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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 18pt"><B>UNITED
STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
</B></FONT><B><FONT STYLE="font-size: 10pt">WASHINGTON, D.C. 20549</FONT></B><FONT STYLE="font-size: 10pt"> </FONT></P>

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<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM 8-K</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">CURRENT REPORT</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):&nbsp;<B>
June 28, 2012</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 18pt"><B><U>Skinny
Nutritional Corp.<BR>
</U></B></FONT><FONT STYLE="font-size: 10pt">(Exact name of registrant as specified in its charter) </FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">COMMISSION FILE NUMBER<B>:&nbsp;&nbsp;<U>0-51313</U></B></P>

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    <TD STYLE="width: 50%; font-size: 10pt; font-weight: bold; text-decoration: underline; text-align: center">Nevada</TD>
    <TD STYLE="width: 50%; font-size: 10pt; font-weight: bold; text-decoration: underline; text-align: center">88-0314792</TD></TR>
<TR>
    <TD STYLE="font-size: 10pt; text-align: center">(State or other jurisdiction of incorporation or <BR>
organization)</TD>
    <TD STYLE="font-size: 10pt; text-align: center; vertical-align: top">(I.R.S. Employer Identification No.)</TD></TR>
<TR>
    <TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: center; vertical-align: top">&nbsp;</TD></TR>
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<TR>
    <TD STYLE="width: 100%; font-size: 10pt; font-weight: bold; text-align: center">1100 East Hector Street, Suite 391</TD></TR>
<TR>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-decoration: underline; text-align: center">Conshohocken, PA 19428</TD></TR>
<TR>
    <TD STYLE="font-size: 10pt; text-align: center">(Address and zip code of principal executive offices)</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><U>(610) 784-2000<BR>
</U></B>(Registrant&rsquo;s telephone number, including area code</P>

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        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">CHECK THE APPROPRIATE BOX BELOW IF THE FORM 8-K FILING IS INTENDED
        TO SIMULTANEOUSLY SATISFY THE FILING OBLIGATION OF THE REGISTRANT UNDER ANY OF THE FOLLOWING PROVISIONS:</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT>
        Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT>
        Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT>
        Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24.5pt"><FONT STYLE="font-family: Wingdings"><B>&uml;</B></FONT>
        Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))</P></TD></TR>
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<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 1.01</B></TD><TD STYLE="text-align: left"><B>Entry into a Material Definitive Agreement.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">On
June 28, 2012, Skinny Nutritional Corp. (the &ldquo;<U>Company</U>&rdquo;) and Trim Capital, LLC (the &ldquo;<U>Purchaser</U>&rdquo;)
entered into a Securities Purchase Agreement (the &ldquo;<U>Purchase Agreement</U>&rdquo;) relating to a financing transaction
for a maximum of $15,000,000 in total proceeds to the Company (the &ldquo;<U>Unit Financing</U>&rdquo;). The Unit Financing is
structured to occur in three separate closings, with each of the second and third closings subject to certain conditions. At the
first closing (the &ldquo;<U>First Closing</U>&rdquo;) which was completed on June 28, 2012, the Company sold a $1,000,000 senior
secured bridge note (the &ldquo;<U>Initial Note</U>&rdquo;) to the Purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.05pt 0pt 4.3pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">At
the second closing (the &ldquo;<U>Second Closing</U>&rdquo;), the Purchaser will purchase an additional $3,000,000 of securities
of the Company, consisting of a combination of an additional senior secured bridge note (the &ldquo;<U>Remaining Note</U>&rdquo;,
and together with the Initial Note, the &ldquo;<U>Notes</U>&rdquo;) and equity units (the &ldquo;<U>Equity Units</U>&rdquo; and,
together with the Notes, the &ldquo;<U>Securities</U>&rdquo;) consisting of shares of a to be authorized series of Senior Preferred
Stock of the Company (&ldquo;<U>Senior Preferred</U>&rdquo;) and common stock of the Company (&ldquo;<U>Common Stock</U>&rdquo;).
The Equity Units to be purchased at the Second Closing will consist of, in the aggregate (1) such number of shares of Senior Preferred
with an aggregate original issue price (the &ldquo;<U>Second Closing Senior Preferred Price</U>&rdquo;) equal to the difference
between (x) $3,000,000 and (y) the principal amount of the Remaining Note and (2) such number of shares of Common Stock (the &ldquo;<U>Second
Closing Common Stock Amount</U>&rdquo;) determined by multiplying (a) 65% of the projected number of shares of Common Stock to
be outstanding as of the date of the Third Closing on a fully diluted basis (&ldquo;<U>Third Closing Fully Diluted Common Stock</U>&rdquo;)
by (b) a fraction, the numerator of which is the Second Closing Senior Preferred Price and the denominator of which is $9,000,000.
Under the Purchase Agreement, the Company agreed to reserve out of its authorized but unissued shares of Common Stock, for the
purpose of selling shares of Common Stock as part of the Equity Units at the Second Closing, at least 100 million shares of Common
Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.05pt 0pt 4.3pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">At
the third closing (the &ldquo;<U>Third Closing</U>&rdquo;), the Notes sold at the First and Second Closings will convert into
additional Equity Units, and, in addition, Purchaser will purchase $5,000,000 of additional Equity Units such that, after the
Third Closing, the Purchaser will own $9,000,000 of Senior Preferred and 65% of the Third Closing Fully Diluted Common Stock.
In addition, at the Third Closing, Purchaser will provide the Company with a $6,000,000 senior secured credit facility (the &ldquo;<U>Credit
Facility</U>&rdquo;). The Equity Units to be purchased at the Third Closing will consist, in the aggregate, of (x) a number of
shares of Senior Preferred Stock with an aggregate original issue price (the &ldquo;<U>Third Closing Purchase Price</U>&rdquo;)
equal to $9,000,000 less the Second Closing Senior Preferred Price and (y) a number of shares of Common Stock determined by subtracting
the Second Closing Common Stock Amount from 65% of Third Closing Fully Diluted Common Stock. The aggregate purchase price of the
Equity Units issued in the Second Closing and the Third Closing shall be $9,000,000 including the outstanding principal amount
of, and accrued interest on, the Notes converted into the Equity Units as of the Third Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.05pt 0pt 4.3pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">In
accordance with the Purchase Agreement, the proceeds from the sale of the Securities shall be used by the Company in accordance
with a budget and use of proceeds approved by the Purchaser in writing (collectively, the &ldquo;<U>Approved Budget</U>&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Notes are secured by a first priority lien on all of the Company&rsquo;s assets, other than the inventory and receivables of the
Company for which the Purchaser&rsquo;s lien is subordinated to the lien held by the Company&rsquo;s senior lender. The liens
were granted to the Purchaser by the Company pursuant to a Security Agreement and an Intellectual Property Security Agreement,
each dated as of June 28, 2012 (the &ldquo;<U>Security Agreement</U>&rdquo; and &ldquo;<U>IP Security Agreement</U>&rdquo;, respectively).
The terms of the Notes are described in greater detail in Item 2.03 of this Current Report on Form 8-K, which is incorporated
herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Senior Preferred Stock has not yet been authorized and, as set forth below, it is a condition to the Second Closing that the terms
of the Senior Preferred Stock be authorized and set forth in a Certificate of Designations to be filed with the Secretary of State
of the State of Nevada (the &ldquo;<U>Senior Preferred Designations</U>&rdquo;). Among the proposed terms of the Senior Preferred
Stock is that the Senior Preferred Stock will have no voting rights at the time of its issuance at the Second Closing; provided
that, following the Third Closing, the holders of the Senior Preferred Stock issued at the Second and Third Closings will be entitled
to elect four members of an expanded seven-member board of directors and will include certain protective provisions requiring
the consent of the holders of the Senior Preferred Stock for certain corporate actions. The proposed terms of the Senior Preferred
Stock are described in greater detail in Item 5.03 of this Current Report on Form 8-K, which is incorporated herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Prior
to, and as a condition to, the Third Closing, a meeting of the stockholders of the Company will be held (the &ldquo;<U>Stockholders
Meeting</U>&rdquo;) at which the stockholders of the Company will be asked to approve, among other things, an amended and restated
Articles of Incorporation in a form to be agreed upon between the Company and the Purchaser (the &ldquo;<U>Amended and Restated
Charter</U>&rdquo;) which integrates into a single instrument all of the provisions of the Articles of Incorporation as in effect
and operative (including the terms of the Senior Preferred Designations) and amends such Articles of Incorporation in a manner
acceptable to the Board of Directors of the Company (the &ldquo;<U>Board</U>&rdquo;) and the Purchaser, including to (a) authorize
a sufficient number shares of Common Stock for issuance in the Unit Financing, (b) authorize a reverse split of the Common Stock
in a ratio to be agreed upon in accordance with Nevada law, (c) authorize a series of junior preferred stock to be issued to the
holders of the Company&rsquo;s outstanding Convertible Senior Subordinated Secured Notes and (d) provide for the indemnification
of directors in such manner that as is satisfactory to the Purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Prior
to the First Closing, the Board approved the Unit Financing, the terms of the Purchase Agreement and Notes as well as, subject
to, among other things, the finalization of the documents relating to the Senior Preferred and the proposed Credit Facility, the
proposed terms of the Senior Preferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Second Closing is subject to customary closing conditions. In addition, the Company&rsquo;s obligation to consummate the Second
Closing is subject to (a) the Purchaser having executed and delivered to the Company a term sheet setting forth the terms and
conditions of the Credit Facility which is acceptable to the Company and the Purchaser (the &ldquo;<U>Credit Facility Term Sheet</U>&rdquo;)
and (b) the Company having entered into a new employment agreement with Michael Salaman on terms acceptable to the Company, Mr.
