended or delisted
from an exchange or over-the-counter market from trading for in excess of five trading days. |
Then,
or at any time thereafter, and in each and every such case, unless 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 all obligations under this Note immediately due and payable within five (5) days of notice,
without presentment, demand, protest or notice of any kinds, 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 enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies afforded by law.
8. The
Holder may not convert this Note to the extent such conversion would result in the
Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange
Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock held by
such Holder after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares
of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance
of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares
which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine
whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder
determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of
Note are convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice
for a principal amount of Note that would result in the issuance of in excess of the permitted amount hereunder, without regard
to any other shares that the Holder or its affiliates may beneficially own, the Company shall notify the Holder of this fact and
shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date and, at the option
of the Holder, either retain any principal amount tendered for conversion in excess of the permitted amount hereunder for future
conversions or return such excess principal amount to the Holder. The provisions
of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior
notice to the Company. Other Holders shall be unaffected by any such waiver.
9. Nothing contained
in this Note shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or receive
notice as a shareholder in respect of any meeting of shareholders or any rights whatsoever as a shareholder of the Company, unless
and to the extent converted in accordance with the terms hereof.
IN WITNESS
WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized.
Dated:
November 12, 2013
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BIONEUTRAL GROUP, INC. |
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By: |
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MARK LOWENTHAL |
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(Print Name) |
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CEO & PRESIDENT |
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Title: |
7
Exhibit
10.80
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: $25,000
Date:
July 11, 2014
CONVERTIBLE
PROMISSORY NOTE
BioNeutral
Group, Inc., (hereinafter called the “Borrower” or “BONU”), 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
$25,000 together with any interest as set forth herein, on July 11, 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower, 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 Borrower 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 Borrower 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 Borrower’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 Borrower’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 Fifty Percent (50%) discount off the lowest intra-day trading price for the Company’s
common stock during the Ten (10) 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 Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than
a merger in which the Borrower 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 Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’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 Borrower (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 Borrower covenants that during the period the conversion right exists, the Borrower 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 Borrower 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 Borrower’s obligations.
The
Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition,
if the Borrower 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 Borrower 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
Borrower (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 Borrower 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 Borrower 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 Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower 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 Borrower,
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 Borrower 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 Borrower, whereupon the Borrower 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 Borrower 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 Borrower 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 Borrower the amount of any such
tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) 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,
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.
(e) 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 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 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.
(f)
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 (“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 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 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 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. 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 are justified. Any delay or failure of performance by the Borrower 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 Borrower, 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 Borrower 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 Borrower 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 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 Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower 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 Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which
more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination
of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either:
(i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower 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 1.6(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 Borrower shall
be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower
or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than
in connection with a plan of complete liquidation of the Borrower, 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 Borrower shall not affect any transaction described in this
Section 1.6(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 Borrower) 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 Borrower 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 Borrower’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 Borrower 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 Borrower in such Dilutive Issuance.
The
Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower 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 Borrower as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower 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 Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower 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 Borrower 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 Borrower 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 Borrower 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 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 Borrower, 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower or
any of its securities on the Borrower’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 Borrower 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 Borrower) the Holder shall regain the rights of a Holder of this Note with
respect to such unconverted portions of this Note and the Borrower 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 Borrower’s failure to convert this Note.
1.9
Prepayment. Maker may prepay this Note, in whole or in part, at any time and from time to time, with premium, where
both parties have approved said premium and prepayment in writing.
ARTICLE
II. CERTAIN COVENANTS
2.1
Distributions on Capital Stock. So long as the Borrower shall have
any obligation under this Note, the Borrower 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
Borrower’s disinterested directors.
2.2
Restriction on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower
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 Borrower or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower 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 Borrower 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 Borrower shall have any obligation under this Note,
the Borrower 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 Borrower shall have any obligation under this Note, the Borrower 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 Borrower, except loans, credits
or advances (a) in existence or committed on the date hereof and which the Borrower 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. principal hereof or interest thereon when due on this Note, whether at maturity,
upon acceleration or otherwise.
3.2
Conversion and the Shares. The Borrower 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 Borrower 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 Borrower 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 Borrower to its transfer agent.
If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion,
such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.
3.3
Breach of Covenants. The Borrower 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 Borrower from the Holder.
3.4
Breach of Representations and Warranties. Any representation or warranty of
the Borrower 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 Borrower or any subsidiary of the Borrower 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 Borrower or any subsidiary
of the Borrower 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 Borrower or any
subsidiary of the Borrower.
3.8 Delisting of Common Stock. The Borrower 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 Borrower shall fail to comply with the reporting requirements of the
Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10 Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.11 Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to
pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as
a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance of Assets. The failure by Borrower 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 Borrower 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 Borrower 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 Borrower proposes to replace its transfer agent, the Borrower 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 Borrower and the Borrower.
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 Borrower 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 Borrower, 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 Borrower, 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 Borrower 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 Borrower 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 BORROWER 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 Borrower
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
3,1 hereof), the Note shall become immediately due and payable and the Borrower 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 Borrower 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 Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower 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:
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4.3 Amendments.
This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower 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 Borrower 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 Borrower 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 Borrower
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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Securities
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 Borrower shall provide the Holder
with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information
sent to shareholders). In the event of any taking by the Borrower 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 Borrower or
any proposed liquidation, dissolution or winding up of the Borrower, the Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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, Borrower has caused this Note to be signed in its name by its duly authorized officer:
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16
Exhibit
10.81
SECURITIES
TRANSFER AGREEMENT
This
SECURITIES TRANSFER AGREEMENT (the “Agreement”), is entered into this 21st day of June, 2014, by
and among JAMES CASSERLY (hereinafter referred to as "Seller"), Darling Capital, LLC (hereinafter referred to as the
"Buyer") and BioNeutral Group, Inc. a Nevada corporation (“BONU" or the "Company").
RECITALS
WHEREAS,
BONU is a publicly traded corporation trading on the OTCPink:QB under the stock symbol BONU; and
WHEREAS,
Seller is the legal and beneficial holder of a 18% Promissory Note in the principal amount of $25,000 issued by BONU dated July
13, 2013, a true and correct copy of which is attached hereto at Exhibit 1 (hereinafter the "Debt"); and
WHEREAS,
Seller desires to sell and transfer to Buyer and Buyer desires to purchase in a private transaction in accordance with the terms
and conditions provided for herein, a portion of the Debt representing $25,000 of the principal balance plus accrued interest
owed on the Closing Date (the “Purchased Debt”); and
WHEREAS,
the Seller is concurrently entering into a Debt Purchase Agreement dated concurrently with this Agreement transferring the Purchased
Debt to Buyer in exchange for payment to Seller of $25,000; and
WHEREAS,
the parties hereto understand that Buyer is relying on this Agreement as material incentive to Buyer’s decision to enter
into that Debt Purchase Agreement and, but for this Agreement, would not do so
AGREEMENT
NOW,
THEREFORE, in consideration of the mutual promises and covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:
A. |
THE
COMPANY’S COVENANTS. |
1. Conversion
Privilege. The Buyer shall have the right, at its option, to convert the Purchased Debt plus accrued interest or any portion
thereof into shares of Common Stock at any time following the date hereof. The number of shares of Common Stock issuable upon
the conversion of the Purchased Debt is determined pursuant to the provisions below and shall be rounded
to the nearest whole share.
2. Full
or Partial Conversion Rights. Notwithstanding the convertibility of the original Promissory Note, all or any portion of the
principal and interest amount owed by the Company to Buyer reflecting the Purchased Debt may be converted into Common Stock. The
provisions of this Agreement that apply to the conversion of all of the Purchased Debt shall also apply to the conversion of a
portion of it. The Purchased Debt may not be converted, whether in whole or in part, except in accordance with this Agreement
or, at the option of the Buyer, under the terms of the original Promissory Note.
3. Conversion
Procedure. Upon the Company’s receipt of a facsimile or email (or by any other means, including mail, messenger, overnight
courier, etc.) of Buyer’s duly completed and signed Notice of Conversion (a copy of which is attached hereto as Exhibit
2), the Company shall, or shall instruct its transfer agent to, issue one or more Certificates representing that number of shares
of Common Stock into which the Purchased Debt are in accordance with the provisions regarding conversion. The Company’s
transfer agent or attorney shall act as Registrar and shall maintain an appropriate ledger containing the necessary information
with respect to each Agreement. For purposes of such Notice, Buyer’s delivery shall be deemed delivered if sent to: BY MAIL
to: BioNeutral Group, Inc.; Att: Tom Cunningham; 211 Warren Street, Newark NJ, 07103: BY EMAIL: tom.c@bioneutral.com
4. Conversion
Date. Such conversion shall be effectuated by surrendering to the Company, or its attorney, the Purchased Debt to be converted
together with a facsimile or email or original of the signed Notice of Conversion. If only a portion of the Purchased Debt is
to be converted, the Company shall promptly reissue a Promissory Note pursuant to identical terms of the Purchased Debt in the
amount of the unconverted portion of the principal and interest then owing on the Purchased Debt. The date on which the Notice
of Conversion is effective (“Conversion Date”) shall be deemed to be the date on which the Buyer has delivered to
the Company a facsimile or email original of the signed Notice of Conversion. Within 5 business days after the Conversion Date
or within 3 business days after receipt of the Purchased Debt to be converted, whichever is later (the “Delivery Date”),
the Company shall deliver to the Buyer, or per the Buyer’s instructions, to any third party, the shares of Common Stock
to be issued pursuant to such Notice of Conversion.
5. Common
Stock to be Issued. Upon the conversion of Purchased Debt or any part thereof and upon receipt by the Company or its attorney
of a facsimile, email or other copy or original of Buyer’s signed Notice of Conversion, Company shall instruct Company’s
transfer agent to issue common stock shares in the name of Buyer (or its nominee) and in such denominations to be specified at
conversion representing the number of shares of Common Stock issuable upon such conversion, as applicable. Company warrants that
no instructions, other than these instructions, have been given or will be given to the transfer agent and that the Common Stock
shall otherwise be freely transferable on the books and records of Company.
6. Conversion
Rate. Subject to the time limitations set forth above, Buyer is entitled to convert the principal and interest owed on the
Note into Common Stock of the Company at a conversion price that is the lesser of (a) the conversion price designated in the Promissory
Note dated July 13, 2013 or (b) 40% (the multiplier) of the lowest closing bid price as reported by Bloomberg for the Company’s
Common Stock for the thirty (30) trading days immediately preceding the Conversion Date of such shares then quoted on any national
securities exchange or other quotation service (such as OTC, Pink Sheets, etc.) (the “Conversion Price”); provided
that if the Closing Bid Price for the common stock on the Clearing date (defined below) is lower than the Closing Bid Price, then
the purchase price shall be adjusted such that the Discount shall be taken from the closing bid price on the Clearing Date, and
the company shall issue additional shares to Purchaser to reflect such adjusted Purchase Price. For purposes of this Agreement,
the Clearing Date shall be the latest date on which (i) the conversion shares are transferred to and deposited into the Buyer's
brokerage account by the Company’s representatives or transfer agent and (ii) Buyer's broker has confirmed with Buyer that
the Buyer may execute trades of the conversion shares. If such events occur after 5:30 PM Eastern Standard Time, the events shall
be deemed to have occurred on the next trading day. No fractional shares or scrip representing fractions of shares will be issued
on conversion, but the number of shares issuable shall be rounded up or down, as the case may be, to the nearest whole share.
7. Chilled
or Frozen Stock. A “chill” is a limitation of certain services available for a security on deposit at the Deposit
Trust Corporation (DTC). A “freeze,” formally referred to as a “global lock,” is a complete restriction
on all DTC services for a particular security on deposit at DTC. If the Company's common stock becomes chilled or frozen by the
DTC at the time that any portion of the principal and interest of the Note is converted by the Buyer,
then the Discount shall be adjusted to thirty percent (30%) for so long as the common stock is chilled or frozen.
