Notes to Consolidated Financial Statements
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant recurring operating losses and negative cash flows from operations. The Company had a working capital deficiency of $222,576 and an accumulated deficit of $18,570,865 as of June 30, 2013. The Company also has no lending relationships with commercial banks and is dependent on the completion of financings involving the private placement of its securities in order to continue operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The Company does not anticipate establishing any lending relationships with commercial banks in the foreseeable future due to its limited operations and assets. The Company continues to execute its strategy of selling anolyte and catholyte solutions and leasing its EcaFlo™ equipment to fund its operations and is focused on obtaining additional capital through the private placement of its securities. The Company is continuing to pursue potential equity and/or debt investors and, from time to time, has engaged placement agents to assist it in this initiative. While the Company is pursuing the opportunities and actions described above, there can be no assurance that it will be successful in its efforts. If the Company is unable to secure additional capital, it will explore other strategic alternatives, including, but not limited to, the sale of the Company. Any additional equity financing may result in substantial dilution to the Company’s stockholders.
2. Inventory
As of June 30, 2013 and December 31, 2012, inventory consisted of parts and materials totaling $65,409 and $82,566, respectively.
During March 2013 and December 2012, the Company reclassified $17,487 and $138,336, respectively, of EcaFlo™ equipment from finished goods inventory to property and equipment. The Company no longer intends to sell the EcaFlo™ equipment but rather will either utilize the EcaFlo™ equipment to manufacture anolyte and catholyte solutions to be sold by the Company or lease the EcaFlo™ equipment to third parties.
3. Note Receivable
The Company has a note receivable with a customer relating to the sale of certain EcaFlo™ equipment. The note payments are $1,250 per month over a 34-month term which commenced on January 15, 2011. The Company imputed interest on this note receivable at a rate of 3% per annum.
During the six months ended June 30, 2013, the Company and the customer agreed to apply $4,172 of accounts payable due by the Company to the customer against the note receivable balance due from the customer to the Company. The accounts payable amount due by the Company to the customer related to the purchase of certain parts and materials by the Company from the customer. During the three and six months ended June 30, 2013, the Company recognized $16 and $53, respectively, of interest income related to this note receivable. During the three and six months ended June 30, 2012, the Company recognized $168 and $348, respectively, of interest income related to this note receivable. As of June 30, 2013 and December 31, 2012, the current portion of the note receivable was $3,590 and $7,762, respectively.
4. Property and Equipment
As of June 30, 2013 and December 31, 2012, property and equipment, on a net basis, consisted of the following (see note 8):
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
Leasehold improvements
|
|
$
|
328,977
|
|
|
$
|
328,977
|
|
Equipment
|
|
|
427,883
|
|
|
|
203,368
|
|
|
|
|
756,860
|
|
|
|
532,345
|
|
Less: Accumulated depreciation
|
|
|
(326,526
|
)
|
|
|
(249,363
|
)
|
|
|
$
|
430,334
|
|
|
$
|
282,982
|
|
5. Accrued Expenses
As of June 30, 2013 and December 31, 2012, accrued expenses consisted of the following:
|
|
June 30,
2013
|
|
|
December 31,
2012
|
|
Accrued compensation
|
|
$
|
115,000
|
|
|
$
|
115,000
|
|
Accrued interest
|
|
|
41,968
|
|
|
|
21,330
|
|
Accrued auditing fees
|
|
|
2,800
|
|
|
|
22,000
|
|
Accrued other expenses
|
|
|
1,633
|
|
|
|
1,633
|
|
|
|
$
|
161,401
|
|
|
$
|
159,963
|
|
6. Customer Deposits
On March 29, 2011, the Company agreed to issue a credit to purchase equipment to a consultant in the amount of $36,109. This credit was issued as payment to the consultant for consulting services previously rendered to the Company. The Company has recorded this amount as a customer deposit.