Salaman and the Purchaser. Further, the Purchaser&rsquo;s obligation to consummate the Second Closing is subject to (a) the Company
having filed with the Secretary of State of the State of Nevada a Certificate of Designations, in form and substance satisfactory
to the Purchaser, setting forth the rights, privileges and preferences of the Senior Preferred, (b) the Company having received
and delivered to the Purchaser an opinion (the &ldquo;<U>Fairness Opinion</U>&rdquo;) to the effect that, as of the date of the
Second Closing, the consideration to be received by the Company in respect of the issuance of the Securities to the Purchaser
and the other transactions contemplated by the Purchase Agreement and the related documents is fair to the Company from a financial
point of view, (c) the officers and directors of the Company having entered into written agreements to vote in favor of the Company
proposals at the Stockholders Meeting, (d) the Company having executed and delivered to the Purchaser a registration rights agreement,
in form and substance satisfactory to the Purchaser, providing customary senior demand and piggyback registration rights with
respect to the registration of the shares of Common Stock comprising the Equity Units and (e) the Company having executed and
delivered to the Purchaser the Credit Facility Term Sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Third Closing is subject to customary closing conditions. In addition, the Company&rsquo;s obligation to consummate the Third
Closing is subject to the Purchaser having executed and delivered to the Company definitive agreements with respect to the Senior
Credit Facility. Further, the Purchaser&rsquo;s obligation to consummate the Third Closing is subject to (a) each of the Company&rsquo;s
proposals having been approved by the stockholders of the Company at the Stockholders Meeting, (b) the Company having filed the
Amended and Restated Charter with the Secretary of State of the State of Nevada and the filing shall have been accepted, (c) the
Company shall have executed and delivered to the Purchaser definitive agreements with respect to the Senior Credit Facility or
shall have entered into an alternative credit facility in an amount and on terms reasonably acceptable to the Purchaser and (d)
the Company&rsquo;s outstanding Convertible Senior Subordinated Secured Notes shall convert into junior preferred stock as described
in Item 2.03 of this Current Report on Form 8-K which is incorporated herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Purchase Agreement provides that, during the period between the date of the Purchase Agreement and the closing of the Unit Financing
or while the Notes are outstanding, the Company will operate its business in the ordinary course. Additionally, during such period,
the Company is restricted from taking certain actions without obtaining the prior consent of the Purchaser as the holder of the
Notes, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(i)
the acquisition of the Company by another entity (other than the Purchaser or any of its affiliates) by means of any transaction
or series of related transactions after the consummation of which the holders of the voting securities of the Company outstanding
immediately prior to such transaction or series of related transactions own, directly or indirectly, less than a majority of the
total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity
(or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary of the Company immediately following
such acquisition, its parent) immediately after such transaction or series of related transactions;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(ii)
the direct or indirect sale, lease, exclusive license, assignment, transfer, conveyance or other disposition by the Company of
all or substantially all of its assets or intellectual property, in one or a series of related transactions, except to a wholly-owned
subsidiary of the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(iii)
any acquisition or disposition (including licensing) of any business or assets including any Company intellectual property, except
in the ordinary course of business;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(iv)
the liquidation, dissolution or winding-up of the business and affairs of the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(v)
any capital expenditure exceeding amounts provided for in the Approved Budget or any use of proceeds from the sale of the Securities
that is not set forth in the Approved Budget;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(vi)
enter into any agreement or arrangement to incur any indebtedness, other than trade indebtedness incurred in the ordinary course
of business;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(vii)
enter into any agreement or arrangement that would result in the creation of any lien on any of the assets of the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(viii)
the direct or indirect purchase, lease, license, assumption or other acquisition by the Company of any material assets, including
any intellectual property, in one or a series of related transactions;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(ix)
purchase for cancellation or otherwise retire or pay off any of its outstanding shares of capital stock, or rights, options or
warrants to subscribe for, purchase or otherwise acquire stock, or evidences of indebtedness or other securities convertible into
or exchangeable for stock (except for the repurchases at cost from employees or consultants pursuant to written agreements upon
the occurrence of certain events (including the termination of employment));</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(x)
other than as contemplated by the Purchase Agreement, and except for certain specified issuances, the creation, modification or
issuance of capital stock or securities convertible into capital stock;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xi)
other than as contemplated by the Purchase Agreement, amend, alter or repeal any provision of the Company&rsquo;s Articles of
Incorporation or Bylaws;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xii)
declare or pay any dividends or make any distribution on any of its outstanding shares of capital stock;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xiii)
the appointment or dismissal of any executive officers of the Company, and any material changes to the compensation payable to
any of the executive officers or directors of the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xiv)
other than as contemplated by the Purchase Agreement, increase or decrease the number of directors constituting the entire Board,
or create any committee of the Board;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xv)
other than certain specified transactions,<B> </B>enter into any transaction, or make any amendment thereto, with any director
or officer of the Company, or any immediate family member or affiliate of any director or officer of the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xvi)
enter into joint ventures or partnerships, or establish any non-wholly-owned subsidiaries;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xvii)
any change to the Company&rsquo;s independent accountants or attorneys; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 5.05pt 0pt 4.3pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(xviii)
approve any operating capital budgets for any period of the Company, or, once such budget has been approved by Purchaser, make
any changes to such budget.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Purchase Agreement contains certain termination rights for both the Company and Purchaser. Specifically, the Purchase Agreement
can be terminated:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(i)
by mutual written consent of the Purchaser and the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(ii)
by the Purchaser by written notice to the Company, if the Second Closing has not been consummated on or before August 28, 2012;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(iii)
by the Purchaser by written notice to the Company, if the Third Closing has not been consummated on or before October 20, 2012;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(iv)
by either the Purchaser or the Company, upon written notice to the other party, if any final, non-appealable law or order, writ,
injunction, judgment, decree or ruling enacted, promulgated, issued or entered by any governmental body shall be in effect having
the effect of making illegal, permanently restraining, enjoining or prohibiting the consummation of the transaction contemplated
by the Purchase Agreement and the other related documents;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(v)
by either the Purchaser or the Company, upon written notice to the other party, if the Stockholders Meeting contemplated by the
Purchase Agreement is duly convened and the stockholders of the Company shall not have approved the proposals of the Company at
the Stockholders Meeting or at any adjournment or postponement thereof;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left"><FONT STYLE="color: black">(vi)
by the Purchaser, upon written notice to the Company, if:</FONT> <FONT STYLE="color: black">(a) the Board shall not have approved
the transaction documents to be executed at the Second Closing and the transactions to be consummated at the Second Closing (or
the Board has revoked such approval) on or prior to October 20, 2012; (b) the Board shall not have approved the transaction documents
to be executed at the Third Closing and the transactions to be consummated at the Third Closing (or the Board has revoked such
approval) on or prior to the October 20, 2012; (c) Board shall have reversed or revoked its recommendation that the stockholders
approve the matters relating to the transaction proposed at the Stockholders Meeting; (d) the Board or any committee thereof shall
have approved, endorsed or recommended any alternative transaction; (e) the Company shall have executed any contract relating
to any alternative transaction; (f) a tender or exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its security holders, within ten (10) business days after the commencement of such tender
or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer; or (g) the Company
shall have materially breached its obligations with respect to the non-solicitation or encouragement of competing proposals; and</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 1in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(vii)
by the Purchaser, upon written notice to the Company, if there shall have been a breach of (a) any covenant or agreement on the
part of the Company set forth in the Purchase Agreement; or (b) any representation or warranty of the Company set forth in the
Purchase Agreement shall have been inaccurate when made or, if not made as of a specific date, shall have become inaccurate, that
would, in the case of both clauses (a) or (b), prevent the consummation of the transactions contemplated by the Purchase Agreement
and the related documents, or, if curable, is not cured within twenty (20) business days after the Company&rsquo;s receipt of
written notice thereof from the Purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Purchase Agreement also prohibits the Company from soliciting or encouraging competing proposals. However, the Company may,
on the terms and subject to the conditions set forth in the Purchase Agreement, provide information to, and negotiate with, a
third party that makes an unsolicited proposal that the Board determines it is required to do in the exercise of its
fiduciary duties. The Purchase Agreement provides that, upon termination of the Purchase Agreement by the Purchaser because:
(i) the Board shall not have approved the transaction documents to be executed at the Second Closing and the transactions to
be consummated at the Second Closing (or the Board has revoked such approval) on or prior to October 20, 2012; (ii) the Board
shall not have approved the transaction documents to be executed at the Third Closing and the transactions to be consummated
at the Third Closing (or the Board has revoked such approval) on or prior to the October 20, 2012; (iii) the Board shall have
reversed or revoked its recommendation that the stockholders approve the matters relating to the transaction proposed at the
Stockholders Meeting; (iv) the Board or any committee thereof shall have approved, endorsed or recommended any alternative
transaction; (v) the Company shall have executed any contract relating to any alternative transaction; (vi) a tender or
exchange offer relating to securities of the Company shall have been commenced and the Company shall not have sent to its
security holders, within ten (10) business days after the commencement of such tender or exchange offer, a statement
disclosing that the Company recommends rejection of such tender or exchange offer; or (vii) the Company shall have materially
breached its obligations with respect to the non-solicitation or encouragement of competing proposals, the Company will pay
Purchaser a termination fee of $750,000 and reimbursement of all reasonable fees and out-of-pocket expenses of the
Purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Michael
Salaman, the Company&rsquo;s CEO and a director, is a minority investor in Trim Capital. Effective as of the First Closing, the
Company entered into consulting agreements (the &ldquo;<U>Consulting Agreements</U>&rdquo;) with Mr. Marc Cummins and a company
affiliated with Mr. William Apfelbaum, pursuant to which each of them will receive a monthly consulting fee of $10,000 during
a term commencing on June 28, 2012 and continuing in effect until the Notes are paid in full or converted into Equity Units (unless
earlier terminated in accordance with their terms). Mr. Cummins is the managing member of the Purchaser and Mr. Apfelbaum is a
minority member. It is anticipated that Messrs. Cummins and Apfelbaum will be elected as members of the Board as nominees of the
holders of the Senior Preferred in connection with the Third Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Purchase Agreement has been included as an exhibit to this Current Report on Form 8-K to provide investors and security holders
with information regarding its terms. It is not intended to provide any other factual information about the Company. The representations,
warranties and covenants contained in the Purchase Agreement were made only for purposes of that agreement and as of specific
dates, were solely for the benefit of the parties to the Purchase Agreement, and may be subject to limitations agreed upon by
the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual
risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards
of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party
beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or condition of the Company, the Purchaser or any of their respective
subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change
after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company&rsquo;s
public disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">A
copy of each of the form of the Initial Note, the Purchase Agreement, the Security Agreement, the IP Security Agreement, and each
of the Consulting Agreements is attached hereto as Exhibits 4.1, 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, and is incorporated
herein by reference. The foregoing summary of the transaction contemplated by the Purchase Agreement and the documents and instruments
to be executed and/or issued in connection therewith, does not purport to be complete and is qualified in its entirety by reference
to the definitive transaction documents, copies of which are attached as exhibits to this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Additional
Information About this Transaction</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.3pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">In
connection with the proposed transaction, Skinny Nutritional Corp. will prepare and file with the Securities and Exchange Commission
(the &ldquo;<U>SEC</U>&rdquo;) a proxy statement for its stockholders. The Company will mail the proxy statement to its stockholders.
The proxy statement will contain information about Skinny Nutritional, the proposed transaction and related matters. STOCKHOLDERS
ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT IS AVAILABLE, AS IT WILL CONTAIN IMPORTANT INFORMATION THAT STOCKHOLDERS
SHOULD CONSIDER BEFORE MAKING A DECISION ABOUT THE TRANSACTION. In addition to receiving the proxy statement from Skinny Nutritional
by mail, stockholders will be able to obtain the proxy statement, as well as other filings containing information about Skinny
Nutritional, without charge, from the SEC&rsquo;s website at www.sec.gov or, without charge, from the Company&rsquo;s website
at www.skinnywater.com or by directing such request to Skinny Nutritional.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Proxy
Solicitation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Skinny
Nutritional Corp. and its directors, executive officers and certain other members of management and employees may be soliciting
proxies from Skinny Nutritional stockholders in favor of the transaction. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of the Skinny Nutritional stockholders in connection with the
proposed transaction will be set forth in the proxy statement when it is filed with the SEC. You can find information about the
Company&rsquo;s executive officers and directors in its Annual Report on Form 10-K filed with the SEC on April&nbsp;16, 2012.
You can obtain free copies of these documents from Skinny Nutritional using the above contact information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Ancillary
Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">In
connection with the Unit Financing, the Company entered into agreements with the holders of 36,666,667 Common Stock Purchase Warrants
(the &ldquo;<U>Warrant Non-Exercise Agreement</U>&rdquo;) pursuant to which such persons have agreed that such Common Stock Purchase
Warrants are not exercisable until the first to occur of (i) the termination of the Unit Financing prior to the Second Closing
or (ii) the Company&rsquo;s stockholders having approved an increase in the number of shares of Common Stock authorized for issuance
under the Company&rsquo;s Articles of Incorporation, as amended, in such an amount so as to enable the Company to have a sufficient
number of available authorized but unissued shares of Common Stock to deliver upon the exercise of the Warrants after giving effect
to the transactions contemplated by the Unit Financing and the Company having filed the amendment to its Articles of Incorporation
with the Secretary of State of the State of Nevada in a form accepted for filing. In addition, in consideration of the execution
by the holders of these Warrants, the Company agreed to seek Board approval to lower the exercise price of the Warrants that are
subject to the Warrant Non-Exercise Agreements to a price to be determined upon the mutual agreement of the Company and each holder
of such Warrants. The enforceability of the Warrant Non-Exercise Agreement is not subject to any agreement to modify the exercise
price of the Warrants. Of the affected Warrants (i) 16,666,667are held by Mr. William Apfelbaum, a minority investor in Trim Capital,
LLC, with whom the Company entered into a Consulting Agreement in connection with the First Closing, and who is anticipated to
be nominated for election to the Board at its next annual meeting of stockholders and (ii) 20,000,000 are held by Mr. Jon Bakhshi
an individual stockholder and former consultant to the Company that is the holder of more that 5% of the Company&rsquo;s outstanding
shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">A
copy of the form of the Warrant Non-Exercise Agreement is attached hereto as Exhibit 10.6 and is incorporated herein by reference.
