On November 9, 2012, the Company issued a short-term note in the principal amount of $60,000 to a stockholder of the Company. The note accrued interest at an annual rate of 10%. On December 21, 2012, the Company re-paid the principal plus accrued interest on this promissory note.

On October 4, 2012, the Company entered into a Purchase Order Sale Agreement (the “PO Agreement”) with Solops LLC, under which it financed certain of its contracts of orders (or purchase orders) (the “Orders”), which represent amounts due from bona fide contracts for the sale and delivery of the Company’s goods to certain merchants, in the principal amount of $1,125,000. Pursuant to the PO Agreement, the Company sold the Orders to Solops for a purchase price of $875,000. Under the terms of the PO Agreement, Solops will receive $1,065,000 through a combination of the merchants’ payments under the Orders directly to Solops, the Company’s collection of accounts receivable under the Orders and resulting payments to Solops and/or any other payments made by the Company to Solops under the PO Agreement. Upon the full payment to Solops of $1,065,000, the PO Agreement will immediately terminate and Solops will convey, assign and deliver back to the Company the Orders and all of its rights thereunder. After such full payment is made, the Company will regain sole ownership of the Orders and it will not have any further obligations to Solops, and Solops will not have any further rights, with respect to the Orders or under the PO Agreement. On November 21, 2012, the Company re-paid its obligation under the PO Agreement.

Effective as of November 21, 2012, the Company entered into a one-year Factoring Agreement and Supply Agreement with Star Funding, Inc. Under the terms of the Factoring Agreement, the Company sells most of its trade receivables to the factor without recourse as to credit risk but with recourse for any claims by the customer for adjustments in the normal course of business. The Company is able to borrow up to 80% of its factored receivables. Under the terms of the Supply Agreement, the Company is able to finance the purchases of its inventory. For the quarter and nine months ended March 31, 2013, accrued interest and commissions totaled approximately $95,490 and $132,255, respectively, under these agreements. Balances due from factor include outstanding accounts receivables from customers net of allowances for discounts and chargebacks.

On March 28, 2013, in connection with the repayment of a short-term shareholder note, the Company issued an additional 150,000 five-year warrants to the holder to compensate the holder as the shareholder note was past due. These warrants are exercisable for a period of five years at a purchase price of $0.25 per share of the Company’s common stock. These warrants contain certain anti-dilution and other customary terms.