loi.htm


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    AudioStocks,
Inc.

    2038
Corte del Nogal, Suite 110

    Carlsbad,
California 92011

    Tel:
760-804-8844

    Fax:
760-804-8845

    


    


    May 13,
2009

    


    


    Re:
Acquisition of 100% of Shrink Technologies, Inc. Common Stock

    


    Dear Mr.
Khine:

    


    This
binding letter of intent (the “Letter of Intent”) sets forth the understanding
of the mutual intentions of the below parties regarding the proposed transaction
between on the one hand, AudioStocks, Inc., a Delaware corporation
(“AudioStocks”) and, on the other hand, Marshall Khine (“Khine”), an individual
residing in the state of California.  Hereinafter, AudioStocks and
Khine may be referred to hereinafter individually as a “Party” and collectively
as the “Parties.”

    


    Each
Party understands and acknowledges that this is a binding Letter of Intent and
therefore creates a legally binding contract, which will be subject to the
Definitive Agreements (as defined below). All Parties agree to make all best and
expeditious efforts to complete the Definitive Agreement on or before May 31,
2009 (the “Closing Date”).

    


    1.           Transaction
Architecture. At the Closing Date, AudioStocks will own 100% of the
common shares of Shrink Technologies, Inc., a California corporation (the
“Shrink Equity”).  The Shrink Equity shall consist of one hundred
percent (100%) of the equity interests in Shrink.  In exchange, Khine
will receive (i) 8,888,888 common shares of AudioStocks common stock (the
“Common Stock”) and (ii) one third of issuable Series C Preferred stock (the
“Preferred Stock”) of AudioStocks (collectively, the Common Stock and the
Preferred Stock” shall be referred to as the “AudioStocks
Shares”).  At the Closing Date: (a) the AudioStocks Shares will be
owned by Khine, (b) the Shrink Equity will be owned by AudioStocks, (c) Noctua
Fund LP shall agree (A) by way of an assent (see Schedule A attached hereto)),
(B) to consolidate approximately $91,000 in convertible notes and other
obligations into a $100,000 secured convertible note issued by AudioStocks on
April 20, 2009 (the “April 20 Note”), thereby increasing the principal face
amount of the April 20 Note to approximately $191,000 and (d) consistent with
this Letter of Intent, AudioStocks and Khine shall abide by the terms of this
Letter of Intent as well as all subsequent final transaction documents which
evidence the Parties’ respective intentions. (The above items (a) through (d),
including item (c) which includes parts (A) and (B), shall be referred to herein
as the “Transaction”.)  Upon the execution of the Letter of Intent,
AudioStocks shall immediately commence a procedure to change its corporate name
to “Shrink Nanotechnologies, Inc.”

    


    2.           Employment Issues,
Resignations and Board of Directors Appointments. Concurrent with or
immediately following the Definitive Agreements (referred to below) being
executed, Luis Leung shall tender his resignation (the “Leung Resignation”) from
all positions then held (executive and Board of Directors).  The
AudioStocks Board of Directors shall appoint Khine to serve as a director of
AudioStocks.  All compensation for Khine, if any, shall be
subsequently approved by the Board of Directors.

    


    3.           Definitive
Agreements. After receipt of this executed Letter of Intent, the Parties
will commence preparation of definitive agreements which will reflect the
Transaction and the arrangements contemplated herein (hereinafter, the documents
referred in this Section shall be the “Definitive Agreements”). The Definitive
Agreements will contain the provisions outlined above, in addition to the usual
and customary representations and warranties, covenants assuring marketable
title to the Shrink Equity, conditions to closing and indemnifications for
transaction of this kind, including, without limitations: tax and securities
filings, and corporate filings, and the accuracies of all of the
same.

    


    4.           Due Diligence and Conflicts
of Interest. For a period not to exceed ten (10) days subsequent to the
execution of this Letter of Intent, the Parties shall comply with reasonable
requests to review relevant information concerning themselves and business
entities they are affiliated with, insofar as such requests are reasonably
related to the completion of the Transaction and the execution of the
going-forward plan of operating the post-Transaction business. Upon the
execution of this Letter of Intent by all Parties, the Parties shall immediately
mutually exchange the following:

    


    
      	
              §  

            	
              All
      Financial Statements of Shrink;

            


    

    
      	
              §  

            	
              the
      Shrink Certificate of Incorporation (with any amendments
      thereto);

            


    

    
      	
              §  

            	
              Operating
      Agreements, if any;

            


    

    
      	
              §  

            	
              A
      schedule of Shrink assets, leases, as well as a current list of service
      agreements and work orders, all as of a recent date, all of which shall be
      kept confidential.

            


    

    


    ALL PARTIES AGREE TO
THOROUGHLY REVIEW THE FORM 10-K FILED BY AUDIOSTOCKS FOR THE PERIOD ENDED
DECEMBER 31, 2008, AS WELL AS THE AMENDED VERSION OF THE FORM 10-K FILED ON
APRIL 21, 2009 AND ALL ADDITIONAL FILINGS MADE BY AUDIOSTOCKS AND ALL RELATED
DISCLOSURES AND CONFLICTS OF INTERESTS RELATED TO THE TRANSACTION CONTEMPLATED
HEREIN.

    


    THERE
ARE NUMEROUS CONFLICTS AND RELATED PARTY INTERESTS  INVOLVED WITH THE
TRANSACTION CONTEMPLATED HEREIN.

    


    THESE FILINGS MAY BE FOUND
AT WWW.SEC.GOV.

    


    5.           Transaction Document
Expenses. Each Party respectively shall be responsible for their own fees
and expenses of the Parties agents, advisors, attorneys and accountants with
respect to the negotiation of this Letter of Intent, the negotiation and
drafting of the Definitive Agreements and, if Definitive Agreements are
executed, the closing of the Transaction.

    


    6.           Termination Fee/No
Shop. Until June 30, 2009, Khine shall not enter into any transaction or
agreement to enter into a transaction for the sale of Shrink
Equity.

    


    7.           Public Announcement.
Within four (4) days following the following the date of this Letter of Intent,
AudioStocks shall (i) release a Form 8-K with the U.S. Securities and Exchange
Commission regarding the Transaction, and (ii) jointly release a press release
regarding the Transaction.  With the exception of the Form 8-K and
Joint Press Release, the Parties agree not to issue any further press releases
or make any further public announcement regarding the Transaction without prior
written mutual consent of all Parties, except where a public announcement is
otherwise required by law.

    


    8.           Jurisdiction.
California state courts, using California law.

    


    We trust
that these terms accurately reflect our understanding. If there are any
questions or comments regarding the same, please feel to contact me at your
convenience. Otherwise kindly execute this Letter of Intent acknowledging your
agreement to the terms outlined above and fax it to 760-804-8845.

    


    Best
regards,

    


    AUDIOSTOCKS,
INC.

    


    _____________________

    By: Luis
Leung

    Its:
Chief Executive Officer

    


    


    


    


    Agreed
and accepted by:

    


    MARSHALL
KHINE

    


    


    _____________________________

    By:
Marshall Khine, Esq.

    An:
Individual


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
A

    


    


    


    For the
good and valuable consideration of the appreciation of the value of instruments
held by Noctua Fund LP (“Noctua”) which have been issued to Noctua by
AudioStocks, Noctua hereby assents to Item 1 (c) of this Letter of
Intent.

    


    


    


    ____________________________

    James B.
Panther, II

    Managing
Member

    of Noctua
Fund Manager, LLC

    the
General Partner of Noctua Fund LP