The foregoing summary of the Warrant Non-Exercise Agreement does not purport to be complete and is qualified in its entirety by
reference to the form of such agreement attached as an exhibit to this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Transition
of Chief Financial Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">On
June 28, 2012, the Company also executed a separation agreement with Donald J. McDonald, its former chief financial officer, regarding
the terms of the termination of his employment agreement and his departure from the Company.&nbsp;The separation agreement is
described in greater detail below in Item 5.02 of this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>New
Lease</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">On
June 29, 2012, the Company entered into a new one year lease with Kalmon Dolgin Affiliates, Inc., as landlord, to commence on
July 1, 2012, for approximately 1,523 square feet of office space located at Spring Mill Corporate Center, 1100 East Hector Street,
Suite 391, Conshohocken, PA 19428. The total annual rent due under the lease is approximately $34,267, plus any additional rent,
as may be provided for in the lease agreement. The Company will use the space for its headquarters and the Company believes that
the amount of space is sufficient for such needs for the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 1.02</B></TD><TD STYLE="text-align: left"><B>Termination of a Material Definitive Agreement.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">As
described in Item&nbsp;5.02 of this Current Report, the Company&rsquo;s employment of Donald J. McDonald, its former Chief Financial
Officer ceased as of June 28, 2012 and his employment agreement dated August 16, 2010, was deemed terminated as of such date.
To the extent required by Item&nbsp;1.02 of Form&nbsp;8-K, the information contained or incorporated by reference in Item&nbsp;1.01
and Item 5.02 of this Current Report on Form 8-K regarding Mr. McDonald is incorporated by reference in this Item&nbsp;1.02.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 2.03</B></TD><TD STYLE="text-align: left"><B>Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Notes
Issuable in the Unit Financing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
information disclosed in Item&nbsp;1.01 of this Current Report on Form 8-K concerning the Unit Financing and issuance of the Initial
Note is incorporated by reference into this Item&nbsp;2.03.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Notes bear interest at a rate of 15%&nbsp;per annum and are secured by all of the assets of the Company. The Initial Note is due
and payable on the earlier of June 28, 2013, or upon an acceleration in accordance with its terms<FONT STYLE="color: black">;
<U>provided</U>, that if the Company issues the Remaining Note at a Second Closing, then the maturity date of the Initial Note
shall be deemed automatically revised and amended to correspond to the maturity date under the Remaining Note, which will be six
months following the Second Closing.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company may prepay the Notes, without penalty or premium, at any time and from time to time. The obligations of the Company under
the Notes are secured pursuant to the Security Agreement and the IP Security Agreement. Payment of the obligations under the Notes
may be accelerated, in general, upon any of the following events: (i)&nbsp;an uncured failure to pay any amount under the Notes
when due; (ii)&nbsp;an uncured breach by the Company of its obligations under any of the offering documents; (iii)&nbsp;a material
breach by the Company of its representations and warranties contained in the offering documents; (iv)&nbsp;certain proceedings
are commenced against the collateral securing the payment of the Notes; (v)&nbsp;certain material judgments are rendered against
the Company; and (vi)&nbsp;the occurrence of certain voluntary and involuntary bankruptcy proceedings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Amendments
to Other Notes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">In
connection with the Unit Financing, the Company entered into agreements with United Capital Funding Corp. and Michael Salaman,
its Chief Executive Officer, to amend the promissory notes issued to them on June 7, 2012 in the principal amounts of $300,000
and $50,000, respectively. Pursuant to these amendment agreements, each note holder agreed that the term of the note be extended
to be equal to the earlier of (i) 90 days from the issue date or (ii) the date of the second closing of the Unit Financing. In
addition, Mr. Salaman agreed to subordinate his note to the obligations of the Company under the notes issued in the Unit Financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
descriptions of the agreements to amend the promissory notes previously issued to United Capital Funding Corp. and Mr. Salaman
are qualified in their entirety by reference to the full text of such agreements, which are filed as Exhibits 4.2 and 4.3, respectively,
to this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">As
previously disclosed, the Company had sold an aggregate principal amount of $705,000 of Convertible Senior Subordinated Secured
Notes (the &ldquo;<U>Bridge Notes</U>&rdquo;) in a private placement that expired March 1, 2012. The Bridge Notes provided that
they would convert into either (i) shares of Common Stock at the initial conversion rate of $0.03 per share or (ii) the securities
issued by the Company in a subsequent financing at a rate equal to a 20% discount of the purchase price of such subsequent financing.
In connection with the Unit Financing, a majority of the holders of the Bridge Notes agreed to amend their notes, which amendment
provides that (x) the Bridge Notes will not convert into the securities issued in the Unit Financing, (y) the conversion rate
of the Bridge Notes and the exercise price of the warrants issued with the Bridge Notes will not be adjusted due to the Unit Financing;
and (z) the holders will convert the Bridge Notes into shares of Common Stock or a newly created junior preferred stock of the
Company (the &ldquo;<U>Junior Preferred</U>&rdquo;) upon the Third Closing. In addition, holders of an aggregate amount of $680,000
of the Bridge Notes also agreed to waive the Company&rsquo;s previously reported failure to timely pay the first interest installment
due on such notes and have consented to allow the Company to issue it shares of Common Stock in satisfaction of such interest
payment pursuant to the terms of the Bridge Notes. The Company will issue a maximum of 1,747,515 shares of Common Stock to the
holders of the Bridge Notes that agreed to waive the Company&rsquo;s failure to timely pay interest in cash. The proposed terms
of the Junior Preferred include the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(i)
the Junior Preferred will be issued with an initial issuance price of $846,000 which is 120% of the principal amount of the Bridge
Notes;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(ii)
the Junior Preferred will be subordinated in rights to dividends and on liquidation and redemption to the rights of the holders
of the Senior Preferred;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(iii)
the Junior Preferred will be subject to mandatory redemption at the original issue price plus accrued but unpaid dividends on
the date which is 5 years from date of issue, subject to the prior redemption in full of the Senior Preferred;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(iv)
upon a liquidation, dissolution or deemed liquidity event (discussed below), the holders of the Junior Preferred will be entitled
to receive the original issue price of the Junior Preferred plus accrued but unpaid dividends, subject to the prior payment of
any liquidation preference to the holders of the Senior Preferred;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(v)
for purposes of the Junior Preferred, a deemed liquidity event shall generally be a sale or exclusive lease of all or substantially
all of the assets of the Company or an acquisition of the Company by another person or entity by means of any transaction or series
of transactions (including any reorganization, merger, consolidation or share transfer) where the stockholders of the Company
immediately preceding such transaction own, following such transaction, less than a majority of the voting securities of the Company;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(vi)
the Junior Preferred shall be entitled to receive dividends at a rate of 6% per annum, payable on the earliest of (a) the closing
of a qualified public offering, as will be defined in the Amended and Restated Charter (or a certificate of designations filed
with the Secretary of State of the State of Nevada setting forth the terms and conditions of the Junior Preferred) (a &ldquo;<U>Qualified
Public Offering</U>&rdquo;), (b) the liquidation or dissolution of the Company or the closing of a deemed liquidity event, (c)
the redemption of the Junior Preferred or (d) semi-annually to the extent that funds are legally available therefor as determined
by the Board in good faith, in any case, junior in right of payment to the Senior Preferred;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(vii)
the Junior Preferred will be convertible into the Company&rsquo;s Common Stock representing 6.1% of the issued and outstanding
Common Stock as of the Third Closing. The Junior Preferred will be convertible at any time at option of holder and will be subject
to mandatory conversion into Common Stock upon the completion of a Qualified Public Offering or upon the affirmative vote of the
holders of the majority of the outstanding shares of Junior Preferred;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(viii)
the number of shares of Common Stock issuable upon conversion of the Junior Preferred shall be subject to adjustment for corporate
events such as stock splits, mergers, consolidations and stock dividends;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(ix)
holders of Junior Preferred shall be entitled to vote with holders of Common Stock on an as converted basis on all matters submitted
to a vote of shareholders, and as may be required under Nevada law; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0.75in; text-align: left">(x)
holders of Junior Preferred shall be entitled to certain piggyback registration rights to provide for the Company to register
the shares of Common Stock underlying the Junior Preferred for resale by the holders under the Securities Act of 1933, as amended;
provided that, such rights shall be subordinated to the registration rights of the investors in the Senior Preferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-indent: 58.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
foregoing summary of the Junior Preferred does not purport to be complete and is qualified in its entirety by reference to the
Amended and Restated Charter which will be included in the proxy statement to be filed by the Company in connection with the Third
Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
descriptions of the agreements to amend the Bridge Notes and of the waivers granted by holders of the Bridge Notes are qualified
in their entirety by reference to the full text of such agreements, which are filed as Exhibits 4.4 and 4.5, respectively, to
this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 3.02</B></TD><TD STYLE="text-align: left"><B>Unregistered Sales of Equity Securities.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company agreed to issue the securities to the Purchaser in the Unit Financing in reliance upon the exemption from registration
under Section&nbsp;4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. The information
disclosed in Item&nbsp;1.01 concerning the Unit Financing is incorporated into this Item&nbsp;3.02 in its entirety.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company hereby incorporates by reference into this Item 3.02 of the Current Report on Form 8-K from Item 5.02 of this Current
Report on Form 8-K the information regarding the Company&rsquo;s agreement to issue additional shares of Common Stock to Mr. McDonald
following the effective date of his departure from the Company, the Company&rsquo;s agreement to issue 750,000 shares of Common
Stock to James Arsenault in connection with this appointment as interim Chief Financial Officer, and the Board&rsquo;s conditional
grant of 10,075,000 shares of Common Stock to certain employees of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company hereby incorporates by reference into this Item 3.02 of the Current Report on Form 8-K from Item 2.03 of this Current
Report on Form 8-K the information regarding the Company&rsquo;s agreement to issue a maximum of 1,747,515 shares of Common Stock
to holders of Bridge Notes in payment of interest due on such Bridge Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company agreed to issue to certain consultants and other service provides shares of Common Stock in consideration of their
performance of services to the Company or agreement to perform certain services to the Company. The Company entered into an
agreement with Bryant Park Capital Securities, Inc., to issue it 1,000,000 shares of Common Stock in full and complete
satisfaction of all compensation that remained due and owing to them arising out of their performance of services to the
Company in connection with the Company&rsquo;s sale of the Bridge Notes. The parties agreed that such shares of Common Stock
would be issued upon the first to occur of either the termination of the Purchase Agreement prior to the Second Closing or
upon the Third Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company entered into an agreement with Jon Bakhshi, a former consultant to the Company and a holder of more than 5.0% of the Company&rsquo;s
outstanding Common Stock, to issue to him an additional 10,000,000 shares of Common Stock (subject to adjustment for splits, stock
dividends, recapitalizations and other similar transactions) in consideration of the grant by him to the Company of a full general
release of any claims held by him arising out of, among other things, the consulting agreement. In addition, Mr. Bakhshi agreed
to vote his shares of Common Stock in favor of the Company&rsquo;s transactions with the Purchaser. The issuance of the additional
shares to Mr. Bakhshi is, however, subject to the first to occur of either (i) the termination of the Purchase Agreement prior
to the Second Closing or (ii) the filing by the Company with the Secretary of State of the State of Nevada of an amendment to
its Articles of Incorporation to increase the number of authorized shares of Common Stock that the Company may issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company&rsquo;s issuance and agreements to issue the shares of Common Stock as described in this Item 3.02 of this Current Report
on Form 8-K was made in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended,
inasmuch as the Company believed the acquirers are accredited investors and the securities will be issued without any form of
general solicitation or general advertising.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 3.03</B></TD><TD STYLE="text-align: left"><B>Material Modification to Rights of Security Holders.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
