Item 1. Financial Statements
Notes to Consolidated Financial Statements
June 30, 2013 and 2012 and the period from
August 17, 1999 (Inception) to June 30, 2013
(Unaudited)
(1) Description of Business and Summary of Significant Accounting Policies.
|
(a)
|
Description of Business, Development Stage Activities
|
ProUroCare Medical Inc. (“ProUroCare,” the “Company,” “we” or “us”) is engaged in the business of developing for market innovative products for the detection and characterization of male urological prostate disease. The primary focus of the Company is currently the prostate imaging device, known as the ProUroScan
TM
System, which is designed to produce an image of the prostate as an adjunctive aid in visualizing and documenting abnormalities of the prostate that have been detected by digital rectal examination. The Company’s developmental activities, conducted by its wholly owned operating subsidiary, ProUroCare Inc. (“PUC”) in conjunction with its development partner, Artann Laboratories, Inc. (“Artann”), have included the acquisition of several technology licenses, the purchase of intellectual property, the development of a strategic business plan and a senior management team, product development and fund raising activities. In April 2012, the ProUroScan System received initial clearance for marketing in the United States by the Food and Drug Administration (“FDA”). The Company is currently in the process of raising additional financing required to complete and obtain FDA approval of a reusable probe for the ProUroScan system and move to commercialization.
|
(b)
|
Basis of Presentation
|
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. In the opinion of management, all adjustments considered necessary for a fair presentation of results have been included. The consolidated balance sheet at December 31, 2012 was derived from the audited consolidated financial statements as of that date. Operating results for the three months and six months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or any other period. The accompanying consolidated financial statements and related notes should be read in conjunction with the audited financial statements of the Company, and notes thereto, contained in our Annual Report on Form 10-K for the year ended December 31, 2012.
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, PUC. Significant intercompany accounts and transactions have been eliminated in consolidation. The financial information furnished reflects, in the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of the interim periods presented.
|
(c)
|
Net Loss Per Common Share
|
Basic and diluted loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding for the reporting period. Dilutive common-equivalent shares have not been included in the computation of diluted net loss per share because their inclusion would be antidilutive. Antidilutive common equivalent shares issuable based on future exercise of stock options or warrants could potentially dilute basic loss per common share in subsequent years. All options and warrants outstanding were anti-dilutive for the three months ended June 30, 2013 and 2012 and the period from August 17, 1999 (Inception) to June 30, 2013 due to the Company’s net losses.
10,495,712
and
10,433,839
shares of common stock issuable under stock options and warrants were excluded from the computation of diluted net loss per common share for each of the three months and six months ended June 30, 2013 and 2012, respectively.
Page 5
|
(d)
|
Stock-Based Compensation
|
The Company’s policy is to grant stock options at fair value at the date of grant and to record stock-based employee compensation expense at fair value. The Company recognizes the expense related to the fair value of the award on a straight-line basis over the vesting period.
From time to time, the Company issues options and warrants to non-employees (typically consultants). It is the Company’s policy to grant warrants at or above the fair market value at the date of grant, determined to be the average of the last closing price of the stock over the previous 10-trading days. The fair value of options or warrants issued to non-employees is measured on the earlier of the date the performance is complete or the date the consultant is committed to perform. In the event that the measurement date occurs after an interim reporting date, the options are measured at their then-current fair value at each interim reporting date. The fair value of options so determined is expensed on a straight-line basis over the associated performance period.
The Company uses the Black-Scholes option-pricing model to estimate the fair value of options. In certain instances where options or warrants are issued for cash or for services rendered, the value of the service provided or money advanced is a more reliable measure of fair value. Provided that the exchange of options or warrants for cash or services is determined through an “arms-length” negotiation, the value of the cash or services is used rather than the valuation model. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option pricing models require the input of highly subjective assumptions. Because the Company’s employee and consultant stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the Company’s stock options.
|
(e)
|
Stock-Based Loan Consideration
|
The Company issues stock and warrants to various lenders and loan guarantors in consideration for their making or guaranteeing certain loans to the Company. The Company values the stock and warrants at fair value at the date of grant, and records the value as debt issuance cost. The debt issuance cost is amortized as either debt extinguishment expense or interest expense, depending on the specific terms of loan amendments.
The Company uses the Black-Scholes option-pricing model to estimate the fair value of warrants, in the same manner as it values stock options (see Note 1(d) above. For the same reasons
explained above with respect to the valuation model’s application to stock options,
the existing valuation model may not necessarily provide a reliable single measure of the fair value of the Company’s stock warrants.
The Company received a cash payment
during the six months ended June 30, 2013, representing
a subscription to a private debt offering. However, under the terms of the debt offering, the funds cannot be used by the Company until a closing on the minimum amount of the offering is held, so the cash is restricted and must be returned to the subscriber if a closing is not completed.
The Company has incurred operating losses, accumulated deficit and negative cash flows from operations since inception, and our requirement for additional working capital to support future operations, raises substantial doubt as to our ability to continue as a going concern. As of June 30, 2013 the Company had an accumulated deficit of $
39,987,047
. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited consolidated financial statements do not include any adjustments related to recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
Note 2. Accounts Payable
Accounts payable are summarized as follows:
|
|
June 30,
2013
|
|
December 31,
2012
|
|
Accounts payable, related parties
|
|
$
|
121,241
|
|
$
|
115,151
|
|
Accounts payable, other
|
|
|
776,983
|
|
|
723,767
|
|
|
|
$
|
898,197
|
|
$
|
838,918
|
|
Note 3. Accrued Expenses.