8. Company’s
Responsibility to Issue Stock. It shall be the Company’s responsibility to take all necessary actions and bear any and
all miscellaneous expenses that may arise as a result of conversion and delivery of shares of common stock in respect of the Note,
including but are not limited to the cost of the issuance of a Rule 144 legal opinion, transfer agent fees, equity issuance and
deposit fees, etc. At Purchaser’s option, any accrued costs paid by Purchaser may be subtracted from the dollar amount of
any conversion of the Note. The person in whose name the certificate of Common Stock is to be registered shall be treated as a
shareholder of record on and after the Conversion Date.
In
the event the Common Stock is not delivered (with legends if required by applicable law and without legends if not required by
applicable law) per the written instructions of the Buyer, within eight (8) business days after the Delivery Date, then in such
event the Company shall pay to Buyer one-half percent (0.10%), in cash, of the dollar value of the Purchased Debt being converted
per each business day following the Delivery Date, up to and including the eighteenth (18th) business day following
the Delivery Date. Delays solely caused by the Buyer’s broker shall not be taken into account in this matter. In the event
the Common Stock is not delivered per the written instructions of the Buyer, within eighteen (18) business days after the Delivery
Date, then, except to the extent the delivery is delayed by operation of law, in such event the Company shall pay to Buyer one
percent (1%), in cash, of the dollar value of the Purchased Debt being converted per each business day following such eighteenth
(18th) business day after the Delivery Date. Buyer shall then be entitled to send written notice to the Company of
the default and the Buyer, and at its sole option may demand full repayment of the Purchased Debt not yet converted, including
accrued interest and liquidated damages through the date that written notice is given to the Company (the “Acceleration
Amount”). If the Company does not wire the Acceleration Amount to the Buyer within five (5) business days of the delivery
by Buyer by fax or email of the default notice, the Acceleration Amount shall accrue interest at twenty-four percent (24%) per
annum. To the extent this provision is inconsistent with the original Debt instrument and any Notes referenced therein, this provision
governs. Such notice shall not affect the Buyer’s rights to the Common Stock due under the Notice of Conversion and all
rights and remedies related to such conversion set forth herein, and shall be in addition to such rights and remedies. The Company
acknowledges that the failure to honor a Notice of Conversion shall cause definable financial hardship to the Buyer as well as
substantial monetary damages, which cannot be determined at this time, and that this damages provision represents the parties’
reasonable estimate of liquidated damages.
If,
by the eighth (8th) business day after the Delivery Date, due to the Company’s direct or indirect actions or
its failure to act, the transfer agent fails for any reason to deliver the Common Stock (with legends if required by applicable
law and without legends if not required by applicable law) upon conversion by the Buyer and after such Delivery Date, the Buyer
purchases, in an open market transaction or otherwise, shares of Common Stock (the "Covering Shares") solely in order
to make delivery in satisfaction of a sale of Common Stock by the Buyer (the "Sold Shares"), which delivery such Buyer
anticipated to make using the Common Stock issuable upon conversion (a "Buy-In"), the Company shall pay to the Buyer,
in addition to any other amounts due to Buyer pursuant to the Purchased Debt, and not in lieu thereof, the Buy-In Adjustment Amount
(as defined below). The "Buy In Adjustment Amount" is the amount equal to the excess, if any, of (x) the Buyer's total
purchase price (including brokerage commissions, if any) for the Covering Shares over (y) the net proceeds (after brokerage commissions,
if any) received by the Buyer from the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount to the Buyer
in immediately available funds within eight (8) business days of written demand by the Buyer.
9. Buyer’s
Right To Liquidated Damages. The Company acknowledges that its failure to deliver the Common Stock within eight (8) business
days after the Delivery Date will cause the Buyer to suffer damages in an amount that will be difficult to ascertain. Accordingly,
the parties agree that it is appropriate to include in this Agreement a provision for liquidated damages. The parties acknowledge
and agree that the liquidated damages provision set forth in this section represents the parties’ good faith effort to quantify
such damages and, as such, agree that the form and amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant
to the terms of this Agreement or to repay, with interest, including default interest, as applicable, the unconverted portion
of the Purchased Debt.
10. Liquidated
Damages When There Are Not Sufficient Available Shares. To the extent that the failure of the Company to issue the Common
Stock due upon conversion is due to the unavailability of authorized but unissued shares of Common Stock, the provisions of this
Section shall apply.
a. The
Company shall at all times reserve and have available all Common Stock necessary to meet conversion of the Purchased Debt by Buyer
of the entire amount of Purchased Debt then outstanding. If, at any time Buyer submits a Notice of Conversion and the Company
does not have sufficient authorized but unissued shares of Common Stock available to effect, in full, a conversion of the Purchased
Debt (a “Conversion Default”, the date of such default being referred to herein as
the “Conversion Default Date”), the Company shall issue to the Buyer all of the shares of Common Stock which are available,
and the Notice of Conversion as to any Purchased Debt requested to be converted but not converted (the “Unconverted Purchased
Debt”), upon Buyer’s sole option, may be deemed null and void. The Company shall provide notice of such Conversion
Default (“Notice of Conversion Default”) to Buyer of outstanding Purchased Debt, by facsimile, within five (5) business
days of such default (with the original delivered by overnight or two day courier), and the Buyer shall give notice to the Company
by facsimile within five business days of receipt of the original Notice of Conversion Default (with the original delivered by
overnight or two day courier) of its election to either nullify or confirm the Notice of Conversion.
b. The
Company agrees to pay to Buyer of outstanding Purchased Debt for a Conversion Default (“Conversion Default Payments”)
in the amount of (N/365) x (.24) x the balance of the outstanding and/or tendered but not converted Purchased Debt held by each
Buyer where N = the number of days from the Conversion Default Date to the date (the “Authorization Date”) that the
Company authorizes a sufficient number of shares of Common Stock to effect conversion of all remaining Purchased Debt. The Company
shall send notice (“Authorization Notice”) to Buyer of outstanding Purchased Debt that additional shares of Common
Stock have been authorized, the Authorization Date and the amount of Buyer’s accrued Conversion Default Payments. The accrued
Conversion Default Payments shall be paid in cash or shall be into Common Stock at the Conversion Rate, at the Buyer’s option,
payable as follows: (i) in the event Buyer elects within ten (10) days of the Authorization Notice in writing to take such payment
in cash, cash payments shall be made to such Buyer by the fifth day of the following calendar month, or (ii) if the Buyer does
not so elect to receive such Conversion Default Payment in cash, such payment shall be made in Common Stock at the then current
Conversion Price within 30 days following the date of the Authorization Notice. The Company acknowledges that its failure to maintain
a sufficient number of authorized but unissued shares of Common Stock to effect in full a conversion of the Purchased Debt will
cause the Buyer to suffer damages in an amount that will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Agreement a provision for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties’ good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and will not constitute a
penalty. The payment of liquidated damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant
to the terms of this Agreement.
c. Maximum
Interest Rate. Nothing contained in this Agreement shall be deemed to establish or require the payment of interest to the
Buyer at a rate in excess of the maximum rate permitted by governing law. In the event that the rate of interest required to be
paid exceeds the maximum rate permitted by governing law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess shall be returned with reasonable promptness by
the Buyer to the Company.
11. Payment
of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of the Common Stock;
provided, however, that the Company shall not be required to pay any tax or taxes which may be payable, (1) with respect to any
secondary transfer of the Purchased Debt or the Common Stock issuable upon exercise hereof or (2) as a result of the issuance
of the Common Stock to any person other than the Buyer, and the Company shall not be required to issue or deliver any certificate
for any Common Stock unless and until the person requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have produced evidence that such tax has been paid to the appropriate taxing authority.
12. Restrictions
on Transfers. The Purchased Debt has not been registered under the Securities Act of 1933, as amended, (the “Act”)
and is being issued under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the Act. The Purchased Debt and
the Common Stock issuable upon the conversion thereof may only be offered or sold pursuant to registration under or an exemption
from the Act.
13. Mergers,
Etc. If the Company merges or consolidates with another corporation or sells or transfers all or substantially all of its
assets to another person and the Buyer is entitled to receive stock, securities or property in respect of or in exchange for Common
Stock, then as a condition of such merger, consolidation, sale or transfer, the Company and any such successor, purchaser or transferee
shall amend the Purchased Debt to provide that it may thereafter be converted on the terms and subject to the conditions set forth
above into the kind and amount of stock, securities or property receivable upon such merger, consolidation,
sale or transfer by Buyer of the number of shares of Common Stock into which the Purchased Debt might have been converted immediately
before such merger, consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may be practicable
to adjustments provided for in this Agreement.
The
Company shall not consolidate or merge into, or transfer all or substantially all of its assets to, any person, unless such person
assumes in writing the obligations of the Company under the Purchased Debt and immediately after such transaction no Event of
Default exists. Any reference herein to the Company shall refer to such surviving or transferee corporation and the obligations
of the Company shall terminate upon such written assumption.
B. |
BUYER’S
REPRESENTATIONS AND WARRANTIES. Buyer represents and warrants to Seller and to the Company that: |
1. Reliance
on Exemptions. Buyer understands that the Transferred Rights are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities laws and that Seller and the Company are relying
upon the truth and accuracy of, and Buyer’s compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the relevant Transferred Rights.
2. Non-affiliate
Status. Buyer is not, and has not for in excess of ninety (90) days been, and subsequent to the Transfer Closing Date will
not be, an “Affiliate” of the Company, as that term is defined by Rule 144 under the 1933 Act. Buyer is not acting
in concert with any other person in a manner that would require their sales of securities to be aggregated for purposes of Rule
144 or would cause Buyer to be considered an “Underwriter” as that term is defined by Section 2 of the 1933 Act.
3. Company
Information. Buyer and its advisors, if any, have had access to all financial statements and disclosures made public through
the SEC’s EDGAR system. Buyer and its advisors have been afforded the opportunity to ask questions of Seller. Neither such
inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify,
amend or affect Buyer’s right to rely on Seller’s representations and warranties contained in Section 3 below. Buyer
understands that its investment in Transferred Rights, including but not limited to the relevant Transferred Note (and/or in the
Common Stock issuable thereunder), involves a significant degree of risk.
4. Governmental
Review. Buyer understands that no United States federal or state agency or any other government or governmental agency has
passed upon or made any recommendation or endorsement of the Transferred Rights or of the Common Stock
issuable thereunder.
5. Transfer
or Resale. Buyer understands that (i) the sale or resale of the Note and the Common Stock issuable thereunder has not been
registered under the 1933 Act or any applicable state securities laws, and the Note and the Common Stock issuable thereunder may
not be transferred unless (a) such security is sold pursuant to an effective registration statement under the 1933 Act, (b) the
security is sold or transferred pursuant to an exemption from such registration, (c) the security is sold or transferred to an
“affiliate” (as defined in Rule 144 promulgated under the 1933 Act or a successor rule; “Rule 144”) of
Buyer who agrees to sell or otherwise transfer the security only in accordance with this Section and who is an Accredited Investor,
or (d) (i) the Common Stock is sold pursuant to Rule 144, if such Rule is available; (ii) any sale of such Common Stock made in
reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any
resale of such Common Stock under circumstances in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 1933 Act) and may require compliance with some other exemption under the
1933 Act or the rules and regulations of the SEC thereunder.
6. Authorization;
Enforcement. This Agreement has been duly and validly authorized by Buyer. This Agreement has been duly executed and delivered
on behalf of Buyer, and this Agreement constitutes a valid and binding agreement of Buyer enforceable in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies or by other equitable
principles of general application.
7. No
Brokers. Buyer has taken no action which would give rise to any claim by any person for brokerage commissions, finder’s
fees or similar payments relating to this Agreement or the transactions contemplated hereby.