information disclosed in Items 1.01 and 5.03 of this Current Report on Form 8-K, including the description of the terms of the
Unit Financing and the provisions of the Bridge Notes and Senior Preferred, is incorporated by reference into this Item&nbsp;3.03.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 5.01</B></TD><TD STYLE="text-align: left"><B>Change in Control.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">To
the extent required to be reported pursuant to this Item 5.01 of the Current Report on Form 8-K, the information regarding the
Unit Financing described in the other sections of this Current Report on Form 8-K, including without limitation, the disclosures
in Items 1.01, 2.03, and 5.03 of this Current Report on Form 8-K, are incorporated herein by reference.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 5.02</B></TD><TD STYLE="text-align: left"><B>Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: center"><B>(b)</B></TD><TD STYLE="text-align: left">As of June 28, 2012, Donald J. McDonald&rsquo;s employment
as the Company&rsquo;s Chief Financial Officer was terminated. In connection with that event, the Company and Mr. McDonald entered
into an Agreement and General Release (the &ldquo;<U>Separation Agreement</U>&rdquo;) regarding the terms of the termination of
his employment agreement and his departure from the Company.&nbsp;Mr. McDonald also agreed to resign as a member of the Board
effective with the cessation of his employment. The Separation Agreement provides that Mr.&nbsp;McDonald will receive the following
in addition to his accrued compensation payable through the termination of his service:</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&bull;
A severance payment equal to his base compensation of $240,000 per annum (the &ldquo;<U>Severance Payment</U>&rdquo;), payable
in equal installments on each of the Company&rsquo;s regular pay dates during the period commencing on the first regular executive
pay date following his termination and continuing to August 16, 2014;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&bull;
the Company, in its absolute discretion, may elect to pay up to $100,000 per annum of the Severance Payment in shares of the Company&rsquo;s
Common Stock, issued as of each of the regular pay dates, at a value based on the fair market value of the Company&rsquo;s Common
Stock on the issue date;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&bull;
the Company will issue 2,000,000 shares of the Company&rsquo;s Common Stock to and agreed that all unvested restricted stock awards
held by him as of the termination of his employment, which is 1,000,000 shares, shall be deemed vested;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&bull;
coverage for COBRA benefits to the maximum amount permitted by law, in accordance with, and subject to, the terms and conditions
of his employment agreement; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">&bull;
reimbursement for reasonable legal fees and costs of negotiating the Separation Agreement and payment of an amount equal to $24,000
for unused vacation time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">In
addition, in the Separation Agreement, Mr. McDonald agreed to vote his shares of Common Stock in favor of the Company&rsquo;s
transactions with the Purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
description of the Separation Agreement is qualified in its entirety by reference to the full text of such agreement, which is
filed as Exhibit 10.7 to this Current Report on Form 8-K.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: center"><B>(c)</B></TD><TD STYLE="text-align: left">Effective as of June 28, 2012, the Company appointed
James Arsenault as its interim Chief Financial Officer, treasurer and principal accounting officer effective immediately. There
are no family relationships between Mr. Arsenault and any director, executive officer, or any person nominated or chosen by the
Company to become a director or executive officer. No information is required to be disclosed with respect to Mr. Arsenault pursuant
to Item&nbsp;404(a) of Regulation&nbsp;S-K other than with respect to the terms of his employment with the Company, which is summarized
below.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-indent: -0.5in; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Biographical
Information.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>James
Arsenault</I> was named interim Chief Financial Officer effective as of June 28, 2012. Mr. Arsenault has served as the Company&rsquo;s
controller from September 2008 until the present. Prior to joining the Company, Mr. Arsenault held several senior positions in
finance and operations over a 20 year career with various divisions and/or subsidiaries of the Tom James Company. From September
2000 to September 2008, Mr. Arsenault served as the chief financial officer and director of operations of IAG Distribution and
was the chief financial officer and president of Atlas Company of Boston from February 1994 to August 2000. During these periods,
he also acted in an advisory capacity with the Tom James Company regarding its merger and acquisition activities. Mr. Arsenault&rsquo;s
career in finance and operation s began in 1989 where he was the controller of the Asher Company, a position he held until January
1994. Mr. Arsenault is 46 years old, earned a B.S. in Accounting from Bryant University and holds a Masters Degree in Business
Administration from Anna Maria College.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.45pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Employment
Arrangements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Company has not entered into an employment agreement with Mr. Arsenault regarding his appointment as interim Chief Financial Officer.
The Company, however, will provide Mr. Arsenault with the following compensation effective with his appointment as interim Chief
Financial Officer: (a) base salary of $140,000 per annum; (b) eligibility to receive an annual cash bonus, the amount of which
to be determined in the discretion of the Board or its designated committee; (c) an initial grant of 750,000 restricted shares
of Common Stock (subject to adjustment for splits, stock dividends, recapitalizations and other similar transactions), which shares
shall be fully vested upon issuance, provided that the issuance of such shares is subject to the filing by the Company with the
Secretary of State of the State of Nevada of an amendment to its Articles of Incorporation to increase the number of authorized
shares of Common Stock of the Company or the earlier termination of the Unit Financing; (d) a monthly car allowance of $500; and
(e) participation at the same level as other senior executive officers of the Company in any group medical, health disability,
retirement or other similar plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: center"><B>(e)</B></TD><TD STYLE="text-align: left">In connection with its consideration of the Unit Financing,
the Board determined that the vesting conditions of the Company&rsquo;s restricted stock award granted to Michael Salaman as of
January 3, 2011, for 2,000,000 shares of Common Stock, of which 1,000,000 shares remain subject to vesting, shall immediately
terminate and such award shall become vested in full upon the occurrence of a change in control of the Company, which shall include
the consummation of the Third Closing of the Unit Financing.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Board also approved, subject to the filing by the Company with the Secretary of State of the State of Nevada of an amendment to
its Articles of Incorporation following the approval by the Company&rsquo;s stockholders of an amendment to the Company&rsquo;s
Articles of Incorporation increasing the number of authorized shares of Common Stock that the Company is authorized to issue,
the grant of an aggregate of 10,075,000 shares of restricted Common Stock (subject to adjustment for splits, stock dividends,
recapitalizations and other similar transactions) to certain of its employees, including the grant of 2,000,000 shares to the
Company&rsquo;s Chief Executive Officer and 2,075,000 to its interim Chief Financial Officer. These awards will be subject to
vesting conditions providing that 25% of each award will vest following the increase in the Company&rsquo;s authorized Common
Stock, and the remainder vesting in equal annual installments on each of the subsequent three anniversary dates, except for the
shares issuable to Mr. Salaman, which will vest immediately following the increase in the Company&rsquo;s authorized Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 5.03</B></TD><TD STYLE="text-align: left"><B>Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Amended
and Restated Articles of Incorporation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Pursuant
to the terms of the Purchase Agreement entered into in the Unit Financing, the Company agreed to seek stockholder approval for
the purpose of, among other things, adopting the Amended and Restated Charter in order to, without limitation, authorize: (a)
a sufficient number shares of Common Stock for issuance in the Unit Financing, upon conversion of the Junior Preferred (as defined
below), and pursuant to a new equity compensation plan, and other corporate purposes, (b) a reverse split of the Common Stock
in a ratio to be agreed upon in accordance with Nevada law, (c) the Junior Preferred, and (d) provide for the indemnification
of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Senior
Preferred</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">As
part of the Second Closing, the Company will establish the Senior Preferred. The Company will file the Senior Preferred Designations
prior to the Second Closing date which shall serve to amend the Company&rsquo;s Articles of Incorporation in order to establish
the terms of the Senior Preferred. The Company will issue an aggregate of $9,000,000 of Senior Preferred in total at the Second
and Third Closings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Liquidation
Preference</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Upon
any liquidation, dissolution or winding up of the Company, the holders of Senior Preferred shall be entitled to receive, in preference
to any distribution to the holders of any Common Stock or any other equity security of the Company, an amount per share equal
to the original issue price of the Senior Preferred, plus accrued and unpaid dividends. A liquidation event will include certain
deemed liquidation events, such as the sale or exclusive lease of all or substantially all of the assets of the Company and the
acquisition of the Company by another person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Redemption</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">At
the election of the holders of at least a majority of the Senior Preferred any time after the fifth anniversary of the Third Closing,
the Company shall redeem the outstanding Senior Preferred at a price per share equal to the original issue price plus accrued
but unpaid dividends. In the event that the Senior Preferred is not redeemed, then the holders of the Senior Preferred will be
entitled to (i) elect a majority of the Board (to the extent that designees of the holders of the Senior Preferred do not already
constitute a majority of the Board) and/or (ii) cause the Company to retain an independent investment banking firm to explore
strategic alternatives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Dividends</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Senior Preferred will carry a cash dividend of 15% of the original issue price per annum, which will be cumulative, shall compound
semi-annually and shall be payable on the earliest of (i) the closing of a qualified public offering, (ii) a liquidation event,
(iii) the redemption of the Senior Preferred, or (iv) semi-annually to the extent that funds are legally available therefor. No
dividends may be paid on the Common Stock or any series of preferred stock ranking junior to or pari passu with the Senior Preferred
unless all accrued but unpaid dividends on the Senior Preferred have been paid in full.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Voting
and Board Rights</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
Senior Preferred shall have no voting rights except as specifically provided or as otherwise required by law. However, following
the Third Closing, the holders of the Senior Preferred, voting separately as a class, will be entitled to elect four members of
an expanded seven person Board (the &ldquo;<U>Preferred Directors</U>&rdquo;), and will vote together with the Common Stock holder
to elect the other three members, one of whom will be the Company&rsquo;s current CEO. The Preferred Directors shall have the
right to designate the Company&rsquo;s chairman.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><I>Protective
Provisions</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Under
the terms of the Senior Preferred, the Company will be restricted from taking certain actions without obtaining the prior consent
of the holders of the Senior Preferred, including: (i) any liquidation event; (ii) any material acquisition or disposition of
any business or assets (other than in the ordinary course); (iii) the redemption of any shares of capital stock other than the
Senior Preferred, except as specifically exempted; (iv) the creation, modification or issuance of capital stock or securities
which are convertible into capital stock, other than certain defined exemptions; (v) amending the Company&rsquo;s Articles of
Incorporation or Bylaws; and (vi) declaring dividends on any class of stock other than the Senior Preferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">Further,
as long as the Senior Preferred is outstanding, consent of a majority of the Preferred Directors shall be required for: (i) making
certain capital expenditures; (ii) incurring debt other than trade debt in the ordinary course; (iii) creating any liens on the
Company&rsquo;s assets; (iv) appointing or dismissing executive officers and making material changes to director and officer compensation;
(v) establishing subsidiaries; (vi) issuing securities in connection with certain transactions; and (vii) approving annual budgets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">The
foregoing summary of the Senior Preferred does not purport to be complete and is qualified in its entirety by reference to the
Certificate of Designation of Senior Preferred which will be included in the proxy statement to be filed by the Company in connection
with the Third Closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left"><B>Junior
Preferred</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4.85pt 0pt 4.5pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; margin-left: 0.75in; text-indent: 0in; text-align: left">As
described above in Item 2.03 of this Current Report on Form 8-K which is incorporated herein by reference, the Company&rsquo;s
current Bridge Notes, in the aggregate principal amount of $705,000, will convert into the Junior Preferred upon the Third Closing.