Pursuant to the terms of a license agreement with a third party related to the use by the third party of the Company’s United States Environmental Protection Agency (the “EPA”) registration for its anolyte solution, the Company received a deposit of $2,000.
7. Convertible Debentures
April 2007 Convertible Debenture
On April 26, 2007, in a private placement, the Company issued a convertible debenture to an individual accredited investor in the principal amount of $25,000. This convertible debenture matured on January 2, 2009 and remains unpaid. The convertible debenture accrues interest at a rate of 12% per annum and is convertible at any time into shares of the Company’s common stock at the option of the holder at a conversion price of $0.40 per share. An aggregate of 62,500 shares of the Company’s common stock can be issued upon the conversion of the outstanding principal amount due on this convertible debenture at the current conversion price of $0.40 per share.
During the three and six months ended June 30, 2013, the Company recorded a total of $748 and $1,488, respectively, of interest expense related to this convertible debenture. During the three and six months ended June 30, 2012, the Company recorded a total of $748 and $1,496, respectively, of interest expense related to this convertible debenture. As of June 30, 2013, the outstanding principal on this convertible debenture was $25,000 and the accrued and unpaid interest was $8,937, which amount is included as a component of accrued expenses.
Zanett Convertible Debentures
On August 21, 2012, the Company issued to Zanett Opportunity Fund, Ltd. (“Zanett”) an 8% convertible debenture in the amount of $476,125 (the “Zanett August 2012 Debenture”). In connection with this private placement, the Company refinanced an 8% convertible debenture, in the principal amount of $376,125, issued to Zanett on July 7, 2011 (the “Zanett July 2011 Debenture”) and refinanced an 8% convertible secured promissory note, in the principal amount of $100,000, issued to Zanett on September 23, 2011 (the “Zanett September 2011 Note”). As a result of the issuance of the Zanett August 2012 Debenture, the Zanett July 2011 Debenture and the Zanett September 2011 Note were cancelled.
The Zanett August 2012 Debenture has a three-year term maturing on August 21, 2015 and bears interest at a rate of 8% per annum. Interest is payable in annual installments in cash or, at the option of the Company, in shares of the Company’s common stock. If the Company elects to pay the interest in shares of its common stock, the number of shares issued as payment will be equal to the quotient of the unpaid interest divided by the market price of the Company’s common stock, as defined in the Zanett August 2012 Debenture.
The entire principal amount of the Zanett August 2012 Debenture is convertible at any time into shares of the Company’s common stock at the option of the holder at a conversion price of $0.10 per share. In addition, at the option of the Company, the entire principal amount of the Zanett August 2012 Debenture is convertible into shares of the Company’s common stock at $0.10 per share upon the occurrence of the merger or acquisition of the Company or if the average closing price of the Company’s common stock for any period of ten consecutive trading days is greater than or equal to $0.15 per share. The quoted market price of the Company’s common stock on August 21, 2012 was $0.05 per share. An aggregate of 4,761,250 shares of the Company’s common stock can be issued upon the conversion of the outstanding principal amount due on the Zanett August 2012 Debenture at the current conversion price of $0.10 per share.
For the three and six months ended June 30, 2013, the Company recorded $9,628 and $19,151, respectively, of interest expense related to the Zanett August 2012 Debenture. As of June 30, 2013, the outstanding principal on the Zanett August 2012 Debenture was $476,125 and the accrued and unpaid interest was $33,031, which is included as a component of accrued expenses.
8. Note Payable
On June 17, 2013, the Company and Benchmark Performance Group, Inc. (“Benchmark”) entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), whereby the Company purchased nineteen EcaFlo™ machines owned by Benchmark as well as the rights to the Excelyte™ trademark and certain other intangible assets. The purchase price for the nineteen EcaFlo™ machines, the Excelyte™ trademark and other intangible assets was $190,000.