C. |
SELLER’S
REPRESENTATIONS AND WARRANTIES. Seller represents and warrants to Buyer that: |
1. Authorization;
Enforcement. (i) Seller has all requisite power and authority to enter into and perform this Agreement and to consummate the
transactions contemplated hereby and to sell the relevant Purchased Note in accordance with the terms hereof, (ii) the execution
and delivery of this Agreement by Seller and the consummation by it of the transactions contemplated hereby (including without
limitation, the sale of the relevant Transferred Rights to Buyer) have been duly authorized by Seller and no further consent or
authorization of Seller or its members is required, (iii) this Agreement has been duly executed and delivered by Seller, and (iv)
this Agreement constitutes a legal, valid and binding obligation of Seller enforceable against Seller in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies
or by other equitable principles of general application.
2. Title.
Seller has good and marketable title to the relevant Purchased Note and Transferred Rights, free and clear of all liens, pledges
and encumbrances of any kind.
3. No
Conflicts. The execution, delivery and performance of this Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby (including, without limitation, the sale of the relevant Transferred Rights to Buyer) will not (i) violate
or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation
of, any agreement, note, bond, indenture or other instrument to which Seller is a party, or (ii) result in a violation of any
law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations
of any self-regulatory organizations to which Seller is subject) applicable to Seller or by which any property of the Seller are
bound or affected. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable
federal and state securities laws, neither Seller nor the Company is required to obtain any consent, authorization or order of,
or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock
market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance
with the terms hereof. Except for filings that may be required under applicable federal and state securities laws in connection
with the issuance and sale of the Seller’s Note, all consents, authorizations, orders, filings and registrations which Seller
is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.
4. No
Brokers. Seller has taken no action which would give rise to any claim by any person for brokerage commissions, finder’s
fees or similar payments relating to this Agreement or the transactions contemplated hereby.
5. Title;
Rule 144 Matters. Seller has owned the Original Note since the Issue Date. Seller is not, and for a period of at least ninety
(90) days prior to the date hereof has not been, an “Affiliate” of the Company, as that term is defined in Rule 144
of the 1933 Act listed immediately below. Subsequent to the Transfer Closing Date, Seller will take no action which would adversely
affect the tacking for the benefit of the Buyer of Seller’s holding period under Rule 144.
An
Affiliate of an issuer is a person that directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, such issuer.
The
term person when used with reference to a person for whose account securities are to be sold in reliance upon this section
includes, in addition to such person, all of the following persons:
(i) Any
relative or spouse of such person, or any relative of such spouse, any one of whom has the same home as such person;
(ii) Any
trust or estate in which such person or any of the persons specified in paragraph (i) of this section collectively own 10 percent
or more of the total beneficial interest or of which any of such persons serve as trustee, executor or in any similar capacity;
and
(iii) Any
corporation or other organization (other than the issuer) in which such person or any of the persons specified in paragraph C.5.(i)
of this section are the beneficial owners collectively of 10 percent or more of any class of equity securities or 10 percent or
more of the equity interest.
6. No
Other Representations. Seller makes no representations or warranties with respect to the Company, its financial status, earnings,
assets, liabilities, corporate status or any other matter. The Seller acknowledges that Buyer is relying on Seller’s representations
as a material condition to entering into this Agreement.
D. |
REPRESENTATIONS
AND WARRANTIES OF COMPANY |
Company
represents and warrants that at the time of the execution of this Agreement and at the Closing thereof:
1. MARKETABLE
TITLE: To the best knowledge and information of the Company, the Seller is conveying to Buyer good and marketable title in
and to the Purchased Debt, free and clear of any and all liens, claims, encumbrances.
2. Rule
144. The Company covenants and agrees to take all reasonable steps necessary or appropriate, including providing an opinion
of counsel confirming the rights of Buyer to sell shares of Common Stock issued to Buyer on conversion of the Note pursuant to
Rule 144 as promulgated by the SEC ("Rule 144"), as such Rule may be in effect from time to time. If the Company does
not promptly provide an opinion from Company counsel, and so long as the requested sale may be made pursuant to Rule 144, the
Company agrees to accept an opinion of counsel to the Buyer which opinion will be issued at the Company's expense.
3. VALIDITY
OF THE PURCHASED DEBT: All of the Purchased Debt being sold by Seller to Buyer under the concurrently executed Debt Purchase
Agreement is validly issued, outstanding, unpaid and assignable. The date for purposes of Rule 144 tacks back to the original
date of the Debt, July 13, 2013 or such earlier date as the law prescribes. The Purchased Debt is convertible at the rate and
in the manner of conversion prescribed by the Promissory Note dated July 13, 2013, except as prescribed by this Agreement. After
the Closing Date, all interest accruing and to be paid on account of the $50,000 principal balance of the Purchased Debt and all
other rights with respect to the Purchased Debt under the original Promissory Note inure to the benefit of Buyer, rather than
Seller. In the event of a conflict, the terms of this Agreement shall govern the terms of conversion by the Seller of the Purchased
Debt or any part of such Purchased Debt. If there is no conflict, then the terms of both agreements govern the conversion of the
Purchased Debt by Buyer. The Company has obtained an opinion of counsel that the Purchased Debt is convertible into free trading
common stock of the Company. The opinion is attached to the Debt Purchase Agreement as Exhibit 4. In order to obtain such opinion,
certain representations were made by the Company and the Seller. The Company represents that the Company is in agreement with
such representations and has no information contrary to such representations.
4. TRANSFERRABILLITY
OF THE DEBT: The Company acknowledges that the Buyer intends to transfer a portion of the Purchased Debt to certain other
individuals and the Company represents that such transferees shall have the right to convert any of the Purchased Debt being transferred
to them into free trading shares pursuant to the opinion discussed immediately above. The transferees shall have the right to
rely on the Seller's representations herein.
5. AUTHORITY.
(i) The Company, and the person signing on its behalf below, has all requisite power and authority to enter into and perform this
Agreement and to consummate the transactions contemplated hereby in accordance with the terms hereof, (ii) the execution and delivery
of this Agreement by the Company and the consummation by it of the transactions contemplated hereby (including without limitation,
the sale of the relevant Purchased Debt to Buyer) have been duly authorized by the Company and no further consent or authorization
of the Company or its members is required, (iii) this Agreement has been duly executed and delivered by the Company, and (iv)
this Agreement constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies or by other
equitable principles of general application.
6. Capitalization.
All of the outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and
non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the
shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. As of the
effective date of this Agreement, and except as disclosed in the SEC Documents, (i) there are no outstanding options, warrants,
scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or
may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements
or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities
under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the
Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion
Shares. At its option, Buyer has had the opportunity to review true and correct copies of the Company’s Certificate of Incorporation
as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the
date hereof (the “Bylaws”), and the terms of all securities convertible into or exercisable for Common Stock of the
Company and the material rights of the holders thereof in respect thereto.
7. NO
CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company and
the Seller of the transactions contemplated hereby (including, without limitation, the sale of the relevant Purchased Debt to
Buyer) will not (i) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which Company is a party, or (ii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which the Company is subject) applicable to the Company or
by which any property of the Company are bound or affected. Except as specifically contemplated by this Agreement and as required
under the 1933 Act and any applicable federal and state securities laws, neither Seller nor the Company is required to obtain
any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency,
self regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations
under this Agreement in accordance with the terms hereof. Except for filings that may be required under applicable federal and
state securities laws in connection with the issuance and sale of the Purchased Debt, all consents, authorizations, orders, filings
and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on
or prior to the date hereof.
8. NO
MATERIAL ADVERSE CHANGE: Since the date of the initiation of negotiations regarding this Transaction, there has not been any
material adverse change in the business, operations, properties, prospects, assets, or condition of the Company (financial or
otherwise), and no event has occurred or circumstance exists that may result in such a material adverse change.
9. DISCLOSURE:
No representation or warranty of the Company in this Agreement omits to state a known material fact necessary to make the
statements herein or therein, in light of the circumstances in which they were made, not misleading. There is no fact known to
Seller that has specific application to either Seller or the Company (other than general economic or industry conditions) and
that materially adversely affects the assets, business, prospects, financial condition, or results of operations of the Company
that has not been set forth in this Agreement.
10. DEBTS:
The Company has no outstanding debts (other than the Debt), judgments, liens, encumbrances, UCC filings, notes, loans, convertible
debt instruments, or other financial obligations whatsoever, other than as disclosed in its public filings with the Securities
and Exchange Commission and in this Agreement.
11. COMPANY’S
REPORTING OBLIGATIONS. The Company will mail to the Buyer hereof at its address as shown on the Register a copy of any annual,
quarterly or other report or proxy statement that it gives to its shareholders generally at the time such report or statement
is sent to shareholders, unless such report is timely filed with the United States Securities and Exchange Commission.
12. CONDUCT
OF BUSINESS: The Company has and shall continue to conduct its business in the normal and ordinary course, consistent with
the present conduct of its business and previous practices, shall not make and/or declare any dividend (cash and/or stock), redemption,
stock split (reverse or forward), and/or stock and/or cash distributions.
13. NO
AMENDMENT OF DEBT OR NOTES WITHOUT CONSENT OF BUYER. Company, hereafter, shall not take any action to amend the Debt instrument
or cooperate in the amendment of any of the Notes referenced in the Promissory Note dated July 13, 2013, absent express written
consent of Buyer.
14. BUYBACK
GUARANTY IN EVENT OF DTC CHILL OR FREEZE. In the event that the DTC issues a chill or freeze of the Company’s common
stock after Buyer has converted some or all of its Purchased Debt, and Buyer holds such shares at that time, then Buyer shall
have the option to sell, and the Company shall have be required to purchase, for a period of six months, such shares of Common
Stock at the Conversion Price at which the stock was issued to Buyer. The purchase price shall be paid in cash concurrently upon
Buyer surrendering such shares of Common Stock to the Company.
E. |
DEFAULTS
AND REMEDIES. |
1. EVENTS
OF DEFAULT. An “Event of Default” occurs if (i) the Company does not make the payment of the principal
or interest due under the Purchased Debt when the same becomes due and payable at maturity, upon demand or otherwise, (ii) the
Company does not make a payment, other than a payment of principal or interest, for a period of five (5) business days after its
due date, (iii) any of the Company’s representations or warranties contained in the Promissory Note dated July 13, 2013
were false when made or the Company fails to comply with any of its other obligations in that agreement, including the delivery
of Common Stock upon conversion before the Delivery Date; (iv) a DTC “chill” or “freeze” is placed on
the stock of the Company; (v) the Common Stock becomes ineligible for listing or quotation for trading on its current trading
market and shall not be eligible to resume listing or quotation on its current trading market within ten trading days; (vi) the
Company pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined): (1) commences a voluntary petition under
Bankruptcy Law; (2) consents to the entry of an order for relief against it in an involuntary bankruptcy petition; (3) consents
to the appointment of a Custodian (as hereinafter defined) of it or for all or substantially all of its property or (4) makes
a general assignment for the benefit of its creditors or (5) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (A) is for relief against the Company in an involuntary bankruptcy petition; (B) appoints a Custodian
of the Company or for all or substantially all of its property or (C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 60 days, or (vi) the Company is in default of any debt, note or Agreement with an outstanding
balance equal to or exceeding $25,000 individually or $50,000 in the aggregate, or (vii) the Company is in default of any provisions
of this Agreement; or (viii) the Company’s representations and warranties contained in this Agreement were not true on the
date that this Agreement is signed. As used in this Section 1, the term “Bankruptcy Law” means Title 11 of the United
States Code or any similar federal or state law for the relief of debtors. The term “Custodian” means any receiver,
trustee, assignee, liquidator or similar official under any Bankruptcy Law.
2. REMEDIES
UPON DEFAULT. If any Event of Default occurs, the outstanding principal amount of the Purchased Debt, plus liquidated damages
and other amounts owing in respect thereof through the date of acceleration, shall become, at the Buyer’s election, immediately
due and payable in cash. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration
of the Purchased Debt, the interest rate on the Purchased Debt shall accrue at an interest rate equal
to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full, the Buyer shall promptly
surrender the Note to or as directed by the Company. In connection with such acceleration described herein, the Buyer need not
provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Buyer may immediately
and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available
to it under applicable law. Such acceleration may be rescinded and annulled by Buyer at any time prior to payment hereunder and
the Buyer shall have all rights as a Buyer of the Agreement until such time, if any, as the Buyer receives full payment pursuant
to this Section 2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent
thereon.
| F. | DILUTION.