The Company expects that it will issue an aggregate of $846,000 of shares of Junior Preferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: left"><B>Item 9.01</B></TD><TD STYLE="text-align: left"><B>Financial Statements and Exhibits.</B></TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B>&#9;<B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in; text-align: left"></TD><TD STYLE="width: 0.75in; text-align: center">(d)</TD><TD STYLE="text-align: left">The following exhibit is filed herewith</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; margin-left: 0.75in">
<TR>
    <TD STYLE="width: 15%; vertical-align: top; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: left">Exhibit No.</TD>
    <TD STYLE="width: 85%; border-bottom: windowtext 1pt solid; padding-left: 3pt; font-weight: bold; text-align: left">Description</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.1</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Note</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.2</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Amendment Agreement to Senior Promissory Note held by United Corporate Funding Corp.</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.3</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Amendment Agreement to Senior Promissory Note held by Michael Salaman</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.4</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Amendment to Convertible Senior Subordinated Secured Notes and Subscription Agreement and Waiver Agreement</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.5</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Note Waiver Agreement</TD></TR>
</TABLE>

<P STYLE="margin: 0; text-align: left">&nbsp;</P>

<P STYLE="margin: 0; text-align: left"></P>

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<P STYLE="margin: 0; text-align: left">&nbsp;</P>

<P STYLE="margin: 0; text-align: left">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 85%; margin-left: 0.75in">
<TR>
    <TD STYLE="vertical-align: top; text-align: left; width: 15%">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; width: 85%; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.1</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Securities Purchase Agreement between the Company and Trim Capital LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.2</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Security Agreement between the Company and Trim Capital LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.3</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Intellectual Property Security Agreement between the Company and Trim Capital LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.4</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Consulting Agreement with Marc Cummins</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.5</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Consulting Agreement with First Trilogy LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.6</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Warrant Non-Exercise Agreement</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.7</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Separation Agreement between the Company and Donald J. McDonald</TD></TR>
</TABLE>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 27pt; text-align: left">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>SIGNATURE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in">Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.5in"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 42%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 25%; text-align: left">&nbsp;</TD>
    <TD STYLE="width: 33%; font-weight: bold; text-align: left">Skinny Nutritional Corp.</TD></TR>
<TR>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">By:&nbsp; &nbsp;/s/ Michael Salaman</TD></TR>
<TR>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">Name: Michael Salaman</TD></TR>
<TR>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">Title: &nbsp;&nbsp;Chief Executive Officer</TD></TR>
<TR>
    <TD STYLE="text-align: left">&nbsp;Date: &nbsp; July 5, 2012</TD>
    <TD STYLE="text-align: left">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>EXHIBIT INDEX</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 15%; vertical-align: top; border-bottom: windowtext 1pt solid; font-weight: bold; text-align: left">Exhibit No.</TD>
    <TD STYLE="width: 85%; border-bottom: windowtext 1pt solid; padding-left: 3pt; font-weight: bold; text-align: left">Description</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.1</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Note</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.2</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Amendment Agreement to Senior Promissory Note held by United Corporate Funding Corp.</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.3</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Amendment Agreement to Senior Promissory Note held by Michael Salaman</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.4</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Amendment to Convertible Senior Subordinated Secured Notes and Subscription Agreement and Waiver Agreement</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">4.5</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Note Waiver Agreement</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.1</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Securities Purchase Agreement between the Company and Trim Capital LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.2</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Security Agreement between the Company and Trim Capital LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.3</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Intellectual Property Security Agreement between the Company and Trim Capital LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.4</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Consulting Agreement with Marc Cummins</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.5</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Consulting Agreement with First Trilogy LLC</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.6</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Form of Warrant Non-Exercise Agreement</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center">10.7</TD>
    <TD STYLE="padding-left: 3pt; text-align: left">Separation Agreement between the Company and Donald J. McDonald</TD></TR>
</TABLE>
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{"company-data": {"conformed-name": "Skinny Nutritional Corp.", "cik": "0001176325", "assigned-sic": "5141", "irs-number": "233100268", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-51313", "film-number": "12948932"}, "business-address": {"street1": "3 BALA PLAZA EAST", "street2": "SUITE 117", "city": "BALA CYNWYD", "state": "PA", "zip": "19004", "phone": "610-784-2000"}, "mail-address": {"street1": "3 BALA PLAZA EAST", "street2": "SUITE 117", "city": "BALA CYNWYD", "state": "PA", "zip": "19004"}, "former-company": {"former-conformed-name": "CREATIVE ENTERPRISES INTERNATIONAL INC", "date-changed": "20020625"}}
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
June 28, 2012
Skinny
Nutritional Corp.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER
:
0-51313
Nevada
88-0314792
(State or other jurisdiction of incorporation or
organization)
(I.R.S. Employer Identification No.)
1100 East Hector Street, Suite 391
Conshohocken, PA 19428
(Address and zip code of principal executive offices)
(610) 784-2000
(Registrant's telephone number, including area code
CHECK THE APPROPRIATE BOX BELOW IF THE FORM 8-K FILING IS INTENDED
        TO SIMULTANEOUSLY SATISFY THE FILING OBLIGATION OF THE REGISTRANT UNDER ANY OF THE FOLLOWING PROVISIONS:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
1
Item 1.01
Entry into a Material Definitive Agreement.
On
June 28, 2012, Skinny Nutritional Corp. (the "
Company
") and Trim Capital, LLC (the "
Purchaser
")
entered into a Securities Purchase Agreement (the "
Purchase Agreement
") relating to a financing transaction
for a maximum of $15,000,000 in total proceeds to the Company (the "
Unit Financing
"). The Unit Financing is
structured to occur in three separate closings, with each of the second and third closings subject to certain conditions. At the
first closing (the "
First Closing
") which was completed on June 28, 2012, the Company sold a $1,000,000 senior
secured bridge note (the "
Initial Note
") to the Purchaser.
At
the second closing (the "
Second Closing
"), the Purchaser will purchase an additional $3,000,000 of securities
of the Company, consisting of a combination of an additional senior secured bridge note (the "
Remaining Note
",
and together with the Initial Note, the "
Notes
") and equity units (the "
Equity Units
" and,
together with the Notes, the "
Securities
") consisting of shares of a to be authorized series of Senior Preferred
Stock of the Company ("
Senior Preferred
") and common stock of the Company ("
Common Stock
").
The Equity Units to be purchased at the Second Closing will consist of, in the aggregate (1) such number of shares of Senior Preferred
with an aggregate original issue price (the "
Second Closing Senior Preferred Price
") equal to the difference
between (x) $3,000,000 and (y) the principal amount of the Remaining Note and (2) such number of shares of Common Stock (the "
Second
Closing Common Stock Amount
") determined by multiplying (a) 65% of the projected number of shares of Common Stock to
be outstanding as of the date of the Third Closing on a fully diluted basis ("
Third Closing Fully Diluted Common Stock
")
by (b) a fraction, the numerator of which is the Second Closing Senior Preferred Price and the denominator of which is $9,000,000.
Under the Purchase Agreement, the Company agreed to reserve out of its authorized but unissued shares of Common Stock, for the
purpose of selling shares of Common Stock as part of the Equity Units at the Second Closing, at least 100 million shares of Common
Stock.
At
the third closing (the "
Third Closing
"), the Notes sold at the First and Second Closings will convert into
additional Equity Units, and, in addition, Purchaser will purchase $5,000,000 of additional Equity Units such that, after the
Third Closing, the Purchaser will own $9,000,000 of Senior Preferred and 65% of the Third Closing Fully Diluted Common Stock.
In addition, at the Third Closing, Purchaser will provide the Company with a $6,000,000 senior secured credit facility (the "
Credit
Facility
"). The Equity Units to be purchased at the Third Closing will consist, in the aggregate, of (x) a number of
shares of Senior Preferred Stock with an aggregate original issue price (the "
Third Closing Purchase Price
")
equal to $9,000,000 less the Second Closing Senior Preferred Price and (y) a number of shares of Common Stock determined by subtracting
the Second Closing Common Stock Amount from 65% of Third Closing Fully Diluted Common Stock. The aggregate purchase price of the
Equity Units issued in the Second Closing and the Third Closing shall be $9,000,000 including the outstanding principal amount
of, and accrued interest on, the Notes converted into the Equity Units as of the Third Closing.
In
accordance with the Purchase Agreement, the proceeds from the sale of the Securities shall be used by the Company in accordance
with a budget and use of proceeds approved by the Purchaser in writing (collectively, the "
Approved Budget
").
The
Notes are secured by a first priority lien on all of the Company's assets, other than the inventory and receivables of the
Company for which the Purchaser's lien is subordinated to the lien held by the Company's senior lender. The liens
were granted to the Purchaser by the Company pursuant to a Security Agreement and an Intellectual Property Security Agreement,
each dated as of June 28, 2012 (the "
Security Agreement
" and "
IP Security Agreement
", respectively).
The terms of the Notes are described in greater detail in Item 2.03 of this Current Report on Form 8-K, which is incorporated
herein by reference.
The
Senior Preferred Stock has not yet been authorized and, as set forth below, it is a condition to the Second Closing that the terms
of the Senior Preferred Stock be authorized and set forth in a Certificate of Designations to be filed with the Secretary of State
of the State of Nevada (the "
Senior Preferred Designations
"). Among the proposed terms of the Senior Preferred
Stock is that the Senior Preferred Stock will have no voting rights at the time of its issuance at the Second Closing; provided
that, following the Third Closing, the holders of the Senior Preferred Stock issued at the Second and Third Closings will be entitled
to elect four members of an expanded seven-member board of directors and will include certain protective provisions requiring
the consent of the holders of the Senior Preferred Stock for certain corporate actions. The proposed terms of the Senior Preferred
Stock are described in greater detail in Item 5.03 of this Current Report on Form 8-K, which is incorporated herein by reference.
2
Prior
to, and as a condition to, the Third Closing, a meeting of the stockholders of the Company will be held (the "
Stockholders
Meeting
") at which the stockholders of the Company will be asked to approve, among other things, an amended and restated
Articles of Incorporation in a form to be agreed upon between the Company and the Purchaser (the "
Amended and Restated
Charter
") which integrates into a single instrument all of the provisions of the Articles of Incorporation as in effect
and operative (including the terms of the Senior Preferred Designations) and amends such Articles of Incorporation in a manner
acceptable to the Board of Directors of the Company (the "
Board
") and the Purchaser, including to (a) authorize
a sufficient number shares of Common Stock for issuance in the Unit Financing, (b) authorize a reverse split of the Common Stock
in a ratio to be agreed upon in accordance with Nevada law, (c) authorize a series of junior preferred stock to be issued to the
holders of the Company's outstanding Convertible Senior Subordinated Secured Notes and (d) provide for the indemnification
of directors in such manner that as is satisfactory to the Purchaser.
Prior
to the First Closing, the Board approved the Unit Financing, the terms of the Purchase Agreement and Notes as well as, subject
to, among other things, the finalization of the documents relating to the Senior Preferred and the proposed Credit Facility, the
proposed terms of the Senior Preferred.
The
Second Closing is subject to customary closing conditions. In addition, the Company's obligation to consummate the Second
Closing is subject to (a) the Purchaser having executed and delivered to the Company a term sheet setting forth the terms and
conditions of the Credit Facility which is acceptable to the Company and the Purchaser (the "
Credit Facility Term Sheet
")
and (b) the Company having entered into a new employment agreement with Michael Salaman on terms acceptable to the Company, Mr.
Salaman and the Purchaser. Further, the Purchaser's obligation to consummate the Second Closing is subject to (a) the Company
having filed with the Secretary of State of the State of Nevada a Certificate of Designations, in form and substance satisfactory
to the Purchaser, setting forth the rights, privileges and preferences of the Senior Preferred, (b) the Company having received
and delivered to the Purchaser an opinion (the "
Fairness Opinion
") to the effect that, as of the date of the
Second Closing, the consideration to be received by the Company in respect of the issuance of the Securities to the Purchaser
and the other transactions contemplated by the Purchase Agreement and the related documents is fair to the Company from a financial
point of view, (c) the officers and directors of the Company having entered into written agreements to vote in favor of the Company
proposals at the Stockholders Meeting, (d) the Company having executed and delivered to the Purchaser a registration rights agreement,
in form and substance satisfactory to the Purchaser, providing customary senior demand and piggyback registration rights with
respect to the registration of the shares of Common Stock comprising the Equity Units and (e) the Company having executed and
delivered to the Purchaser the Credit Facility Term Sheet.
The
Third Closing is subject to customary closing conditions. In addition, the Company's obligation to consummate the Third
Closing is subject to the Purchaser having executed and delivered to the Company definitive agreements with respect to the Senior
Credit Facility. Further, the Purchaser's obligation to consummate the Third Closing is subject to (a) each of the Company's
proposals having been approved by the stockholders of the Company at the Stockholders Meeting, (b) the Company having filed the
Amended and Restated Charter with the Secretary of State of the State of Nevada and the filing shall have been accepted, (c) the
Company shall have executed and delivered to the Purchaser definitive agreements with respect to the Senior Credit Facility or
shall have entered into an alternative credit facility in an amount and on terms reasonably acceptable to the Purchaser and (d)
the Company's outstanding Convertible Senior Subordinated Secured Notes shall convert into junior preferred stock as described
in Item 2.03 of this Current Report on Form 8-K which is incorporated herein by reference.
