LivingVentures, Inc.

In September 2012, the Company issued unsecured notes payable to three of its principals for cash advances made to fund an acquisition and certain operating costs. The notes totaled $785,827, carried a per annum interest rate of 5%, and were due in one year. In March 2014 $250,000 of the note balance was transferred to a new note with a January 2017 maturity date. In November 2013 the Company issued an additional unsecured note payable to one of the three principals in the amount of $50,000, bearing interest at 10% and due November 2014. As of June 30, 2014, related party short-term and long-term notes payable totaled $190,000 and $264,719, respectively. As of December 31, 2013, related party short-term and long-term notes payable totaled $535,827 and $250,000, respectively.

The Credit Agreement provides for an initial commitment of $600,000, provided only $300,000 of the commitment was made available to the Company on the closing date with the remaining principal amount held in reserve by the lender.  The availability of borrowings under the Credit Facility is subject to a borrowing base calculation based upon funds available in a lock box account maintained in the lender’s name. Under circumstances described in the Credit Agreement, the commitment may be increased by up to $4.4 million, for a total commitment of $5 million.  Borrowings under the Credit Facility will bear interest at fixed rate of interest equal to eleven percent (11.0%) per annum, calculated on the actual number of days elapsed over a 360-day year. The Credit Facility is secured by a lien on all assets of the Company and its subsidiaries and is guaranteed by all of the Company’s subsidiaries.  Under the circumstances described in the Credit Agreement, the lender has the right to convert amounts due under the Credit Facility into the Company’s common stock.

In addition to representations and warranties, affirmative, restrictive and financial covenants, and events of default (applicable to the Company and its subsidiaries) which are customary for credit facilities of this type, the Credit Agreement provides that the Company must not permit its financial condition to materially differ in any material negative way (as compared to its current financial condition) and must meet specified revenue targets as set forth in the Credit Facility.  The Credit Facility is cross-defaulted with the Company’s other outstanding indebtedness and provides that a Material Adverse Effect (as defined in the Credit Agreement), a Change of Control (as defined in the Credit Agreement), a judgment for an amount in excess of $25,000 or an adverse change in the Company’s financial condition, as determined by the lender acting in good faith, are all events of default.

As consideration for the entry into the Credit Agreement, the Company agreed to pay certain fees to the lender, including a commitment fee equal to two percent (2.0%) of the commitment and an investment banking and advisory services fee paid in shares of the Company’s common stock with an aggregate value of $170,000 (the “Fee Shares”).  Each Fee Share was valued at a price equal to the lowest volume weighted average price for the five business days prior to the closing date of the Credit Facility.  Under circumstances described in the Credit Agreement, (i) the lender can require the Company to redeem the Fee Shares and (ii) upon the sale of the Fee Shares by the lender, the Company may be required to issue additional shares of the Company’s common stock.

During the three months and six months ended June 30, 2014 salary expense totaled $311,361 and $642,076 respectively, compared to $363,152 and $696,283 for the three and six months ended June 30, 2013, a decrease of $51,791 and $54,207 compared to 2013. The decreases in salary expense was primarily attributable to the closing of the Orlando office and reduction of staff which occurred in the first three months of 2014.