The
number
of
shares
of
Common
Stock
issuable
upon
conversion
of
the
Purchased
Debt
may
increase
substantially
in
certain
circumstances.
The
Company’s
executive
officers
and
directors
have
studied
and
fully
understand
the
nature
of
the
transactions
contemplated
by
this
Agreement
and
recognize
that
they
have
a
potential
dilutive
effect.
The
board
of
directors
of
the
Company
has
concluded,
in
its
good
faith
business
judgment,
that
such
issuance
is
in
the
best
interests
of
the
Company.
The
Company
specifically
acknowledges
that
its
obligation
to
issue
additional
shares
of
Common
Stock
is
binding
upon
the
Company
and
enforceable
regardless
of
the
dilution
such
issuance
may
have
on
the
ownership
interests
of
other
shareholders
of
the
Company. |
| G. | TIME
IS
OF
THE
ESSENCE.
Where
this
Agreement
or
the
Promissory
Note
dated
July
13,
2013
authorizes
or
requires
the
payment
of
money
or
the
performance
of
a
condition
or
obligation
on
a
Saturday
or
Sunday
or
a
public
holiday,
or
authorizes
or
requires
the
payment
of
money
or
the
performance
of
a
condition
or
obligation
within,
before
or
after
a
period
of
time
computed
from
a
certain
date,
and
such
period
of
time
ends
on
a
Saturday
or
a
Sunday
or
a
public
holiday,
such
payment
may
be
made
or
condition
or
obligation
performed
on
the
next
succeeding
business
day,
and
if
the
period
ends
at
a
specified
hour,
such
payment
may
be
made
or
condition
performed,
at
or
before
the
same
hour
of
such
next
succeeding
business
day,
with
the
same
force
and
effect
as
if
made
or
performed
in
accordance
with
the
terms
of
this
Agreement.
A
“business
day”
shall
mean
a
day
on
which
the
banks
in
New
York
are
not
required
or
allowed
to
be
closed.
Time
is
of
the
essence
in
the
performance
of
all
obligations
under
this
Agreement
and
under
the
Promissory
Note
dated
July
13,
2013. |
| H. | WAIVERS.
Any
waiver
by
the
Company
or
the
Buyer
of
a
breach
of
any
provision
of
this
Agreement
shall
not
operate
as
or
be
construed
to
be
a
waiver
of
any
other
breach
of
such
provision
or
of
any
breach
of
any
other
provision
of
this
Agreement.
The
failure
of
the
Company
or
the
Buyer
to
insist
upon
strict
adherence
to
any
term
of
this
Agreement
on
one
or
more
occasions
shall
not
be
considered
a
waiver
or
deprive
that
party
of
the
right
thereafter
to
insist
upon
strict
adherence
to
that
term
or
any
other
term
of
this
Agreement
on
any
other
occasion.
Any
waiver
by
the
Company
or
the
Buyer
must
be
in
writing. |
| I. | RULES
OF
CONSTRUCTION.
In
this
Agreement,
unless
the
context
otherwise
requires,
words
in
the
singular
number
include
the
plural,
and
in
the
plural
include
the
singular,
and
words
of
the
masculine
gender
include
the
feminine
and
the
neuter,
and
when
the
sense
so
indicates,
words
of
the
neuter
gender
may
refer
to
any
gender.
The
numbers
and
titles
of
sections
contained
in
the
Agreement
are
inserted
for
convenience
of
reference
only,
and
they
neither
form
a
part
of
the
Agreement
nor
are
they
to
be
used
in
the
construction
or
interpretation
hereof.
Wherever,
in
this
Agreement,
a
determination
of
the
Company
is
required
or
allowed,
such
determination
shall
be
made
by
a
majority
of
the
Board
of
Directors
of
the
Company
and
if
it
is
made
in
good
faith,
it
shall
be
conclusive
and
binding
upon
the
Company
and
the
Buyer
of
this
Agreement. |
| J. | ABSOLUTE
OBLIGATION.
Except
as
expressly
provided
herein,
no
provision
of
this
Agreement
shall
alter
or
impair
the
obligation
of
the
Company,
which
is
absolute
and
unconditional,
to
pay
the
principal
of
and
liquidated
damages,
as
applicable
on
this
Agreement
at
the
time,
place,
and
rate,
and
in
the
coin
or
currency,
herein
prescribed.
This
Agreement
is
a
direct
debt
obligation
of
the
Company.
This
Agreement
ranks
pari
passu
with
all
other
Debt
holders
now
or
hereafter
issued
under
the
terms
set
forth
herein. |
| K. | GOVERNING
LAW
AND
VENUE:
This
Agreement
shall
be
governed
and
interpreted
solely
in
accordance
with
the
laws
of
the
State
of
New
York,
and
applicable
U.S.
federal
law,
if
any,
and
in
each
case
without
regard
to
their
choice
of
laws
principles.
In
the
event
of
a
dispute
between
the
parties,
the
parties
agree
to
the
exclusive
jurisdiction
of
the
federal
and
state
courts
of
New
York
located
in
the
City
of
New
York
and
agree
not
to
challenge
the
venue
of
such
action
based
on
forum
non
conveniens
or
on
any
similar
theory. |
| L. | LEGAL
FORM:
The
parties
hereto
agree
that
they
have
been
represented
by
counsel
during
the
negotiation
and
execution
of
this
Agreement;
that
this
Agreement
and
all
exhibits
hereto
have
been
jointly
drafted
and
that
any
ambiguity
in
the
terms
of
such
agreements
shall
not
be
construed
against
either
party
based
on
the
author
of
the
language
that
is
deemed
to
be
ambiguous. |
| M. | SEVERABLE.
In
the
event
that
any
provision
of
this
Agreement
is
invalid
or
enforceable
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
provision
hereof
which
may
prove
invalid
or
unenforceable
under
any
law
shall
not
affect
the
validity
or
enforceability
of
any
other
provision
hereof. |
| N. | ATTORNEYS’
FEES
AND
COSTS
TO
PREVAILING
PARTY.
In
the
event
that
litigation
or
arbitration
arises
between
the
parties
to
this
Agreement
pertaining
to
this
Agreement,
including,
but
not
limited
to,
the
interpretation
or
enforcement
of
its
terms,
the
prevailing
party
in
such
litigation
shall
be
entitled
to
an
award
of
its
reasonable
attorneys’
fees
and
costs
incurred
in
connection
with
such
action
or
proceeding. |
| O. | ENTIRE
AGREEMENT:
This
Agreement,
the
Debt
Purchase
Agreement,
the
Exhibits
to
such
documents,
and
the
public
filings
referenced
herein
embody
the
entire
agreement
between
the
parties
hereto
with
respect
to
the
subject
matter
hereof,
and
supersedes
all
prior,
and
contemporaneous,
negotiations,
agreements,
and
understandings,
whether
written
or
oral.
This
Agreement,
or
any
provision
herein,
may
not
be
changed,
waived,
discharged,
or
terminated,
except
by
an
express
written
instrument
signed
by
the
party
against
whom
enforcement
of
the
change,
waiver,
discharge
or
termination
is
sought. |
| P. | COUNTERPARTS;
FACSIMILE
SIGNATURES.
This
Agreement
may
be
executed
in
one
or
more
counterparts,
each
of
which
shall
be
deemed
an
original
but
all
of
which
shall
constitute
one
and
the
same
agreement
and
shall
become
effective
when
counterparts
have
been
signed
by
each
party
and
delivered
to
the
other
party.
This
Agreement,
once
executed
by
a
party,
may
be
delivered
to
the
other
party
hereto
by
facsimile
transmission
of
a
copy
of
this
Agreement
bearing
the
signature
of
the
party
so
delivering
this
Agreement. |
Rest
of page intentionally left Blank
IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.
|
BIONEUTRAL
GROUP, INC. |
|
|
|
|
By: |
|
|
|
Name: |
|
|
Title: |
|
|
|
|
Facsimile
No. for delivery of Notices: |
|
|
|
|
|
BUYER: |
|
|
|
By: |
/s/
Yehuda Marrus |
|
|
Yehuda Marrus,
Managing Member Darling Capital, |
|
|
|
|
SELLER: |
|
|
|
|
By: |
/s/
JAMES CASSERLY |
|
|
JAMES
CASSERLY |
19
Exhibit
10.82
15%
CONVERTIBLE PROMISSORY NOTE
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS
AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS. THE SECURITIES ARE SUBJECT
TO RESTRICTIONS OF TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SUCH LAWS PURSUANT
TO REGISTRATION OR AN EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF
THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
ISSUANCE
DATE
|
As
of: July 21st, 2014 |
|
|
CONVERTIBLE
NOTE DUE |
February 21,
2015 |
AMOUNT: |
$12,500.00 |
FOR
VALUE RECEIVED, BioNeutral Group, Inc., a Nevada corporation (“the Company”), hereby promises to pay to Darling Capital,
LLC or registered assigns (the “Holder”) on February 21, 2015 (the “Maturity Date”), a principal amount
of Twelve Thousand Dollars ($12,500) (the “Principal Amount”), and to pay interest on the principal amount
hereof, in such amounts, at such times and on such terms and conditions as are specified herein.
The
principal of this Note is payable in United States dollars, at the address as designated in writing by the Holder. The Company
will pay the outstanding principal amount of this Note in cash on the Maturity Date to the registered holder of this Note.
This
Note is subject to the following additional provisions:
1. Interest.
until the outstanding principal and interest amount hereof is paid in full or has been converted, interest on the unpaid principal
amount of this Note (the “Note”), shall accrue at the rate of fifteen Percent (15%) per annum, payable in arrears,
in cash, All past due principal and interest shall accrue at the rate of 22% (default interest rate).
2. Method
of Payment. The Company may draw a check for the payment of interest to the order of the Holder of this Note and mail it to
the Holder’s address as designated in writing by the Holder.
3. Conversion
3.1 Conversion
Privilege. The Holder shall have the right, at its option, to convert the unpaid principal and interest due on this Note (the
“Debt”) or any portion thereof into shares of Common Stock at any time following the date hereof. The number of shares
of Common Stock issuable upon the conversion of the Debt is determined pursuant to the provisions below and shall be rounded to
the nearest whole share.
3.1.1.
Full or Partial Conversion Rights. All or any portion of the principal and interest amount owed by the Company to Holder
under this Note reflecting the Debt may be converted into Common Stock. The provisions of this Note that apply to the conversion
of all of the Debt shall also apply to the conversion of a portion of it. The Debt may not be converted, whether in whole or in
part, except in accordance with this Note.
3.1.2.
Conversion Procedure. Upon the Company’s receipt of a facsimile or email (or by any other means, including mail,
messenger, overnight courier, etc.) of Holder’s duly completed and signed Notice of Conversion (in the form attached hereto
at Exhibit 1), the Company shall, or shall instruct its transfer agent to, issue one or more Certificates representing that number
of shares of Common Stock into which the Debt is convertible in accordance with the provisions regarding conversion. The Company’s
transfer agent or attorney shall act as Registrar and shall maintain an appropriate ledger containing the necessary information
with respect to each conversion. For purposes of such Notice, Holder’s delivery shall be deemed delivered if sent to:
BY
MAIL to: BioNeutral Group, Inc.; Att: Tom Cunningham; 211 Warren Street, Newark NJ, 07103: BY EMAIL: tom.c@bioneutral.com
3.2. Conversion
Date. Such conversion shall be effectuated by surrendering to the Company, or its attorney, the Debt to be converted together
with a facsimile or email or original of the signed Notice of Conversion. If only a portion of the Debt is to be converted, the
Company shall promptly reissue a Promissory Note pursuant to identical terms of the Debt in the amount of the unconverted portion
of the principal and interest then owing on the Debt. The date on which the Notice of Conversion is effective (“Conversion
Date”) shall be deemed to be the date on which the Holder has delivered to the Company a facsimile or email original of
the signed Notice of Conversion. Within eight (8) business days after the Conversion Date or within eight (8) business days after
receipt of the Debt to be converted, whichever is later (the “Delivery Date”), the Company shall deliver to the Holder,
or per the Holder’s instructions, to any third party, the shares of Common Stock to be issued pursuant to such Notice of
Conversion.