The
Purchase Agreement provides that, during the period between the date of the Purchase Agreement and the closing of the Unit Financing
or while the Notes are outstanding, the Company will operate its business in the ordinary course. Additionally, during such period,
the Company is restricted from taking certain actions without obtaining the prior consent of the Purchaser as the holder of the
Notes, including:
(i)
the acquisition of the Company by another entity (other than the Purchaser or any of its affiliates) by means of any transaction
or series of related transactions after the consummation of which the holders of the voting securities of the Company outstanding
immediately prior to such transaction or series of related transactions own, directly or indirectly, less than a majority of the
total voting power represented by the outstanding voting securities of the Company or such other surviving or resulting entity
(or if the Company or such other surviving or resulting entity is a wholly-owned subsidiary of the Company immediately following
such acquisition, its parent) immediately after such transaction or series of related transactions;
3
(ii)
the direct or indirect sale, lease, exclusive license, assignment, transfer, conveyance or other disposition by the Company of
all or substantially all of its assets or intellectual property, in one or a series of related transactions, except to a wholly-owned
subsidiary of the Company;
(iii)
any acquisition or disposition (including licensing) of any business or assets including any Company intellectual property, except
in the ordinary course of business;
(iv)
the liquidation, dissolution or winding-up of the business and affairs of the Company;
(v)
any capital expenditure exceeding amounts provided for in the Approved Budget or any use of proceeds from the sale of the Securities
that is not set forth in the Approved Budget;
(vi)
enter into any agreement or arrangement to incur any indebtedness, other than trade indebtedness incurred in the ordinary course
of business;
(vii)
enter into any agreement or arrangement that would result in the creation of any lien on any of the assets of the Company;
(viii)
the direct or indirect purchase, lease, license, assumption or other acquisition by the Company of any material assets, including
any intellectual property, in one or a series of related transactions;
(ix)
purchase for cancellation or otherwise retire or pay off any of its outstanding shares of capital stock, or rights, options or
warrants to subscribe for, purchase or otherwise acquire stock, or evidences of indebtedness or other securities convertible into
or exchangeable for stock (except for the repurchases at cost from employees or consultants pursuant to written agreements upon
the occurrence of certain events (including the termination of employment));
(x)
other than as contemplated by the Purchase Agreement, and except for certain specified issuances, the creation, modification or
issuance of capital stock or securities convertible into capital stock;
(xi)
other than as contemplated by the Purchase Agreement, amend, alter or repeal any provision of the Company's Articles of
Incorporation or Bylaws;
(xii)
declare or pay any dividends or make any distribution on any of its outstanding shares of capital stock;
(xiii)
the appointment or dismissal of any executive officers of the Company, and any material changes to the compensation payable to
any of the executive officers or directors of the Company;
(xiv)
other than as contemplated by the Purchase Agreement, increase or decrease the number of directors constituting the entire Board,
or create any committee of the Board;
(xv)
other than certain specified transactions,
enter into any transaction, or make any amendment thereto, with any director
or officer of the Company, or any immediate family member or affiliate of any director or officer of the Company;
(xvi)
enter into joint ventures or partnerships, or establish any non-wholly-owned subsidiaries;
(xvii)
any change to the Company's independent accountants or attorneys; and
(xviii)
approve any operating capital budgets for any period of the Company, or, once such budget has been approved by Purchaser, make
any changes to such budget.
4
The
Purchase Agreement contains certain termination rights for both the Company and Purchaser. Specifically, the Purchase Agreement
can be terminated:
(i)
by mutual written consent of the Purchaser and the Company;
(ii)
by the Purchaser by written notice to the Company, if the Second Closing has not been consummated on or before August 28, 2012;
(iii)
by the Purchaser by written notice to the Company, if the Third Closing has not been consummated on or before October 20, 2012;
(iv)
by either the Purchaser or the Company, upon written notice to the other party, if any final, non-appealable law or order, writ,
injunction, judgment, decree or ruling enacted, promulgated, issued or entered by any governmental body shall be in effect having
the effect of making illegal, permanently restraining, enjoining or prohibiting the consummation of the transaction contemplated
by the Purchase Agreement and the other related documents;
(v)
by either the Purchaser or the Company, upon written notice to the other party, if the Stockholders Meeting contemplated by the
Purchase Agreement is duly convened and the stockholders of the Company shall not have approved the proposals of the Company at
the Stockholders Meeting or at any adjournment or postponement thereof;
(vi)
by the Purchaser, upon written notice to the Company, if:
(a) the Board shall not have approved
the transaction documents to be executed at the Second Closing and the transactions to be consummated at the Second Closing (or
the Board has revoked such approval) on or prior to October 20, 2012; (b) the Board shall not have approved the transaction documents
to be executed at the Third Closing and the transactions to be consummated at the Third Closing (or the Board has revoked such
approval) on or prior to the October 20, 2012; (c) Board shall have reversed or revoked its recommendation that the stockholders
approve the matters relating to the transaction proposed at the Stockholders Meeting; (d) the Board or any committee thereof shall
have approved, endorsed or recommended any alternative transaction; (e) the Company shall have executed any contract relating
to any alternative transaction; (f) a tender or exchange offer relating to securities of the Company shall have been commenced
and the Company shall not have sent to its security holders, within ten (10) business days after the commencement of such tender
or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer; or (g) the Company
shall have materially breached its obligations with respect to the non-solicitation or encouragement of competing proposals; and
(vii)
by the Purchaser, upon written notice to the Company, if there shall have been a breach of (a) any covenant or agreement on the
part of the Company set forth in the Purchase Agreement; or (b) any representation or warranty of the Company set forth in the
Purchase Agreement shall have been inaccurate when made or, if not made as of a specific date, shall have become inaccurate, that
would, in the case of both clauses (a) or (b), prevent the consummation of the transactions contemplated by the Purchase Agreement
and the related documents, or, if curable, is not cured within twenty (20) business days after the Company's receipt of
written notice thereof from the Purchaser.
The
Purchase Agreement also prohibits the Company from soliciting or encouraging competing proposals. However, the Company may,
on the terms and subject to the conditions set forth in the Purchase Agreement, provide information to, and negotiate with, a
third party that makes an unsolicited proposal that the Board determines it is required to do in the exercise of its
fiduciary duties. The Purchase Agreement provides that, upon termination of the Purchase Agreement by the Purchaser because:
(i) the Board shall not have approved the transaction documents to be executed at the Second Closing and the transactions to
be consummated at the Second Closing (or the Board has revoked such approval) on or prior to October 20, 2012; (ii) the Board
shall not have approved the transaction documents to be executed at the Third Closing and the transactions to be consummated
at the Third Closing (or the Board has revoked such approval) on or prior to the October 20, 2012; (iii) the Board shall have
reversed or revoked its recommendation that the stockholders approve the matters relating to the transaction proposed at the
Stockholders Meeting; (iv) the Board or any committee thereof shall have approved, endorsed or recommended any alternative
transaction; (v) the Company shall have executed any contract relating to any alternative transaction; (vi) a tender or
exchange offer relating to securities of the Company shall have been commenced and the Company shall not have sent to its
security holders, within ten (10) business days after the commencement of such tender or exchange offer, a statement
disclosing that the Company recommends rejection of such tender or exchange offer; or (vii) the Company shall have materially
breached its obligations with respect to the non-solicitation or encouragement of competing proposals, the Company will pay
Purchaser a termination fee of $750,000 and reimbursement of all reasonable fees and out-of-pocket expenses of the
Purchaser.
5
Michael
Salaman, the Company's CEO and a director, is a minority investor in Trim Capital. Effective as of the First Closing, the
Company entered into consulting agreements (the "
Consulting Agreements
") with Mr. Marc Cummins and a company
affiliated with Mr. William Apfelbaum, pursuant to which each of them will receive a monthly consulting fee of $10,000 during
a term commencing on June 28, 2012 and continuing in effect until the Notes are paid in full or converted into Equity Units (unless
earlier terminated in accordance with their terms). Mr. Cummins is the managing member of the Purchaser and Mr. Apfelbaum is a
minority member. It is anticipated that Messrs. Cummins and Apfelbaum will be elected as members of the Board as nominees of the
holders of the Senior Preferred in connection with the Third Closing.
The
Purchase Agreement has been included as an exhibit to this Current Report on Form 8-K to provide investors and security holders
with information regarding its terms. It is not intended to provide any other factual information about the Company. The representations,
warranties and covenants contained in the Purchase Agreement were made only for purposes of that agreement and as of specific
dates, were solely for the benefit of the parties to the Purchase Agreement, and may be subject to limitations agreed upon by
the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual
risk between the parties to the Purchase Agreement instead of establishing these matters as facts, and may be subject to standards
of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party
beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or condition of the Company, the Purchaser or any of their respective
subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change
after the date of the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company's
public disclosures.
A
copy of each of the form of the Initial Note, the Purchase Agreement, the Security Agreement, the IP Security Agreement, and each
of the Consulting Agreements is attached hereto as Exhibits 4.1, 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, and is incorporated
herein by reference. The foregoing summary of the transaction contemplated by the Purchase Agreement and the documents and instruments
to be executed and/or issued in connection therewith, does not purport to be complete and is qualified in its entirety by reference
to the definitive transaction documents, copies of which are attached as exhibits to this Current Report on Form 8-K.
Additional
Information About this Transaction
In
connection with the proposed transaction, Skinny Nutritional Corp. will prepare and file with the Securities and Exchange Commission
(the "
SEC
") a proxy statement for its stockholders. The Company will mail the proxy statement to its stockholders.
The proxy statement will contain information about Skinny Nutritional, the proposed transaction and related matters. STOCKHOLDERS
ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT IS AVAILABLE, AS IT WILL CONTAIN IMPORTANT INFORMATION THAT STOCKHOLDERS
SHOULD CONSIDER BEFORE MAKING A DECISION ABOUT THE TRANSACTION. In addition to receiving the proxy statement from Skinny Nutritional
by mail, stockholders will be able to obtain the proxy statement, as well as other filings containing information about Skinny
Nutritional, without charge, from the SEC's website at www.sec.gov or, without charge, from the Company's website
at www.skinnywater.com or by directing such request to Skinny Nutritional.
Proxy
Solicitation
Skinny
Nutritional Corp. and its directors, executive officers and certain other members of management and employees may be soliciting
proxies from Skinny Nutritional stockholders in favor of the transaction. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of the Skinny Nutritional stockholders in connection with the
proposed transaction will be set forth in the proxy statement when it is filed with the SEC. You can find information about the
Company's executive officers and directors in its Annual Report on Form 10-K filed with the SEC on April 16, 2012.
You can obtain free copies of these documents from Skinny Nutritional using the above contact information.
6
Ancillary
Agreements
In
connection with the Unit Financing, the Company entered into agreements with the holders of 36,666,667 Common Stock Purchase Warrants
(the "
Warrant Non-Exercise Agreement
") pursuant to which such persons have agreed that such Common Stock Purchase
Warrants are not exercisable until the first to occur of (i) the termination of the Unit Financing prior to the Second Closing
or (ii) the Company's stockholders having approved an increase in the number of shares of Common Stock authorized for issuance
under the Company's Articles of Incorporation, as amended, in such an amount so as to enable the Company to have a sufficient
number of available authorized but unissued shares of Common Stock to deliver upon the exercise of the Warrants after giving effect
to the transactions contemplated by the Unit Financing and the Company having filed the amendment to its Articles of Incorporation
with the Secretary of State of the State of Nevada in a form accepted for filing. In addition, in consideration of the execution
by the holders of these Warrants, the Company agreed to seek Board approval to lower the exercise price of the Warrants that are
subject to the Warrant Non-Exercise Agreements to a price to be determined upon the mutual agreement of the Company and each holder
of such Warrants. The enforceability of the Warrant Non-Exercise Agreement is not subject to any agreement to modify the exercise
price of the Warrants. Of the affected Warrants (i) 16,666,667are held by Mr. William Apfelbaum, a minority investor in Trim Capital,
LLC, with whom the Company entered into a Consulting Agreement in connection with the First Closing, and who is anticipated to
be nominated for election to the Board at its next annual meeting of stockholders and (ii) 20,000,000 are held by Mr. Jon Bakhshi
an individual stockholder and former consultant to the Company that is the holder of more that 5% of the Company's outstanding
shares of Common Stock.