The Company paid $38,000 in conjunction with the closing of the Asset Purchase Agreement and issued a promissory note with a principal balance of $152,000. The promissory note bears interest at a rate of 7% per annum and requires the Company to make twenty-four monthly payments of $6,805 commencing August 1, 2013. The promissory note is secured by the nineteen EcaFlo™ machines.
9. Stockholders’ Deficiency
Common Stock
On April 30, 2013, the Company sold to E. Wayne Kinsey III, a member of the Company’s board of directors, 4,166,667 shares of the Company’s common stock for an aggregate purchase price of $125,000, or $0.03 per share. In addition, the Company sold 3,000,000 shares of its common stock to an individual investor for an aggregate purchase price of $90,000, or $0.03 per share.
On April 30, 2013, the Company issued 250,000 shares of its common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The total expense associated with the issuance of these shares was $11,875, representing the fair market value of the shares of common stock on the date of issuance to the consultant ($0.0475 per share).
On May 16, 2013, the Company sold an aggregate of 2,666,666 shares of its common stock to four individual investors for an aggregate purchase price of $80,000, or $0.03 per share.
On May 22, 2013, the Company sold 3,333,333 shares of its common stock to an individual investor for an aggregate purchase price of $100,000, or $0.03 per share.
On May 31, 2013, the Company issued 250,000 shares of its common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The total expense associated with the issuance of these shares was $12,500, representing the fair market value of the shares of common stock on the date of issuance to the consultant ($0.05 per share).
On June 20, 2013, the Company sold 800,000 shares of its common stock to an individual investor for an aggregate purchase price of $24,000, or $0.03 per share.
On June 26, 2013, the Company issued 450,000 shares of its common stock to Crystal Enterprises, Inc. (“Crystal”) in order to resolve certain disputes and to avoid further litigation costs associated with defending litigation brought by Crystal (see Note 13). The total expense associated with the issuance of these shares was $26,550, representing the fair market value of the shares of common stock on the date of issuance to Crystal ($0.059 per share).
On June 28, 2013, the Company sold 850,000 shares of its common stock to an individual investor for an aggregate purchase price of $25,500, or $0.03 per share.
Stock Options
The Company currently has two stock option/stock compensation plans in place: the 2010 Stock Incentive Plan and the 2012 Equity Incentive Plan (collectively, the “Equity Incentive Plans”).
The 2010 Stock Incentive Plan was approved by the stockholders in September 2010. The Company had reserved for issuance an aggregate of 10,000,000 shares of common stock under the 2010 Stock Incentive Plan. As of June 30, 2013, stock options to purchase 5,813,587 shares of the Company’s common stock were outstanding under the 2010 Stock Incentive Plan and 90,500 shares of the Company’s common stock had been issued under the 2010 Stock Incentive Plan. As a result of the adoption of the Company’s 2012 Equity Incentive Plan, no further awards are permitted under the 2010 Stock Incentive Plan.
The 2012 Equity Incentive Plan was approved by the stockholders in May 2012. The Company has reserved for issuance an aggregate of 14,000,000 shares of common stock under the 2012 Stock Incentive Plan. The 2012 Equity Incentive Plan is designed to encourage and enable employees and directors of the Company to acquire or increase their holdings of common stock and other proprietary interests in the Company. It is intended to promote these individuals’ interests in the Company, thereby enhancing the efficiency, soundness, profitability, growth and stockholder value of the Company. The 2012 Equity Incentive Plan provides for grants and/or awards in the form of incentive and non-qualified stock option grants, stock appreciation rights, restricted stock awards, performance share awards, phantom stock awards and dividend equivalent awards. As of June 30, 2013, no grants or awards had been made under the 2012 Equity Incentive Plan.
Common stock grants and stock option awards under the Equity Incentive Plans were issued or granted at prices as determined by the Company’s compensation committee, but such prices were not less than the fair market value of the Company's common stock on the date of grant or issuance. Stock options granted and outstanding to date consist of both incentive stock options and non-qualified stock options.