3.3. Common
Stock to be Issued. Upon the conversion of Debt or any part thereof and upon receipt by the Company or its attorney of a facsimile,
email or other copy or original of Holder’s signed Notice of Conversion, Company shall instruct Company’s transfer
agent to issue Stock Certificates in the name of Holder (or its nominee) and in such denominations to be specified at conversion
representing the number of shares of Common Stock issuable upon such conversion, as applicable. Company warrants that no instructions,
other than these instructions, have been given or will be given to the transfer agent and that the Common Stock shall otherwise
be freely transferable on the books and records of Company.
3.4. Conversion
Rate. Subject to the time limitations set forth above, Holder is entitled to convert the principal and interest owed on this
Note into Common Stock of the Company at a conversion price that is 40% (the multiplier) of the lowest closing bid price as reported
by Bloomberg for the Company’s Common Stock for the thirty (30) trading days immediately preceding the Conversion Date of
such shares then quoted on any national securities exchange or other quotation service (such as OTC, Pink Sheets, etc.) (the “Conversion
Price”); provided that if the Closing Bid Price for the common stock on the Clearing date (defined below) is lower than
the Closing Bid Price, then the purchase price shall be adjusted such that the Discount shall be taken from the closing bid price
on the Clearing Date, and the company shall issue additional shares to Purchaser to reflect such adjusted Purchase Price. For
purposes of this Agreement, the Clearing Date shall be the latest date on which (i) the conversion shares are transferred to and
deposited into the Buyer's brokerage account by the Company’s representatives or transfer agent and (ii) Buyer's broker
has confirmed with Buyer that the Buyer may execute trades of the conversion shares. If such events occur after 5:30 PM Eastern
Standard Time, the events shall be deemed to have occurred on the next trading day. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded up or down, as the case may
be, to the nearest whole share. No fractional shares or scrip representing fractions of shares will be issued on conversion, but
the number of shares issuable shall be rounded up or down, as the case may be, to the nearest whole share. The Company shall bear
any and all miscellaneous expenses that may arise as a result of conversion and delivery of shares of common stock, including
but are not limited to the cost of the issuance of a Rule 144 legal opinion, transfer agent fees, equity issuance and deposit
fees, etc. At Purchaser’s option, any accrued costs paid by Purchaser may be subtracted from the dollar amount of any conversion
of the Note.
3.5. Chilled
or Frozen Stock. If the Company's common stock becomes chilled or frozen by the Deposit Trust Corporation (DTC) at the time that
any portion of the principal and interest of the Note is converted by the Holder, then the Discount shall be adjusted to thirty
percent (30%) (the multiplier) for so long as the common stock is chilled or frozen.
3.6. Company’s
Responsibility To Issue Stock. It shall be the Company’s responsibility to take all necessary actions and to bear all
such costs to issue certificates for the Common Stock as provided herein, including the responsibility and cost for delivery of
an opinion letter to the transfer agent, if so required. The person in whose name the
certificate of Common Stock is to be registered shall be treated as a shareholder of record on and after the Conversion Date.
In
the event the Common Stock is not delivered (with legends if required by applicable law and without legends if not required by
applicable law) per the written instructions of the Holder, within eight (8) business days after the Delivery Date, then in such
event the Company shall pay to Holder one-half percent (0.5%), in cash, of the dollar value of the Debt being converted per each
business day following the Delivery Date, up to and including the eighteenth (18th) business day following the Delivery
Date. Delays solely caused by the Buyer’s broker shall not be taken into account in this matter. In the event the Common
Stock is not delivered per the written instructions of the Holder, within eighteen (18) business days after the Delivery Date,
then, except to the extent the delivery is delayed by operation of law, in such event the Company shall pay to Holder one percent
(1%), in cash, of the dollar value of the Debt being converted per each business day following such eighteenth (18th)
business day after the Delivery Date. Holder shall then be entitled to send written notice to the Company of the default and the
Holder, and at its sole option may demand full repayment of the Debt not yet converted, including accrued interest and liquidated
damages through the date that written notice is given to the Company (the “Acceleration Amount”). If the Company does
not wire the Acceleration Amount to the Holder within five (5) business days of the delivery by Holder by fax or email of the
default notice, the Acceleration Amount shall accrue interest at sixteen percent (16%) per annum. Such notice shall not affect
the Holder’s rights to the Common Stock due under the Notice of Conversion and all rights and remedies related to such conversion
set forth herein, and shall be in addition to such rights and remedies. The Company acknowledges that the failure to honor a Notice
of Conversion shall cause definable financial hardship to the Holder as well as substantial monetary damages, which cannot be
determined at this time, and that this damages provision represents the parties’ reasonable estimate of liquidated damages.
3.7. Liquidated
Damages. If, by the eighth (8th) business day after the Delivery Date, due to the Company’s direct or indirect
actions or its failure to act, the transfer agent fails for any reason to deliver the Common Stock (with legends if required by
applicable law and without legends if not required by applicable law) upon conversion by the Holder and after such Delivery Date,
the Holder purchases, in an open market transaction or otherwise, shares of Common Stock (the "Covering Shares") solely
in order to make delivery in satisfaction of a sale of Common Stock by the Holder (the "Sold Shares"), which delivery
such Holder anticipated to make using the Common Stock issuable upon conversion (a "Buy-In"), the Company shall pay
to the Holder, in addition to any other amounts due to Holder pursuant to the Debt, and not in lieu thereof, the Buy-In Adjustment
Amount (as defined below). The "Buy In Adjustment Amount" is the amount equal to the excess, if any, of (x) the Holder's
total purchase price (including brokerage commissions, if any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Holder from the sale of the Sold Shares. The Company shall pay the Buy-In Adjustment Amount
to the Holder in immediately available funds within five (5) business days of written demand by the Holder.
The
Company acknowledges that its failure to deliver the Common Stock within eight (8) business days after the Delivery Date will
cause the Holder to suffer damages in an amount that will be difficult to ascertain. Accordingly, the parties agree that it is
appropriate to include in this Note a provision for liquidated damages. The parties acknowledge and agree that the liquidated
damages provision set forth in this section represents the parties’ good faith effort to quantify such damages and, as such,
agree that the form and amount of such liquidated damages are reasonable and will not constitute a penalty. The payment of liquidated
damages shall not relieve the Company from its obligations to deliver the Common Stock pursuant to the terms of this Note or to
repay, with interest, including default interest, as applicable, the unconverted portion of the Debt.
3.8. Liquidated
Damages When There Are Not Sufficient Available Shares. To the extent that the failure of the Company to issue the Common
Stock due upon conversion is due to the unavailability of authorized but unissued shares of Common Stock, the provisions of this
Section shall apply.
3.8.1.
The Company shall at all times reserve and have available all Common Stock necessary to meet conversion of the Debt by Holder
of the entire amount of Debt then outstanding. If, at any time Holder submits a Notice of Conversion and the Company does not
have sufficient authorized but unissued shares of Common Stock available to effect, in full, a conversion of the Debt (a “Conversion
Default”, the date of such default being referred to herein as the “Conversion Default Date”), the Company shall
issue to the Holder all of the shares of Common Stock which are available, and the Notice of Conversion as to any Debt requested
to be converted but not converted (the “Unconverted Debt”), upon Holder’s sole option, may be deemed null and
void. The Company shall provide notice of such Conversion Default (“Notice of Conversion Default”) to Holder of outstanding
Debt, by facsimile, within eight (8) business days of such default (with the original delivered by overnight or two day courier),
and the Holder shall give notice to the Company by facsimile within five business days of receipt of the original Notice of Conversion
Default (with the original delivered by overnight or two day courier) of its election to either nullify or confirm the Notice
of Conversion.
3.8.2.
The Company agrees to pay to Holder of outstanding Debt for a Conversion Default (“Conversion Default Payments”) in
the amount of (N/365) x (.24) x the balance of the outstanding and/or tendered but not converted Debt held by each Holder where
N = the number of days from the Conversion Default Date to the date (the “Authorization Date”) that the Company authorizes
a sufficient number of shares of Common Stock to effect conversion of all remaining Debt. The Company shall send notice (“Authorization
Notice”) to Holder of outstanding Debt that additional shares of Common Stock have been authorized, the Authorization Date
and the amount of Holder’s accrued Conversion Default Payments. The accrued Conversion Default Payments shall be paid in
cash or shall be convertible into Common Stock at the Conversion Rate, at the Holder’s option, payable as follows: (i) in
the event Holder elects within ten (10) days of the Authorization Notice in writing to take such payment in cash, cash payments
shall be made to such Holder by the fifth day of the following calendar month, or (ii) if the Holder does not so elect to receive
such Conversion Default Payment in cash, such payment shall be made in Common Stock at the then current Conversion Price within
30 days following the date of the Authorization Notice. The Company acknowledges that its failure to maintain a sufficient number
of authorized but unissued shares of Common Stock to effect in full a conversion of the Debt will cause the Holder to suffer damages
in an amount that will be difficult to ascertain. Accordingly, the parties agree that it is appropriate to include in this Note
a provision for liquidated damages. The parties acknowledge and agree that the liquidated damages provision set forth in this
section represents the parties’ good faith effort to quantify such damages and, as such, agree that the form and amount
of such liquidated damages are reasonable and will not constitute a penalty. The payment of liquidated damages shall not relieve
the Company from its obligations to deliver the Common Stock pursuant to the terms of this Note.
3.9. Maximum
Interest Rate. Nothing contained in this Note shall be deemed to establish or require the payment of interest to the Holder
at a rate in excess of the maximum rate permitted by governing law. In the event that the rate of interest required to be paid
exceeds the maximum rate permitted by governing law, the rate of interest required to be paid thereunder shall be automatically
reduced to the maximum rate permitted under the governing law and such excess shall be returned with reasonable promptness by
the Holder to the Company.
3.10. Payment
of Taxes. The Company shall pay all documentary stamp taxes, if any, attributable to the initial issuance of the Common Stock;
provided, however, that the Company shall not be required to pay any tax or taxes which may be payable, (1) with respect to any
secondary transfer of the Debt or the Common Stock issuable upon exercise hereof or (2) as a result of the issuance of the Common
Stock to any person other than the Holder, and the Company shall not be required to issue or deliver any certificate for any Common
Stock unless and until the person requesting the issuance thereof shall have paid to the Company the amount of such
tax or shall have produced evidence that such tax has been paid to the appropriate taxing authority.
3.11. Buyback
Guaranty In Event of DTC Chill or Freeze. In the event that the DTC issues a chill or freeze of the Company’s common
stock (A “chill” is a limitation of certain services available for a security on deposit at the DTC. A “freeze,”
formally referred to as a “global lock,” is a complete restriction on all DTC services for a particular security on
deposit at DTC.) after Holder has converted some or all of its Debt, and Holder holds such shares at that time, then Holder shall
have the option to sell, and the Company shall be required to purchase, for a period of six months, such shares of Common Stock
at the Conversion Price at which the stock was issued to Holder. The purchase price shall be paid in cash concurrently upon Holder
surrendering such shares of Common Stock to the Company.
4. Restrictions
on Transfers. The Debt has not been registered under the Securities Act of 1933, as amended, (the “Act”) and is
being issued under Section 4(2) of the Act and Rule 506 of Regulation D promulgated under the Act. The Debt and the Common Stock
issuable upon the conversion thereof may only be offered or sold pursuant to registration under or an exemption from the Act.