A
copy of the form of the Warrant Non-Exercise Agreement is attached hereto as Exhibit 10.6 and is incorporated herein by reference.
The foregoing summary of the Warrant Non-Exercise Agreement does not purport to be complete and is qualified in its entirety by
reference to the form of such agreement attached as an exhibit to this Current Report on Form 8-K.
Transition
of Chief Financial Officer
On
June 28, 2012, the Company also executed a separation agreement with Donald J. McDonald, its former chief financial officer, regarding
the terms of the termination of his employment agreement and his departure from the Company. The separation agreement is
described in greater detail below in Item 5.02 of this Current Report on Form 8-K.
New
Lease
On
June 29, 2012, the Company entered into a new one year lease with Kalmon Dolgin Affiliates, Inc., as landlord, to commence on
July 1, 2012, for approximately 1,523 square feet of office space located at Spring Mill Corporate Center, 1100 East Hector Street,
Suite 391, Conshohocken, PA 19428. The total annual rent due under the lease is approximately $34,267, plus any additional rent,
as may be provided for in the lease agreement. The Company will use the space for its headquarters and the Company believes that
the amount of space is sufficient for such needs for the foreseeable future.
Item 1.02
Termination of a Material Definitive Agreement.
As
described in Item 5.02 of this Current Report, the Company's employment of Donald J. McDonald, its former Chief Financial
Officer ceased as of June 28, 2012 and his employment agreement dated August 16, 2010, was deemed terminated as of such date.
To the extent required by Item 1.02 of Form 8-K, the information contained or incorporated by reference in Item 1.01
and Item 5.02 of this Current Report on Form 8-K regarding Mr. McDonald is incorporated by reference in this Item 1.02.
Item 2.03
Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
7
Notes
Issuable in the Unit Financing
The
information disclosed in Item 1.01 of this Current Report on Form 8-K concerning the Unit Financing and issuance of the Initial
Note is incorporated by reference into this Item 2.03.
The
Notes bear interest at a rate of 15% per annum and are secured by all of the assets of the Company. The Initial Note is due
and payable on the earlier of June 28, 2013, or upon an acceleration in accordance with its terms
;
provided
, that if the Company issues the Remaining Note at a Second Closing, then the maturity date of the Initial Note
shall be deemed automatically revised and amended to correspond to the maturity date under the Remaining Note, which will be six
months following the Second Closing.
The
Company may prepay the Notes, without penalty or premium, at any time and from time to time. The obligations of the Company under
the Notes are secured pursuant to the Security Agreement and the IP Security Agreement. Payment of the obligations under the Notes
may be accelerated, in general, upon any of the following events: (i) an uncured failure to pay any amount under the Notes
when due; (ii) an uncured breach by the Company of its obligations under any of the offering documents; (iii) a material
breach by the Company of its representations and warranties contained in the offering documents; (iv) certain proceedings
are commenced against the collateral securing the payment of the Notes; (v) certain material judgments are rendered against
the Company; and (vi) the occurrence of certain voluntary and involuntary bankruptcy proceedings.
Amendments
to Other Notes
In
connection with the Unit Financing, the Company entered into agreements with United Capital Funding Corp. and Michael Salaman,
its Chief Executive Officer, to amend the promissory notes issued to them on June 7, 2012 in the principal amounts of $300,000
and $50,000, respectively. Pursuant to these amendment agreements, each note holder agreed that the term of the note be extended
to be equal to the earlier of (i) 90 days from the issue date or (ii) the date of the second closing of the Unit Financing. In
addition, Mr. Salaman agreed to subordinate his note to the obligations of the Company under the notes issued in the Unit Financing.
The
descriptions of the agreements to amend the promissory notes previously issued to United Capital Funding Corp. and Mr. Salaman
are qualified in their entirety by reference to the full text of such agreements, which are filed as Exhibits 4.2 and 4.3, respectively,
to this Current Report on Form 8-K.
As
previously disclosed, the Company had sold an aggregate principal amount of $705,000 of Convertible Senior Subordinated Secured
Notes (the "
Bridge Notes
") in a private placement that expired March 1, 2012. The Bridge Notes provided that
they would convert into either (i) shares of Common Stock at the initial conversion rate of $0.03 per share or (ii) the securities
issued by the Company in a subsequent financing at a rate equal to a 20% discount of the purchase price of such subsequent financing.
In connection with the Unit Financing, a majority of the holders of the Bridge Notes agreed to amend their notes, which amendment
provides that (x) the Bridge Notes will not convert into the securities issued in the Unit Financing, (y) the conversion rate
of the Bridge Notes and the exercise price of the warrants issued with the Bridge Notes will not be adjusted due to the Unit Financing;
and (z) the holders will convert the Bridge Notes into shares of Common Stock or a newly created junior preferred stock of the
Company (the "
Junior Preferred
") upon the Third Closing. In addition, holders of an aggregate amount of $680,000
of the Bridge Notes also agreed to waive the Company's previously reported failure to timely pay the first interest installment
due on such notes and have consented to allow the Company to issue it shares of Common Stock in satisfaction of such interest
payment pursuant to the terms of the Bridge Notes. The Company will issue a maximum of 1,747,515 shares of Common Stock to the
holders of the Bridge Notes that agreed to waive the Company's failure to timely pay interest in cash. The proposed terms
of the Junior Preferred include the following:
(i)
the Junior Preferred will be issued with an initial issuance price of $846,000 which is 120% of the principal amount of the Bridge
Notes;
(ii)
the Junior Preferred will be subordinated in rights to dividends and on liquidation and redemption to the rights of the holders
of the Senior Preferred;
(iii)
the Junior Preferred will be subject to mandatory redemption at the original issue price plus accrued but unpaid dividends on
the date which is 5 years from date of issue, subject to the prior redemption in full of the Senior Preferred;
8
(iv)
upon a liquidation, dissolution or deemed liquidity event (discussed below), the holders of the Junior Preferred will be entitled
to receive the original issue price of the Junior Preferred plus accrued but unpaid dividends, subject to the prior payment of
any liquidation preference to the holders of the Senior Preferred;
(v)
for purposes of the Junior Preferred, a deemed liquidity event shall generally be a sale or exclusive lease of all or substantially
all of the assets of the Company or an acquisition of the Company by another person or entity by means of any transaction or series
of transactions (including any reorganization, merger, consolidation or share transfer) where the stockholders of the Company
immediately preceding such transaction own, following such transaction, less than a majority of the voting securities of the Company;
(vi)
the Junior Preferred shall be entitled to receive dividends at a rate of 6% per annum, payable on the earliest of (a) the closing
of a qualified public offering, as will be defined in the Amended and Restated Charter (or a certificate of designations filed
with the Secretary of State of the State of Nevada setting forth the terms and conditions of the Junior Preferred) (a "
Qualified
Public Offering
"), (b) the liquidation or dissolution of the Company or the closing of a deemed liquidity event, (c)
the redemption of the Junior Preferred or (d) semi-annually to the extent that funds are legally available therefor as determined
by the Board in good faith, in any case, junior in right of payment to the Senior Preferred;
(vii)
the Junior Preferred will be convertible into the Company's Common Stock representing 6.1% of the issued and outstanding
Common Stock as of the Third Closing. The Junior Preferred will be convertible at any time at option of holder and will be subject
to mandatory conversion into Common Stock upon the completion of a Qualified Public Offering or upon the affirmative vote of the
holders of the majority of the outstanding shares of Junior Preferred;
(viii)
the number of shares of Common Stock issuable upon conversion of the Junior Preferred shall be subject to adjustment for corporate
events such as stock splits, mergers, consolidations and stock dividends;
(ix)
holders of Junior Preferred shall be entitled to vote with holders of Common Stock on an as converted basis on all matters submitted
to a vote of shareholders, and as may be required under Nevada law; and
(x)
holders of Junior Preferred shall be entitled to certain piggyback registration rights to provide for the Company to register
the shares of Common Stock underlying the Junior Preferred for resale by the holders under the Securities Act of 1933, as amended;
provided that, such rights shall be subordinated to the registration rights of the investors in the Senior Preferred.
The
foregoing summary of the Junior Preferred does not purport to be complete and is qualified in its entirety by reference to the
Amended and Restated Charter which will be included in the proxy statement to be filed by the Company in connection with the Third
Closing.
The
descriptions of the agreements to amend the Bridge Notes and of the waivers granted by holders of the Bridge Notes are qualified
in their entirety by reference to the full text of such agreements, which are filed as Exhibits 4.4 and 4.5, respectively, to
this Current Report on Form 8-K.
Item 3.02
Unregistered Sales of Equity Securities.
The
Company agreed to issue the securities to the Purchaser in the Unit Financing in reliance upon the exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder. The information
disclosed in Item 1.01 concerning the Unit Financing is incorporated into this Item 3.02 in its entirety.
The
Company hereby incorporates by reference into this Item 3.02 of the Current Report on Form 8-K from Item 5.02 of this Current
Report on Form 8-K the information regarding the Company's agreement to issue additional shares of Common Stock to Mr. McDonald
following the effective date of his departure from the Company, the Company's agreement to issue 750,000 shares of Common
Stock to James Arsenault in connection with this appointment as interim Chief Financial Officer, and the Board's conditional
grant of 10,075,000 shares of Common Stock to certain employees of the Company.
9
The
Company hereby incorporates by reference into this Item 3.02 of the Current Report on Form 8-K from Item 2.03 of this Current
Report on Form 8-K the information regarding the Company's agreement to issue a maximum of 1,747,515 shares of Common Stock
to holders of Bridge Notes in payment of interest due on such Bridge Notes.
The
Company agreed to issue to certain consultants and other service provides shares of Common Stock in consideration of their
performance of services to the Company or agreement to perform certain services to the Company. The Company entered into an
agreement with Bryant Park Capital Securities, Inc., to issue it 1,000,000 shares of Common Stock in full and complete
satisfaction of all compensation that remained due and owing to them arising out of their performance of services to the
Company in connection with the Company's sale of the Bridge Notes. The parties agreed that such shares of Common Stock
would be issued upon the first to occur of either the termination of the Purchase Agreement prior to the Second Closing or
upon the Third Closing.
The
Company entered into an agreement with Jon Bakhshi, a former consultant to the Company and a holder of more than 5.0% of the Company's
outstanding Common Stock, to issue to him an additional 10,000,000 shares of Common Stock (subject to adjustment for splits, stock
dividends, recapitalizations and other similar transactions) in consideration of the grant by him to the Company of a full general
release of any claims held by him arising out of, among other things, the consulting agreement. In addition, Mr. Bakhshi agreed
to vote his shares of Common Stock in favor of the Company's transactions with the Purchaser. The issuance of the additional
shares to Mr. Bakhshi is, however, subject to the first to occur of either (i) the termination of the Purchase Agreement prior
to the Second Closing or (ii) the filing by the Company with the Secretary of State of the State of Nevada of an amendment to
its Articles of Incorporation to increase the number of authorized shares of Common Stock that the Company may issue.
The
Company's issuance and agreements to issue the shares of Common Stock as described in this Item 3.02 of this Current Report
on Form 8-K was made in reliance upon the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended,
inasmuch as the Company believed the acquirers are accredited investors and the securities will be issued without any form of
general solicitation or general advertising.
Item 3.03
Material Modification to Rights of Security Holders.
The
information disclosed in Items 1.01 and 5.03 of this Current Report on Form 8-K, including the description of the terms of the
Unit Financing and the provisions of the Bridge Notes and Senior Preferred, is incorporated by reference into this Item 3.03.
Item 5.01
Change in Control.
To
the extent required to be reported pursuant to this Item 5.01 of the Current Report on Form 8-K, the information regarding the
Unit Financing described in the other sections of this Current Report on Form 8-K, including without limitation, the disclosures
in Items 1.01, 2.03, and 5.03 of this Current Report on Form 8-K, are incorporated herein by reference.