A summary of stock option transactions under the Equity Incentive Plans during the six months ended June 30, 2013 is set forth below:
|
|
Stock
Option
Shares
|
|
|
Weighted
Average
Exercise
Price Per
Common
Share
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2012
|
|
|
5,813,587
|
|
|
$
|
0.18
|
|
|
$
|
—
|
|
Granted during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Exercised during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Terminated during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding at June 30, 2013
|
|
|
5,813,587
|
|
|
$
|
0.18
|
|
|
$
|
—
|
|
Available for purchase at June 30, 2013
|
|
|
1,806,793
|
|
|
$
|
0.10
|
|
|
$
|
—
|
|
Available for purchase at December 31, 2012
|
|
|
1,806,793
|
|
|
$
|
0.10
|
|
|
$
|
—
|
|
Information with respect to outstanding stock options and stock options exercisable as of June 30, 2013 is as follows:
|
|
|
Stock Options Outstanding
|
|
|
Stock Options Exercisable
|
|
|
|
|
Number of
Shares
Available
Under
Outstanding
Stock
Options
|
|
|
Weighted
Average
Exercise
Price Per
Common
Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Number of
Shares
Available
for
Purchase
Under
Outstanding
Stock
|
|
|
Weighted
Average
Exercise
Price Per
Common
Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
$
|
0.08
|
|
|
|
300,000
|
|
|
$
|
0.08
|
|
|
|
0.8
|
|
|
|
300,000
|
|
|
$
|
0.08
|
|
|
|
0.8
|
|
$
|
0.10
|
|
|
|
2,180,253
|
|
|
$
|
0.10
|
|
|
|
5.7
|
|
|
|
1,506,793
|
|
|
$
|
0.10
|
|
|
|
6.5
|
|
$
|
0.20
|
|
|
|
1,666,666
|
|
|
$
|
0.20
|
|
|
|
8.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
$
|
0.30
|
|
|
|
1,666,668
|
|
|
$
|
0.30
|
|
|
|
8.8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
5,813,587
|
|
|
$
|
0.18
|
|
|
|
7.2
|
|
|
|
1,806,793
|
|
|
$
|
0.10
|
|
|
|
5.6
|
|
A summary of the non-vested shares subject to stock options granted under the Equity Incentive Plans as of June 30, 2013 is as follows:
|
|
Stock
Option
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
Per Share
|
|
Non-vested at December 31, 2012
|
|
|
4,006,794
|
|
|
$
|
0.05
|
|
Granted during the period
|
|
|
—
|
|
|
|
—
|
|
Vested during the period
|
|
|
—
|
|
|
|
—
|
|
Terminated during the period
|
|
|
—
|
|
|
|
—
|
|
Non-vested at June 30, 2013
|
|
|
4,006,794
|
|
|
$
|
0.05
|
|
As of June 30, 2013, there was $56,954 of total unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Equity Incentive Plans. That cost is expected to be recognized over a weighted average period of fifteen months.
Warrants to Purchase Common Stock
On April 1, 2013, the Company issued a warrant to purchase 250,000 shares of the Company’s common stock in connection with a consulting agreement with an unaffiliated third party for investor relations services. The warrant is exercisable at $0.04 per share and has a term of three years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $4,696, using the following weighted average assumptions: exercise price of $0.04 per share; common stock price of $0.04 per share; volatility of 125%; term of three years; dividend yield of 0%; interest rate of 0.36%; and risk of forfeiture of 35%.