5. Mergers,
Etc. If the Company merges or consolidates with another corporation or sells or transfers all or substantially all of its
assets to another person and the Holder is entitled to receive stock, securities or property in respect of or in exchange for
Common Stock, then as a condition of such merger, consolidation, sale or transfer, the Company and any such successor, purchaser
or transferee shall amend the Debt to provide that it may thereafter be converted on the terms and subject to the conditions set
forth above into the kind and amount of stock, securities or property receivable upon such merger, consolidation, sale or transfer
by Holder of the number of shares of Common Stock into which the Debt might have been converted immediately before such merger,
consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may be practicable to adjustments
provided for in this Note.
The
Company shall not consolidate or merge into, or transfer all or substantially all of its assets to, any person, unless such person
assumes in writing the obligations of the Company under the Debt and immediately after such transaction no Event of Default exists.
Any reference herein to the Company shall refer to such surviving or transferee corporation and the obligations of the Company
shall terminate upon such written assumption.
6. Representations
and Warranties of Company. Company represents and warrants that at the time of the execution of this Note and at the Closing
thereof:
6.1
Rule 144. The Company covenants and agrees to take all reasonable
steps necessary or appropriate, including providing an opinion of counsel confirming the rights of Holder to sell shares of Common
Stock issued to Holder on conversion of this Note pursuant to Rule 144 as promulgated by the SEC ("Rule 144"), as such
Rule may be in effect from time to time. If the Company does not promptly provide an opinion from Company counsel, and so long
as the requested sale may be made pursuant to Rule 144, the Company agrees to accept an opinion of counsel to the Holder which
opinion will be issued at the Company's expense.
6.2
Transferability of Debt: The Company acknowledges that the
Holder may transfer this Note to any third party and that all rights hereunder shall be enforceable by the transferee of such
Note to the same extent as such rights may have been enforced by the Holder.
6.3 Authority.
(i) The Company, and the person signing on its behalf below, has all requisite power and authority to enter into and perform
this Note and to consummate the transactions contemplated hereby in accordance with the terms hereof, (ii) the execution and delivery
of this Note by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by the
Company and no further consent or authorization of the Company or its members is required, (iii) this Note has been duly executed
and delivered by the Company, and (iv) this Note constitutes a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights
and remedies or by other equitable principles of general application.
6.4 No
Conflicts. The execution, delivery and performance of this Note by the Company and the consummation by the Company of the
transactions contemplated hereby will not (i) violate or conflict with, or result in a breach of any provision of, or constitute
a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, any agreement, note, bond, indenture or other instrument to which
Company is a party, or (ii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-regulatory organizations to which the Company is subject) applicable
to the Company or by which any property of the Company are bound or affected. Except as
specifically contemplated by this Note and as required under the 1933 Act and any applicable federal and state securities laws,
the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute,
deliver or perform any of its obligations under this Note in accordance with the terms hereof. Except for filings that may be
required under applicable federal and state securities laws in connection with the issuance and sale of the Debt, all consents,
authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have
been obtained or effected on or prior to the date hereof.
6.5 No
Material Adverse Change. Since the date of the initiation of negotiations regarding this Transaction, there has not been any
material adverse change in the business, operations, properties, prospects, assets, or condition of the Company (financial or
otherwise), and no event has occurred or circumstance exists that may result in such a material adverse change.
6.6 Disclosure.
No representation or warranty of the Company in this Note omits to state a known material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not misleading. There is no fact known to the Company
that has specific application to either the Company (other than general economic or industry conditions) and that materially adversely
affects the assets, business, prospects, financial condition, or results of operations of the Company that has not been set forth
in this Note.
6.7 Debts.
The Company has no outstanding debts (other than the Debt), judgments, liens, encumbrances, UCC filings, notes, loans, convertible
debt instruments, or other financial obligations whatsoever, other than as disclosed in its public filings with the Securities
and Exchange Commission and in this Note.
6.8 Company’s
Reporting Obligations. The Company will mail to the Holder hereof at its address as shown on the Register a copy of any annual,
quarterly or other report or proxy statement that it gives to its shareholders generally at the time such report or statement
is sent to shareholders, unless such report is timely filed with the United States Securities and Exchange Commission.
6.9 Conduct
of Business. The Company has and shall continue to conduct its business in the normal and ordinary course, consistent with
the present conduct of its business and previous practices, shall not make and/or declare any dividend (cash and/or stock), redemption,
stock split (reverse or forward), and/or stock and/or cash distributions.
7. DEFAULTS
AND REMEDIES.
7.1 EVENTS
OF DEFAULT. An “Event of Default” occurs if (i) the Company does not make the payment of the principal or interest
due under this Note when the same becomes due and payable at maturity, upon demand or otherwise, (ii) the Company does not make
a payment, other than a payment of principal or interest, for a period of five (5) business days after its due date, (iii) any
of the Company’s representations or warranties contained in this Note were false when made or the Company fails to comply
with any of its other obligations in this Note, including the delivery of Common Stock upon conversion before the Delivery Date;
(iv) a DTC “chill” or “freeze” is placed on the stock of the Company; (v) the Common Stock becomes ineligible
for listing or quotation for trading on its current trading market and shall not be eligible to resume listing or quotation on
its current trading market within ten trading days; (vi) the Company pursuant to or within the meaning of any Bankruptcy Law (as
hereinafter defined): (1) commences a voluntary petition under Bankruptcy Law; (2) consents to the entry of an order for relief
against it in an involuntary bankruptcy petition; (3) consents to the appointment of a Custodian (as hereinafter defined) of it
or for all or substantially all of its property or (4) makes a general assignment for the benefit of its creditors or (5) a court
of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company in an
involuntary bankruptcy petition; (B) appoints a Custodian of the Company or for all or substantially all of its property or (C)
orders the liquidation of the Company, and the order or decree remains un-stayed and in effect for 60 days, or (vi) the Company
is in default of any debt, note or Agreement with an outstanding balance equal to or exceeding $25,000 individually or $50,000
in the aggregate, or (vii) the Company is in default of any provisions of this Note; or (viii) the Company’s representations
and warranties contained in this Note were not true on the date that this Note is signed. As used in this Section 1, the term
“Bankruptcy Law” means Title 11 of the United States Code or any similar federal or state law for the relief of debtors.
The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
7.2 REMEDIES
UPON DEFAULT. If any Event of Default occurs, the outstanding principal amount of the Debt, plus liquidated damages and other
amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election, immediately due
and payable in cash. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration
of the Debt, he interest rate on the Debt shall accrue at an interest rate equal to the
lesser of sixteen percent (16%) per annum or the maximum rate permitted under applicable law. Upon the payment in full, the Holder
shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the
Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the
Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and
all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time
prior to payment hereunder and the Holder shall have all rights as a Holder of the Note until such time, if any, as the Holder
receives full payment pursuant to this Section. No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
8. DILUTION.
The number of shares of Common Stock issuable upon conversion of the Debt may increase substantially in certain circumstances.
The Company’s executive officers and directors have studied and fully understand the nature of the transactions contemplated
by this Note and recognize that they have a potential dilutive effect. The Board of Directors of the Company has concluded, in
its good faith business judgment, that such issuance is in the best interests of the Company. The Company specifically acknowledges
that its obligation to issue additional shares of Common Stock is binding upon the Company and enforceable regardless of the dilution
such issuance may have on the ownership interests of other shareholders of the Company.
9. TIME
IS OF THE ESSENCE. Where this Note authorizes or requires the payment of money or the performance of a condition or obligation
on a Saturday or Sunday or a public holiday, or authorizes or requires the payment of money or the performance of a condition
or obligation within, before or after a period of time computed from a certain date, and such period of time ends on a Saturday
or a Sunday or a public holiday, such payment may be made or condition or obligation performed on the next succeeding business
day, and if the period ends at a specified hour, such payment may be made or condition performed, at or before the same hour of
such next succeeding business day, with the same force and effect as if made or performed in accordance with the terms of this
Note. A “business day” shall mean a day on which the banks in New York are not required or allowed to be closed. Time
is of the essence in the performance of all obligations under this Note.
10. WAIVERS.
Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company
or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver
or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any
other occasion. Any waiver by the Company or the Holder must be in writing.
11. RULES
OF CONSTRUCTION. In this Note, unless the context otherwise requires, words in the singular number include the plural,
and in the plural include the singular, and words of the masculine gender include the feminine and the neuter, and when the sense
so indicates, words of the neuter gender may refer to any gender. The numbers and titles of sections contained in the Agreement
are inserted for convenience of reference only, and they neither form a part of the Agreement nor are they to be used in the construction
or interpretation hereof. Wherever, in this Note, a determination of the Company is required or allowed, such determination shall
be made by a majority of the Board of Directors of the Company and if it is made in good faith, it shall be conclusive and binding
upon the Company and the Holder of this Note.
12. ABSOLUTE
OBLIGATION. Except as expressly provided herein, 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 liquidated damages, as applicable on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.
13. GOVERNING
LAW AND VENUE. This Note shall be governed and interpreted solely in accordance with the laws of the State of New York, and
applicable U.S. federal law, if any, and in each case without regard to their choice of laws principles. In the event of a dispute
between the parties, the parties agree to the exclusive jurisdiction of the federal and state courts of New York located in the
City of New York and agree not to challenge the venue of such action based on forum non conveniens or on any similar theory.
14.
LEGAL FORM. The parties hereto agree that they have been represented by
counsel during the negotiation and execution of this Note; that this Note and all exhibits hereto have been jointly drafted
and that any ambiguity in the terms of such agreements shall not be construed against either party based on the author of the
language that is deemed to be ambiguous.
15. SEVERABLE.
In the event that any provision of this Note is invalid or enforceable 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 provision hereof which may prove invalid or unenforceable under any law shall not affect the
validity or enforceability of any other provision hereof.
16. ATTORNEYS’
FEES AND COSTS TO PREVAILING PARTY. In the event that litigation or arbitration arises between the parties to this Note pertaining
to this Note, including, but not limited to, the interpretation or enforcement of its terms, the prevailing party in such litigation
shall be entitled to an award of its reasonable attorneys’ fees and costs incurred in connection with such action or proceeding.
17. ENTIRE
AGREEMENT. This Note, the Exhibits attached hereto, and the public filings referenced herein embody the entire agreement between
the parties hereto with respect to the subject matter hereof, and supersedes all prior, and contemporaneous, negotiations, agreements,
and understandings, whether written or oral. This Note, or any provision herein, may not be changed, waived, discharged, or terminated,
except by an express written instrument signed by the party against whom enforcement of the change, waiver, discharge or termination
is sought.
IN
WITNESS WHEREOF, the Company has duly executed this Note as of the date first written above.
|
BioNeutral
Group, Inc.. |
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|
By: |
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Name: |
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Title : |
Exhibit
A
NOTICE
OF CONVERSION
(To
be Executed by the Registered Holder in order to Convert the Notes.)
The
undersigned hereby irrevocably elects, as of_____________, 20__ to convert $_________________of the Note into Shares of Common
Stock (the “Shares”) of BioNeutral Group, Inc.. (the “Company”).
Date
of Conversion _____________________________________________________
Applicable
Conversion Price ______________________________________________
Number
of Shares Issuable upon this conversion _______________________________
Signature
______________________________________
[Name]
Address
___________________________________________________
__________________________________________________________
Phone
________________ Fax
_________________________
Assignment
of Note
The
undersigned here by sell(s) and assign(s) and transfer(s) unto |
|
|
|
(name,
address and SSN or EIN of assignee) |
|
Dollars
($ ) |
|
|
(principal
amount of Note, $1,000 or integral multiples of $1,000) |
|
of
principal amount of this Note together with all accrued and unpaid interest hereon. |
Date:______________ |
Signed: ______________________________________________________ |
|
(Signature
must conform in all respects to name of Holder shown of face of Note) |
15
Exhibit
10.83
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: $51,500.00
Date:
July 18, 2014 (Tacking Back to January 15, 2014)
CONVERTIBLE
PROMISSORY NOTE
BioNeutral
Group, Inc., (hereinafter called the “Borrower” or “BONU”), 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
$51,500, together with any interest as set forth herein, on July 18, 2015 (the “Maturity Date”), and to pay interest
on the unpaid principal balance hereof at the rate of eighteen percent (18%) (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 shall serve in lieu of (and tack back to) $51,500 of principal convertible securities
owing to Ray Dunning, pursuant to that certain $51,500 Convertible Promissory Note dated January 15, 2014 (attached hereto), and
incorporate all interests and charges contemplated therein.