Item 5.02
Departure of Directors or Certain Officers; Election
of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(b)
As of June 28, 2012, Donald J. McDonald's employment
as the Company's Chief Financial Officer was terminated. In connection with that event, the Company and Mr. McDonald entered
into an Agreement and General Release (the "
Separation Agreement
") regarding the terms of the termination of
his employment agreement and his departure from the Company. Mr. McDonald also agreed to resign as a member of the Board
effective with the cessation of his employment. The Separation Agreement provides that Mr. McDonald will receive the following
in addition to his accrued compensation payable through the termination of his service:
10
•
A severance payment equal to his base compensation of $240,000 per annum (the "
Severance Payment
"), payable
in equal installments on each of the Company's regular pay dates during the period commencing on the first regular executive
pay date following his termination and continuing to August 16, 2014;
•
the Company, in its absolute discretion, may elect to pay up to $100,000 per annum of the Severance Payment in shares of the Company's
Common Stock, issued as of each of the regular pay dates, at a value based on the fair market value of the Company's Common
Stock on the issue date;
•
the Company will issue 2,000,000 shares of the Company's Common Stock to and agreed that all unvested restricted stock awards
held by him as of the termination of his employment, which is 1,000,000 shares, shall be deemed vested;
•
coverage for COBRA benefits to the maximum amount permitted by law, in accordance with, and subject to, the terms and conditions
of his employment agreement; and
•
reimbursement for reasonable legal fees and costs of negotiating the Separation Agreement and payment of an amount equal to $24,000
for unused vacation time.
In
addition, in the Separation Agreement, Mr. McDonald agreed to vote his shares of Common Stock in favor of the Company's
transactions with the Purchaser.
The
description of the Separation Agreement is qualified in its entirety by reference to the full text of such agreement, which is
filed as Exhibit 10.7 to this Current Report on Form 8-K.
(c)
Effective as of June 28, 2012, the Company appointed
James Arsenault as its interim Chief Financial Officer, treasurer and principal accounting officer effective immediately. There
are no family relationships between Mr. Arsenault and any director, executive officer, or any person nominated or chosen by the
Company to become a director or executive officer. No information is required to be disclosed with respect to Mr. Arsenault pursuant
to Item 404(a) of Regulation S-K other than with respect to the terms of his employment with the Company, which is summarized
below.
Biographical
Information.
James
Arsenault
was named interim Chief Financial Officer effective as of June 28, 2012. Mr. Arsenault has served as the Company's
controller from September 2008 until the present. Prior to joining the Company, Mr. Arsenault held several senior positions in
finance and operations over a 20 year career with various divisions and/or subsidiaries of the Tom James Company. From September
2000 to September 2008, Mr. Arsenault served as the chief financial officer and director of operations of IAG Distribution and
was the chief financial officer and president of Atlas Company of Boston from February 1994 to August 2000. During these periods,
he also acted in an advisory capacity with the Tom James Company regarding its merger and acquisition activities. Mr. Arsenault's
career in finance and operation s began in 1989 where he was the controller of the Asher Company, a position he held until January
1994. Mr. Arsenault is 46 years old, earned a B.S. in Accounting from Bryant University and holds a Masters Degree in Business
Administration from Anna Maria College.
Employment
Arrangements
The
Company has not entered into an employment agreement with Mr. Arsenault regarding his appointment as interim Chief Financial Officer.
The Company, however, will provide Mr. Arsenault with the following compensation effective with his appointment as interim Chief
Financial Officer: (a) base salary of $140,000 per annum; (b) eligibility to receive an annual cash bonus, the amount of which
to be determined in the discretion of the Board or its designated committee; (c) an initial grant of 750,000 restricted shares
of Common Stock (subject to adjustment for splits, stock dividends, recapitalizations and other similar transactions), which shares
shall be fully vested upon issuance, provided that the issuance of such shares is subject to the filing by the Company with the
Secretary of State of the State of Nevada of an amendment to its Articles of Incorporation to increase the number of authorized
shares of Common Stock of the Company or the earlier termination of the Unit Financing; (d) a monthly car allowance of $500; and
(e) participation at the same level as other senior executive officers of the Company in any group medical, health disability,
retirement or other similar plans.
11
(e)
In connection with its consideration of the Unit Financing,
the Board determined that the vesting conditions of the Company's restricted stock award granted to Michael Salaman as of
January 3, 2011, for 2,000,000 shares of Common Stock, of which 1,000,000 shares remain subject to vesting, shall immediately
terminate and such award shall become vested in full upon the occurrence of a change in control of the Company, which shall include
the consummation of the Third Closing of the Unit Financing.
The
Board also approved, subject to the filing by the Company with the Secretary of State of the State of Nevada of an amendment to
its Articles of Incorporation following the approval by the Company's stockholders of an amendment to the Company's
Articles of Incorporation increasing the number of authorized shares of Common Stock that the Company is authorized to issue,
the grant of an aggregate of 10,075,000 shares of restricted Common Stock (subject to adjustment for splits, stock dividends,
recapitalizations and other similar transactions) to certain of its employees, including the grant of 2,000,000 shares to the
Company's Chief Executive Officer and 2,075,000 to its interim Chief Financial Officer. These awards will be subject to
vesting conditions providing that 25% of each award will vest following the increase in the Company's authorized Common
Stock, and the remainder vesting in equal annual installments on each of the subsequent three anniversary dates, except for the
shares issuable to Mr. Salaman, which will vest immediately following the increase in the Company's authorized Common Stock.
Item 5.03
Amendments to Articles of Incorporation or Bylaws;
Change in Fiscal Year.
Amended
and Restated Articles of Incorporation
Pursuant
to the terms of the Purchase Agreement entered into in the Unit Financing, the Company agreed to seek stockholder approval for
the purpose of, among other things, adopting the Amended and Restated Charter in order to, without limitation, authorize: (a)
a sufficient number shares of Common Stock for issuance in the Unit Financing, upon conversion of the Junior Preferred (as defined
below), and pursuant to a new equity compensation plan, and other corporate purposes, (b) a reverse split of the Common Stock
in a ratio to be agreed upon in accordance with Nevada law, (c) the Junior Preferred, and (d) provide for the indemnification
of directors.
Senior
Preferred
As
part of the Second Closing, the Company will establish the Senior Preferred. The Company will file the Senior Preferred Designations
prior to the Second Closing date which shall serve to amend the Company's Articles of Incorporation in order to establish
the terms of the Senior Preferred. The Company will issue an aggregate of $9,000,000 of Senior Preferred in total at the Second
and Third Closings.
Liquidation
Preference
Upon
any liquidation, dissolution or winding up of the Company, the holders of Senior Preferred shall be entitled to receive, in preference
to any distribution to the holders of any Common Stock or any other equity security of the Company, an amount per share equal
to the original issue price of the Senior Preferred, plus accrued and unpaid dividends. A liquidation event will include certain
deemed liquidation events, such as the sale or exclusive lease of all or substantially all of the assets of the Company and the
acquisition of the Company by another person.
Redemption
At
the election of the holders of at least a majority of the Senior Preferred any time after the fifth anniversary of the Third Closing,
the Company shall redeem the outstanding Senior Preferred at a price per share equal to the original issue price plus accrued
but unpaid dividends. In the event that the Senior Preferred is not redeemed, then the holders of the Senior Preferred will be
entitled to (i) elect a majority of the Board (to the extent that designees of the holders of the Senior Preferred do not already
constitute a majority of the Board) and/or (ii) cause the Company to retain an independent investment banking firm to explore
strategic alternatives.
Dividends
12
The
Senior Preferred will carry a cash dividend of 15% of the original issue price per annum, which will be cumulative, shall compound
semi-annually and shall be payable on the earliest of (i) the closing of a qualified public offering, (ii) a liquidation event,
(iii) the redemption of the Senior Preferred, or (iv) semi-annually to the extent that funds are legally available therefor. No
dividends may be paid on the Common Stock or any series of preferred stock ranking junior to or pari passu with the Senior Preferred
unless all accrued but unpaid dividends on the Senior Preferred have been paid in full.
Voting
and Board Rights
The
Senior Preferred shall have no voting rights except as specifically provided or as otherwise required by law. However, following
the Third Closing, the holders of the Senior Preferred, voting separately as a class, will be entitled to elect four members of
an expanded seven person Board (the "
Preferred Directors
"), and will vote together with the Common Stock holder
to elect the other three members, one of whom will be the Company's current CEO. The Preferred Directors shall have the
right to designate the Company's chairman.
Protective
Provisions
Under
the terms of the Senior Preferred, the Company will be restricted from taking certain actions without obtaining the prior consent
of the holders of the Senior Preferred, including: (i) any liquidation event; (ii) any material acquisition or disposition of
any business or assets (other than in the ordinary course); (iii) the redemption of any shares of capital stock other than the
Senior Preferred, except as specifically exempted; (iv) the creation, modification or issuance of capital stock or securities
which are convertible into capital stock, other than certain defined exemptions; (v) amending the Company's Articles of
Incorporation or Bylaws; and (vi) declaring dividends on any class of stock other than the Senior Preferred.
Further,
as long as the Senior Preferred is outstanding, consent of a majority of the Preferred Directors shall be required for: (i) making
certain capital expenditures; (ii) incurring debt other than trade debt in the ordinary course; (iii) creating any liens on the
Company's assets; (iv) appointing or dismissing executive officers and making material changes to director and officer compensation;
(v) establishing subsidiaries; (vi) issuing securities in connection with certain transactions; and (vii) approving annual budgets.
The
foregoing summary of the Senior Preferred does not purport to be complete and is qualified in its entirety by reference to the
Certificate of Designation of Senior Preferred which will be included in the proxy statement to be filed by the Company in connection
with the Third Closing.
Junior
Preferred
As
described above in Item 2.03 of this Current Report on Form 8-K which is incorporated herein by reference, the Company's
current Bridge Notes, in the aggregate principal amount of $705,000, will convert into the Junior Preferred upon the Third Closing.
The Company expects that it will issue an aggregate of $846,000 of shares of Junior Preferred.
Item 9.01
Financial Statements and Exhibits.
(d)
The following exhibit is filed herewith
Exhibit No.
Description
4.1
Form of Note
4.2
Amendment Agreement to Senior Promissory Note held by United Corporate Funding Corp.
4.3
Amendment Agreement to Senior Promissory Note held by Michael Salaman
4.4
Form of Amendment to Convertible Senior Subordinated Secured Notes and Subscription Agreement and Waiver Agreement
4.5
Form of Note Waiver Agreement
13
10.1
Securities Purchase Agreement between the Company and Trim Capital LLC
10.2
Security Agreement between the Company and Trim Capital LLC
10.3
Intellectual Property Security Agreement between the Company and Trim Capital LLC
10.4
Consulting Agreement with Marc Cummins
10.5
Consulting Agreement with First Trilogy LLC
10.6
Form of Warrant Non-Exercise Agreement
10.7
Separation Agreement between the Company and Donald J. McDonald
14
SIGNATURE
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
hereunto duly authorized.
Skinny Nutritional Corp.
By:   /s/ Michael Salaman
Name: Michael Salaman
Title:   Chief Executive Officer
Date:   July 5, 2012
15
EXHIBIT INDEX
Exhibit No.
Description
4.1
Form of Note
4.2
Amendment Agreement to Senior Promissory Note held by United Corporate Funding Corp.
4.3
Amendment Agreement to Senior Promissory Note held by Michael Salaman
4.4
Form of Amendment to Convertible Senior Subordinated Secured Notes and Subscription Agreement and Waiver Agreement
4.5
Form of Note Waiver Agreement
10.1
Securities Purchase Agreement between the Company and Trim Capital LLC
10.2
Security Agreement between the Company and Trim Capital LLC
10.3
Intellectual Property Security Agreement between the Company and Trim Capital LLC
10.4
Consulting Agreement with Marc Cummins
10.5
Consulting Agreement with First Trilogy LLC
10.6
Form of Warrant Non-Exercise Agreement
10.7
Separation Agreement between the Company and Donald J. McDonald
16