A summary of warrant transactions during the six months ended June 30, 2013 is as follows:
|
|
Warrant
Shares
|
|
|
Weighted
Average
Exercise
Price Per
Common
Share
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2012
|
|
|
45,852,998
|
|
|
$
|
0.17
|
|
|
$
|
—
|
|
Issued during the period
|
|
|
750,000
|
|
|
$
|
0.04
|
|
|
|
—
|
|
Exercised during the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Terminated during the period
|
|
|
(225,000
|
)
|
|
$
|
0.28
|
|
|
|
—
|
|
Outstanding at June 30, 2013
|
|
|
46,377,998
|
|
|
$
|
0.17
|
|
|
$
|
—
|
|
Available for purchase at June 30, 2013
|
|
|
46,377,998
|
|
|
$
|
0.17
|
|
|
$
|
16,250
|
|
Available for purchase at December 31, 2012
|
|
|
45,852,998
|
|
|
$
|
0.17
|
|
|
$
|
—
|
|
Warrants issued by the Company contain exercise prices that were approved by the Company’s board of directors. Such exercise prices are generally not less than the quoted market price of the Company's common stock on the date of issuance. Warrants currently issued either vested immediately or over a period of up to three years and have a maximum term of ten years from the date of issuance.
Information with respect to outstanding warrants and warrants exercisable at June 30, 2013 is as follows:
|
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
|
|
Number of
Shares
Available
Under
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price Per
Common
Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
|
Number of
Shares
Available
for
Purchase
Under
Outstanding
Warrants
|
|
|
Weighted
Average
Exercise
Price Per
Common
Share
|
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
$
|
0.07 - 0.10
|
|
|
|
23,806,061
|
|
|
$
|
0.09
|
|
|
|
4.4
|
|
|
|
23,806,061
|
|
|
$
|
0.09
|
|
|
|
4.4
|
|
$
|
0.20 - 0.35
|
|
|
|
19,949,437
|
|
|
$
|
0.22
|
|
|
|
1.3
|
|
|
|
19,949,437
|
|
|
$
|
0.22
|
|
|
|
1.3
|
|
$
|
0.50
|
|
|
|
2,622,500
|
|
|
$
|
0.50
|
|
|
|
0.4
|
|
|
|
2,622,500
|
|
|
$
|
0.50
|
|
|
|
0.4
|
|
|
|
|
|
|
46,377,998
|
|
|
$
|
0.17
|
|
|
|
2.8
|
|
|
|
46,377,998
|
|
|
$
|
0.17
|
|
|
|
2.8
|
|
As of June 30, 2013, there were no non-vested shares subject to warrants and there was no unrecognized compensation cost.
10. Stock-Based Compensation
During the three and six months ended June 30, 2013 and 2012, the Company recorded stock-based compensation expense as follows:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
General and administrative
|
|
$
|
37,549
|
|
|
$
|
22,842
|
|
|
$
|
73,825
|
|
|
$
|
38,071
|
|
Sales and marketing
|
|
|
2,548
|
|
|
|
16,885
|
|
|
|
5,068
|
|
|
|
40,677
|
|
Research and development
|
|
|
1,092
|
|
|
|
5,401
|
|
|
|
2,172
|
|
|
|
9,890
|
|
|
|
$
|
41,189
|
|
|
$
|
45,128
|
|
|
$
|
81,065
|
|
|
$
|
88,638
|
|
For the three and six months ended June 30, 2013, the Company recorded stock-based compensation expense related to stock options granted to employees and directors of $12,118 and $24,103, respectively. For the three and six months ended June 30, 2013, the Company recorded stock-based compensation expense related to common stock and warrants granted to non-employees of $29,071 and $56,962, respectively.
For the three and six months ended June 30, 2012, the Company recorded stock-based compensation expense related to stock options and warrants granted to employees and directors of $40,845 and $71,038, respectively. For the three and six months ended June 30, 2012, the Company recorded stock-based compensation expense related to stock options and warrants granted to non-employees of $4,283 and $17,600, respectively.
11. Net Loss Per Common Share
Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive. The dilutive effect of the outstanding stock options and warrants is computed using the treasury stock method.
For the three and six months ended June 30, 2013, diluted net loss per share did not include the effect of 5,813,587 shares of common stock issuable upon the exercise of outstanding stock options, 46,377,998 shares of common stock issuable upon the exercise of outstanding warrants and 4,823,750 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.
