12.  SUBSEQUENT EVENTS

On July 7, 2015, the Company issued a press release disclosing the listing of the Company’s intellectual property inclusive of patents and trademarks of the company for sale, as well as the asphalt paving assets, or in the alternative seek a potential merger candidate in the asphalt industry.  The Company significantly scaled down operations during July and through the date of this report to receive and evaluate proposals for purchasing the intellectual property or interested candidates in merging or acquiring the Company.  The Company is still negotiating with prospective parties.  If the Company does not reach an agreement, it will be required to cease all operations.

On August 1, 2015 the Company is no longer under a rental lease agreement for the office and warehouse space in Gardena, CA.  The Company is now on a month-to-month agreement and will be required to exit the premises if the landlord identifies a new tenant.

The Company has missed the first principal payment in regards to the Dr. Pave revolving line of credit.  The revolving line of credit is secured by the assets of Dr. Pave, LLC a wholly owned subsidiary of the Company with a book value of $83,895.  The Company is in default and the lender may at any time foreclose upon the Dr. Pave assets.

Heather Kearns has tendered her resignation as Interim Chief Executive Officer and Interim Chief Financial Officer with an effective 11:59 pm on August 19, 2015.

Debt offerings

On August 16, 2015 the Company extended all Secured Notes issued under the Senior Secured Loan Agreement to February 15, 2016, in the aggregate amount of $947,361.  In addition, interest has accrued and continues to accrue under the terms of the Notes. The Company shall pay interest and continue to accrue monthly interest under the terms of the Notes until February 15, 2016.  The Company entered into notes under the senior secured loan agreement with JMW Fund, Richland Fund, and San Gabriel Fund in an aggregate principal amount of $39,000, included in the total loan amount extended as stated above, subsequent to the quarter-end. The interest rate on the notes is 12% per annum and monthly interest payments are due the first day each month.  If any interest payment remains unpaid in excess of 90 days, and the lender has not declared the entire principal and unpaid accrued interest due and payable, the interest rate on that amount only will be increased to 18% per annum, until the past due interest amount is paid in full.  The notes and any future notes under the loan agreement are secured by all of the assets of the Company, including intellectual property rights. The Company is in default on interest payments related to the secured notes, the lenders have the right to call the notes or to foreclose on the assets of the Company.