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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower, 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 Borrower 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 Borrower 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 Borrower’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 Borrower’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 Fifty Percent (50%) discount off the lowest intra-day trading price for the Company’s
common stock during the Ten (10) 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 Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a
merger in which the Borrower 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 Borrower or (ii) any person, group or entity (including the Borrower) publicly announces
a tender offer to purchase 50% or more of the Borrower’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 Borrower (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 Borrower covenants that during the period the conversion right exists, the Borrower 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 Borrower 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 Borrower’s obligations.
The
Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition,
if the Borrower 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 Borrower 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
Borrower (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 Borrower 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 Borrower 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 Borrower unless the entire unpaid
principal amount of this Note is so converted. The Holder and the Borrower 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 Borrower,
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 Borrower 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 Borrower, whereupon the Borrower 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 Borrower 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 Borrower 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 Borrower the amount of any such
tax or shall have established to the satisfaction of the Borrower that such tax has been paid.
(d) 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,
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.
(e) 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 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 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.
(f) 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 (“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 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 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 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. 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
are justified. Any delay or failure of performance by the Borrower 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 Borrower, 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 Borrower
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 Borrower 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 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 Borrower shall issue to the Holder a new certificate therefore free of any transfer
legend if (i) the Borrower 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 Borrower, the effectuation by the Borrower of a transaction
or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation,
merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower
is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower
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 1.6(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 Borrower shall be changed into the same or a different number of shares
of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of
all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower,
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 Borrower shall not affect any transaction described in this Section
1.6(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 Borrower) 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 Borrower 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 Borrower’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 Borrower 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 Borrower in such Dilutive
Issuance.
The
Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower 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 Borrower as consideration for the issuance or granting of all such Options,
plus the minimum aggregate amount of additional consideration, if any, payable to the Borrower 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 Borrower shall be deemed to have issued or sold shares of Common Stock if the Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower, 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 Borrower 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 Borrower 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
Borrower 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 Borrower 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 Borrower or
any of its securities on the Borrower’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 Borrower 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 Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted
portions of this Note and the Borrower 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 Borrower’s failure to convert this Note.
1.9 Prepayment.
Maker may prepay this Note, in whole or in part, at any time and from time to time, with premium, where both parties
have approved said premium and prepayment in writing.
ARTICLE
II. CERTAIN COVENANTS
2.1 Distributions
on Capital Stock. So long as the Borrower shall have any obligation under this Note, the Borrower 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 Borrower’s disinterested directors.
2.2 Restriction
on Stock Repurchases. So long as the Borrower shall have any obligation under this Note, the Borrower 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 Borrower
or any warrants, rights or options to purchase or acquire any such shares.
2.3 Borrowings.
So long as the Borrower shall have any obligation under this Note, the Borrower 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 Borrower 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 Borrower shall have any obligation under this Note, the Borrower 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 Borrower shall have any obligation under this Note, the Borrower 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 Borrower, except loans, credits or advances (a)
in existence or committed on the date hereof and which the Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower to its transfer agent. If at the option of the Holder, the
Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be
paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.
3.3 Breach
of Covenants. The Borrower 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 Borrower from the Holder.
3.4 Breach
of Representations and Warranties. Any representation or warranty of the Borrower 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 Borrower or any subsidiary of the Borrower 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 Borrower or any subsidiary of the Borrower
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 Borrower or any
subsidiary of the Borrower.
3.8 Delisting
of Common Stock. The Borrower 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 Borrower shall fail to comply with the reporting requirements of the Exchange Act; and/or
the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.
3.10 Liquidation.
Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
3.11 Cessation
of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts
as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going
concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
3.12 Maintenance
of Assets. The failure by Borrower 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 Borrower 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 Borrower 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 Borrower proposes to replace its transfer agent, the Borrower 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 Borrower and the Borrower.
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 Borrower 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 Borrower, 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 Borrower, 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 Borrower
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 Borrower 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 BORROWER 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 Borrower 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 3,1 hereof), the
Note shall become immediately due and payable and the Borrower 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 Borrower 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 Borrower remains in default (and so long and to the extent that
there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default
Amount, the number of shares of Common Stock of the Borrower 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 Borrower, to:
If
to the Holder:
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WHC
Capital, LLC. |
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200
Stonehinge Lane, |
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Suite
3 |
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Carle
Place, NY. 11514 |
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Facsimile:
212.574.3326 |
4.3 Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower 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 Borrower
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 Borrower shall provide the Holder with prior
notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Borrower 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 Borrower or any proposed liquidation,
dissolution or winding up of the Borrower, the Borrower 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 Borrower 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 Borrower 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 Borrower 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
Borrower 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, Borrower has caused this Note to be signed in its name by its duly authorized officer:
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BioNeutral
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By: |
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16
Exhibit 10.84
NEITHER
THE SECURITIES REPRESENTED BY THIS NOTE OR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES
NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS
AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO
THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR APPLICABLE STATE SECURITIES LAWS.
PROMISSORY NOTE
$23,600 |
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Newark, New Jersey |
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May 1, 2014 |
BioNeutral Group Inc., a Nevada
corporation (the “Company”), for value received hereby promises to pay to Ray Dunning or his registered assigns
(the “Holder”), the sum of $23,600, or such other amount as shall then equal the outstanding principal amount
hereof and all accrued and unpaid interest, as set forth below, on May 1, 2015 (the “Maturity Date”). Payment due
hereunder shall be made by wire transfer of immediately available funds, in lawful tender of the United States, to an account
designated in writing by the Holder.
1. Interest.
Until all outstanding principal and interest on this Note shall have been paid in full, interest on the unpaid principal balance
of this Note shall accrue as follows from the date of May 1, 2014. Interest shall accrue at the rate of eighteen percent (8%) per
annum (the “Initial Interest Rate”). Interest will be payable on the Maturity Date.
2. Events
of Default. If any of the events specified in this Section 3 shall occur (herein individually referred to as an “Event
of Default”), the Company agrees to give the Holder prompt written notice of such event. The Holder may, so long as such
condition exists or has not been cured during the applicable cure period (whether or not the Holder has received notice of such
event), declare the entire principal and unpaid accrued interest here on immediately due and payable, by notice in writing to the
Company; provided, that upon occurrence of an Event of Default specified in subsection (iv) below, all principal and interest shall
automatically become immediately due and payable in full:
(i) Failure by
the Company to make any payment hereunder when due, which failure has not been cured within ten (10) days following such due date;
or
(ii) Any failure or inability to effect
a conversion of this Note into Common Stock as provided for in Section 5 hereof, if such failure continues for five (5) business
days after the request for conversion.
(iii) Any
breach by the Company of any material representation, warranty or covenant in this Note which results in a Material Adverse Effect
on the Company’s business, operations or financial condition; provided, that, in the event of any such breach, such breach
shall not have been cured by the Company within 30 days after the earlier to occur of (a) written notice to the Company of such
breach, or (b) the Company’s knowledge of such breach; or
(iv) The institution
by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution of bankruptcy or
insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization or release under
the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of any such petition
or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or of any substantial
part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate action by the
Company in furtherance of any such action; or
(v) If, within
sixty (60) days after the commencement of an action against the Company seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been resolved
in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company stayed,
or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial
part of the properties of the Company, such appointment shall not have been vacated; or
3. Prepayment.
The Company shall have the right, at any time prior to the Maturity Date, to prepay any outstanding amount due to the Holder for
an amount equal to 100% of the unpaid principal amount of this Note along with any accrued interest.
4.1 Notices
of Record Date, etc. In the event that the Company takes any of the actions specified in this section the Company will provide
notice to the Holder.
4.1.1 Any taking by the Company
of a record of the holders of any class of securities of the Company for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive any other right; or
4.1.2 Any capital
reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any transfer of
all or substantially all of the assets of the Company to any other person or any consolidation or merger involving the Company;
or
4.1.3 Any voluntary
or involuntary dissolution, liquidation or winding-up of the Company; the Company will mail to the holder of this Note at least
five (5) business days prior to the earliest date specified therein, a notice specifying:
4.1.3.1 The
date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character
of such dividend, distribution or right; and
4.1.3.2 The
date on which any such reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation or winding-up
is expected to become effective and the record date for determining stockholders entitled to vote thereon.
5. Conversion. The Holder
shall have the right to convert the principal amount of this Note and all accrued but unpaid interest into Common Stock of the
Company on the Maturity Date at a conversion price equal to 50% of the average closing price of the Company’s common stock
for the 10 preceding days of the Maturity Date; 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 Borrower 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 Borrower, 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).
6. Assignment.
Subject to the restrictions on transfer set forth herein, the rights and obligations of the Company and the Holder of this Note
shall be binding upon and benefit the successors and assigns of the parties. This Note may not be assigned or transferred by the
parties except in accordance with the terms hereof. This Convertible Note is nontransferable by the Note holder without
prior written approval of the Board of Directors of the Company.
7. Waiver and Amendment. Any provision of this Note
may be amended, waived or modified upon the written consent of the Company and the Holder.
8. Transfer
of this Note. With respect to any offer, sale or other disposition of this Note, the Holder will give written notice to the
Company prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder’s counsel,
which counsel must be acceptable to the Company, to the effect that such offer, sale or other distribution may be effected without
registration or qualification (under any federal or state law then in effect). Promptly upon receiving such written notice and
opinion, the Company, as promptly as practicable, shall notify such Holder that such Holder may sell or otherwise dispose of this
Note, all in accordance with the terms of the notice delivered to the Company. Each Note thus transferred shall bear a legend
as to the applicable restrictions on transferability in order to ensure compliance with the Act, unless in the opinion of counsel
for the Company such legend is not required. The Company may issue stop transfer instructions to its transfer agent in connection
with such restrictions.
9. Treatment
of Note. To the extent permitted by GAAP, the Company will treat, account and report the Note as debt and not equity for accounting
purposes and with respect to any returns filed with federal, state or local tax authorities.
10. Notices.
Any notice, request or other communication required or permitted hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered or if faxed with confirmation of receipt by telephone or if mailed by registered or certified
mail, postage prepaid, at the respective addresses of the parties as set forth in this Note. Any party hereto may by notice so
given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when personally delivered,
faxed, or when deposited in the mail in the manner set forth above and shall be deemed to have been received when delivered.
11. No
Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or any other person the
right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for the election of directors
of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no dividends or interest shall
be payable or accrued in respect of this Note or the interest represented hereby.
12. Usury.
This Note is hereby expressly limited so that in no event whatsoever, whether by reason of acceleration of maturity of the
loan evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Holder hereunder for the loan, use, forbearance
or detention of money exceed that permissible under applicable law. If at any time the performance of any provision of this Note
or of any other agreement or instrument entered into in connection with this Note involves a payment exceeding the limit of the
interest that may be validly charged for the loan, use, forbearance or detention of money under applicable law, then automatically
and retroactively, ipso facto, the obligation to be performed shall be reduced to such limit, it being the specific intent of the
Company and the Holder that all payments under this Note are to be credited first to interest as permitted by law, but not in excess
of (i) the agreed rate of interest set forth herein or therein or (ii) that permitted by law, whichever is the lesser,
and the balance toward the reduction of principal. The provisions of this Section 12 shall never be superseded or waived and shall
control every other provision of this Note and all other agreements and instruments between the Company and the Holder entered
into in connection with this Note.
13. Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey, excluding that
body of law relating to conflict of laws.
14. Heading;
References. All headings used herein are used for convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to Sections hereof.
15. Waiver.
The Company hereby waives demand, notice, presentment, protest and notice of dishonor.
IN WITNESS WHEREOF,
the Company has caused this Note to be issued this 1st day of May 2014.
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BioNeutral Group, Inc. |
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By: |
/s/ Mark Lowenthal |
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Name: |
Mark A. Lowenthal |
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Title: |
President and Chief
Executive Officer |
CONVERSION FORM
TO: BioNeutral Group, Inc.
211 Warren Street
Newark,
New Jersey 07103
The undersigned, hereby irrevocably elects
to convert the principal amount and any accrued but unpaid interest on this Convertible Note at a conversion price of $____ per
share. The undersigned hereby agrees that upon conversion, the entire principal due on this Convertible Note shall be deemed fully
paid and the Convertible Note will be cancelled in full. The Company shall have no obligation with respect to any principal payments
after the Effective Date.
Instructions
for Registration of Stock
NAME: _______________________________________________________________________
ADDRESS: ___________________________________________________________________
TELEPHONE: ________________________________________________________________
EMAIL: ___________________________________________________________________
AMOUNT TO BE CONVERTED $_________________________________________
DATED: ___________________________________________________________________
6
Exhibit 10.85
THE SECURITIES REPRESENTED BY THIS INSTRUMENT
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
BIONEUTRAL GROUP, INC.
CONVERTIBLE PROMISSORY NOTE
1. Principal and Interest.
(a) BioNeutral Group, Inc.,
a Nevada corporation (the "Company"), for value received, hereby promises to pay to the order of DH Technical Consulting,
LLC (the "Investor" or the "Holder") the sum of Fifteen Thousand US dollars ($15,000).
(b) Upon repayment of This
Promissory Note (the "Note") an additional 8% interest bonus payment will be added to any unpaid balance per month. This
Note shall be payable upon demand June 30, 2013 (the "Demand Date"). Commencing on the Demand Date, all principal and
the interest bonus payment hereunder shall be payable by the Company upon demand made by the Holder or Investor.
(c) Upon payment in full
of the principal and bonus payment, this Note shall be surrendered to the Company for cancellation.
(d) The principal and bonus
payment under this Note shall be payable at the principal office of the Company and shall be forwarded to the address of the Holder
hereof as such Holder shall from time to time designate.
2. Attorney's Fees.
If the indebtedness represented by this Note or any part thereof is collected in bankruptcy, receivership or other judicial proceedings
or if this Note is placed in the hands of attorneys for collection after default, the Company agrees to pay, in addition to the
principal and the bonus payment payable hereunder, reasonable attorneys' fees and costs incurred by the Investor.
3. Conversion.
3.1 Voluntary Conversion.
In the event that the Note is not paid prior to the Demand Date, the Holder shall have the right thereafter, exercisable in whole
or in part, to convert the outstanding principal and bonus payment hereunder into a number of fully paid and nonassessable whole
shares of the Company's $.00001 par value common stock ("Common Stock") determined in accordance with Section 3.2 below.
3.2 Shares Issuable.
The number of whole shares of Common Stock into which this Note may be voluntarily converted ("Conversion Shares") shall
be determined by dividing the aggregate principal amount borrowed hereunder by $.01 (the "Note Conversion Price"); provided,
however, that, in no event, shall 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 Holder and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note
or the unexercised or unconverted portion of any other security of Maker 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 Holder
and its affiliates of more than 9.9% of the outstanding shares of common stock of the Company. 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 and Regulation 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. 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 Note Conversion Price. 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 Company’s option, accrued
and unpaid interest, if any, on such principal amount at the interest rate provided in this Note to the conversion date, provided,
however, that the Company shall have the right to pay any or all interest in cash.
3.3 Notice and Conversion
Procedures. If the Holder elects to convert this Note, the Holder shall provide the Company with a written notice of conversion
setting forth the amount to be converted. The notice must be delivered to the Company together with this Note. Within twenty (20)
business days of receipt of such notice, the Company shall deliver to the Holder certificate(s) for the Common Stock issuable upon
such conversion and, if the entire principal amount hereunder was not so converted, a new note representing such balance.
3.4 Other Conversion
Provisions.
(a) Adjustment of Note Conversion
Price. In the event the Company shall in any manner, subsequent to the issuance of this Note, approve a reclassification involving
a reverse stock split and subdivision of the Company's issued and outstanding shares of Common Stock, the Note Conversion Price
shall forthwith be adjusted by proportionately increasing the Note Conversion Price on the date that such subdivision shall become
effective. In the event the Company shall in any manner, subsequent to the issuance of this Note, approve a reclassification involving
a forward stock split and subdivision of the Company's issued and outstanding shares of Common Stock, the Note Conversion Price
shall forthwith be adjusted by proportionately decreasing the Note Conversion Price on the date that such subdivision shall become
effective.
(b) Common Stock Defined. Whenever
reference is made in this Note to the shares of Common Stock, the term "Common Stock" shall mean the Common Stock of
the Company authorized as of the date hereof, and any other class of stock ranking on a parity with such Common Stock. Shares issuable
upon conversion hereof shall include only shares of Common Stock of the Company.
3.5 No Fractional Shares.
No fractional shares of Common Stock shall be issued upon conversion of this Note. In lieu of the Company issuing any fractional
shares to the Holder upon the conversion of this Note, the Company shall pay to the Holder the amount of outstanding principal
hereunder that is not so converted.
4. Representations,
Warranties and Covenants of the Company. The Company represents, warrants and covenants with the Holder as follows:
(a) Authorization; Enforceability.
All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution
and delivery of this Note and the performance of all obligations of the Company hereunder has been taken, and this Note constitutes
a valid and legally binding obligation of the Company, enforceable in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable
remedies.
(b) Governmental Consents.
No consent, approval, qualification, order or authorization of, or filing with, any local, state or federal governmental authority
is required on the part of the Company in connection with the Company's valid execution, delivery or performance of this Note except
any notices required to be filed with the Securities and Exchange Commission under Regulation D of the Securities Act of 1933,
as amended (the "1933 Act"), or such filings as may be required under applicable state securities laws, which, if applicable,
will be timely filed within the applicable periods therefore.
(c) No Violation.
The execution, delivery and performance by the Company of this Note and the consummation of the transactions contemplated hereby
will not result in a violation of its Certificate of Incorporation or Bylaws, in any material respect of any provision of any mortgage,
agreement, instrument or contract to which it is a party or by which it is bound or, to the best of its knowledge, of any federal
or state judgment, order, writ, decree, statute, rule or regulation applicable to the Company or be in material conflict with or
constitute, with or without the passage of time or giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon any assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license, authorization or approval applicable to the Company, its
business or operations, or any of its assets or properties.
5. Representations and
Covenants of the Holder. The Company has entered into this Note in reliance upon the following representations and covenants
of the Holder:
(a) Investment Purpose.
This Note and the Common Stock issuable upon conversion of the Note are acquired for investment and not with a view to the sale
or distribution of any part thereof, and the Holder has no present intention of selling or engaging in any public distribution
of the same except pursuant to a registration or exemption.
(b) Private Issue.
The Holder understands (i) that this Note and the Common Stock issuable upon conversion of this Note are not registered under the
1933 Act or qualified under applicable state securities laws, and (ii) that the Company is relying on an exemption from registration
predicated on the representations set forth in this Section 8.
(c) Financial Risk.
The Holder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks
of its investment, and has the ability to bear the economic risks of its investment.
(d) Risk of No Registration.
The Holder understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12
of the Securities Exchange Act of 1934 (the "1934 Act"), or file reports pursuant to Section 15(d) of the 1934 Act, or
if a registration statement covering the securities under the 1933 Act is not in effect when it desires to sell the Common Stock
issuable upon conversion of the Note, it may be required to hold such securities for an indefinite period. The Holder also understands
that any sale of the Note or the Common Stock which might be made by it in reliance upon Rule 144 under the 1933 Act may be made
only in accordance with the terms and conditions of that Rule.
6. Assignment. Subject
to the restrictions on transfer described in Section 9 below, the rights and obligations of the Company and the Holder shall be
binding upon and benefit the successors, assigns, heirs, administrators and transferees of the parties.
7. Waiver and Amendment.
Any provision of this Note may be amended, waived or modified upon the written consent of the Company and the Holder.
8. Transfer of This
Note or Securities Issuable on Conversion Hereof. With respect to any offer, sale or other disposition of this Note or securities
into which this Note may be converted, the Holder will give written notice to the Company prior. thereto, describing briefly the
manner thereof. Unless the Company reasonably determines that such transfer would violate applicable securities laws, or that
such transfer would adversely affect the Company's ability to account for future transactions to which it is a party as a pooling
of interests, and notifies the Holder thereof within five (5) business days after receiving notice of the transfer, the Holder
may effect such transfer. The Note thus transferred and each certificate representing the securities thus transferred shall bear
a legend as to the applicable restrictions on transferability in order to ensure compliance with the 1933 Act, unless in the opinion
of counsel for the Company such legend is not required in order to ensure compliance with the 1933 Act. The Company may issue
stop transfer instructions to its transfer agent in connection with such restrictions.
9. Notices. Any
notice, other communication or payment required or permitted hereunder shall be in writing and shall be deemed to have been given
upon delivery if personally delivered or three (3) business days after deposit if deposited in the USA's mail for mailing by certified
mail, postage prepaid, and addressed as follows:
If to Investor: |
DH
Technical Consulting, LLC; Attn: David Hoenig |
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91
Stratford Road |
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East Brunswick, NJ 08816 |
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If to Company: |
Mark Lowenthal |
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BioNeutral Group, Inc. |
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211 Warren St. |
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Newark, NJ 07103 |
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Each of the above addressees may change its
address for purposes of this Section by giving to the other addressee notice of such new address in conformance with this Section.
10. Governing Law.
This Note is being delivered in and shall be construed in accordance with the laws of the State of New Jersey, without regard to
the conflicts of laws provisions thereof.
11. Heading; References.
All headings used herein are used for convenience only and shall not be used to construe or interpret this Note. Except as otherwise
indicated, all references herein to Sections refer to Sections hereof.
12. Waiver by the Company.
The Company hereby waives demand, notice, presentment, protest and notice of dishonor.
13. Delays. No delay
by the Holder in exercising any power or right hereunder shall operate as a waiver of any power or right.
14. Severability.
If one or more provisions of this Note are held to be unenforceable under applicable law, such provision shall be excluded from
this Note and the balance of the Note shall be interpreted as if such provision was so excluded and shall be enforceable in accordance
with its terms.
15. No Impairment.
The Company will not, by any voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of
this Note and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder
of this Note against impairment.
IN WITNESS WHEREOF, BioNeutral
Group, Inc. has caused this Note to be executed in its corporate name and this Note to be dated, issued and delivered, all on the
date first above written.
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BioNeutral Group, Inc. |
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By: |
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Name: |
Mark Lowenthal |
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Title: |
CEO and President |
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INVESTOR |
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Name |
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Title |
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6
Exhibit 31.1
CERTIFICATIONS
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002
I, Mark Lowenthal, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of BioNeutral Group, Inc. for the period ended
July 31, 2014; |
| 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. | I am 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 my supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to me 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 my 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 my 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. | I have disclosed, based on my 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. |
September 22, 2014 |
/s/ Mark Lowenthal |
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Name: |
Mark Lowenthal |
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Title: |
Interim Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer) |
Exhibit
32.1
CERTIFICATIONS
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
In connection with the
quarterly report of BioNeutral Group, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2014 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Lowenthal, Principal Executive
Officer and Principal 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, to my knowledge:
| 1. | The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| 2. | The information contained in the report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
September 22, 2014 |
/s/ Mark Lowenthal |
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Name: |
Mark Lowenthal |
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Title: |
Interim Chief Executive Officer
(Principal Executive Officer and Principal Financial Officer) |