For the three and six months ended June 30, 2012, diluted net loss per share did not include the effect of 6,646,920 shares of common stock issuable upon the exercise of outstanding options, 44,462,998 shares of common stock issuable upon the exercise of outstanding warrants and 10,323,750 shares of common stock issuable upon the conversion of convertible debt, as their effect would be anti-dilutive.
12. Related-Party Transactions
On April 30, 2013, the Company sold to E. Wayne Kinsey III, a member of the Company’s board of directors, 4,166,667 shares of the Company’s common stock for an aggregate purchase price of $125,000, or $0.03 per share (see Note 9).
13. Commitments and Contingencies
Lease Agreement – South Carolina
The Company entered into a lease agreement for its premises located in Little River, South Carolina on January 1, 2006. The lease agreement had an original term of three years. In January 2009, the Company agreed to renew the lease agreement for a term of five years, terminating December 31, 2013, at $71,291 per year. The renewal term contained the same covenants, conditions, and provisions as provided in the original lease agreement. The future minimum lease payments due under this lease for the remainder of fiscal 2013 total $35,646.
Litigation with Crystal Enterprises
On January 12, 2012, a civil complaint was filed against the Company in the United States District Court for the Western District of Washington by Crystal Enterprises, Inc. In its complaint, Crystal alleged interference with prospective advantage or business expectancy, tortious interference with contract, breach of fiduciary duty, breach of non-disclosure agreement and breach of contact. Crystal’s allegations centered on discussions among the Company, Crystal, Pendred, Inc. (an affiliate of Crystal) and Biolize Products, LLC, regarding the establishment of a business relationship involving the distribution of the Company’s anolyte and catholyte solutions. Crystal sought monetary damages as well as attorney fees. The Company refuted all claims made by Crystal, including the monetary damages claimed by Crystal.
In order to resolve the dispute and to avoid further litigation costs associated with defending the litigation, the Company agreed to a settlement with Crystal. Pursuant to the settlement, neither party admitted to any wrongdoing, the parties agreed to unconditional mutual releases regarding, among other things, all of the claims made by Crystal in the civil complaint and the Company issued 450,000 shares of its common stock to Crystal (see Note 9). The total expense associated with the issuance of these shares was $26,550, representing the fair market value of the shares of common stock on the date of issuance to Crystal ($0.059 per share).
14. Subsequent Events
On July 31, 2013, the Company sold an aggregate of 7,366,665 shares of its common stock to eleven individual investors for an aggregate purchase price of $221,000, or $0.03 per share. The Company incurred offering costs of $8,800 in connection with these transactions.
On August 2, 2013, the Company sold an aggregate of 2,803,366 shares of its common stock to six individual investors for an aggregate purchase price of $84,101, or $0.03 per share. The Company incurred offering costs of $5,808 in connection with these transactions.
On August 2, 2013, the Company issued a warrant to purchase 401,567 shares of the Company’s common stock in connection with a placement agent and advisory services agreement. The warrant is exercisable at $0.0345 per share and has a term of five years. The warrant vested upon issuance. The fair value of the warrant on the date of issuance as calculated using the Black-Scholes model was $23,188, using the following weighted average assumptions: exercise price of $0.0345 per share; common stock price of $0.095 per share; volatility of 141%; term of five years; dividend yield of 0%; interest rate of 1.36%; and risk of forfeiture of 35%.
On August 5, 2013, the Company sold 3,333,333 shares of its common stock to an institutional investor and 500,000 shares of its common stock to an individual investor for an aggregate purchase price of $115,000, or $0.03 per share. The Company incurred offering costs of $8,050 in connection with these transactions.
On August 9, 2013, the Company sold an aggregate of 4,833,333 shares of its common stock to nine individual investors for an aggregate purchase price of $145,000, or $0.03 per share. The Company incurred offering costs of $7,350 in connection with these transactions.