Accrued expenses are summarized as follows:
|
|
June 30,
2013
|
|
December 31,
2012
|
|
Accrued development expense
|
|
$
|
472,125
|
|
$
|
515,000
|
|
Accrued interest
|
|
|
309,769
|
|
|
183,924
|
|
Accrued compensation
|
|
|
214,375
|
|
|
118,080
|
|
Accrued royalties
|
|
|
58,334
|
|
|
33,000
|
|
Accrued directors fees
|
|
|
34,625
|
|
|
0
|
|
Other accrued expenses
|
|
|
100,683
|
|
|
43,277
|
|
Audit fees
|
|
|
21,000
|
|
|
42,000
|
|
Accrued loan consideration to be paid in stock
|
|
|
0
|
|
|
73,652
|
|
|
|
$
|
1,210,911
|
|
$
|
1,008,933
|
|
Note 4. Debt Issuance Costs
The Company’s loans have been made pursuant to loan arrangements or guarantees that include the provision of compensation to the lenders or guarantors in the form of Company common stock or warrants. The value of the compensation issued in the form of common stock or warrants is recorded as debt issuance cost and amortized over the term of the loans.
Pursuant to the debt guarantees of the Company’s bank loans and loans received from individual lenders,
1,728,549
warrants valued at $
522,723
were issued or accrued for issuance during the six months ended June 30, 2013 (see Notes 4, 5 and 6). Of this, warrants valued at $
73,652
were issued in lieu of amounts previously accrued for issuance in the form of common stock. Bank refinance fees of $
2,500
paid in cash were recorded as debt issuance cost and immediately amortized as debt extinguishment expense.
Debt issuance costs are summarized as follows:
|
|
June 30,
2013
|
|
December 31,
2012
|
|
Debt issuance costs, gross
|
|
$
|
2,239,390
|
|
$
|
1,787,819
|
|
Less amortization
|
|
|
(2,076,402)
|
|
|
(1,782,573)
|
|
Debt issuance costs, net
|
|
$
|
162,988
|
|
$
|
5,246
|
|
Debt issuance cost amortization is recorded as either debt extinguishment expense or interest expense, depending on the specific terms of loan amendments. The amortization of debt issuance costs for the six months ended June 30, 2013 and 2012, and the period from August 17, 1999 (Inception) to June 30, 2013 was as follows:
|
|
Six months ended June 30,
|
|
August 17, 1999
(Inception) to
|
|
|
|
2013
|
|
2012
|
|
June 30, 2013
|
|
Amortization of expense
|
|
$
|
293,829
|
|
$
|
344,940
|
|
$
|
4,129,847
|
|
Note 5. Notes Payable Bank.
The following summarizes the balances of bank notes payable at June 30, 2013 and December 31, 2012:
|
|
June 30, 2013
|
|
December 31, 2012
|
|
Short-term notes payable, bank:
|
|
|
|
|
|
|
|
Crown Bank promissory note
|
|
$
|
450,000
|
|
$
|
500,000
|
|
Central Bank line of credit
|
|
|
100,000
|
|
|
100,000
|
|
Central Bank promissory note
|
|
|
100,025
|
|
|
0
|
|
Total short-term notes payable, bank
|
|
$
|
650,025
|
|
$
|
600,000
|
|
|
|
|
|
|
|
|
|
Long-term notes payable, bank:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central Bank promissory note
|
|
$
|
0
|
|
$
|
100,025
|
|
Crown Bank Loan
On March 27, 2013, the Company refinanced its $
500,000
promissory note with Crown Bank (the “Crown Loan”). Pursuant to the amendment, a principal reduction payment of $
50,000
was made on March 27, 2013, with
a second $50,000 reduction due on January 15, 2014
. The note matures on
February 15, 2014
, and
bears interest at the prime rate plus one percent, but never less than 6.0% (currently 6.0%).
The Crown Loan remains secured by all Company assets and continues to be guaranteed by James L. Davis, a director of the Company and William S. Reiling, a greater than 5% shareholder of the Company (see Note 6 for consideration paid to the guarantors in the form of equity). On the renewal date, it was determined that a substantial modification of the terms of the note was made as the present value of the cash flows under the new promissory note was greater than 10% higher than the present value of the cash flows under the original note. Accordingly, the value of the warrants issued pursuant to this arrangement were recorded as debt issuance cost and are being expensed as debt extinguishment expense as they are earned. The Company recognized $
145,678
of debt extinguishment expense related to the warrants and $
2,500
of debt extinguishment expense related to bank fees during the six months ended June 30, 2013.
Central Bank Loans
On January 17, 2013, the Company renewed its $
100,025
Central Bank loan. The renewed loan matures on
January 17, 2014
, and
bears interest at the prime rate plus one percent, with a minimum annual rate of
5.0
% (currently 5.0%).
On May 11, 2013, the Company renewed its $
100,000
Central Bank line of credit. The renewed line of credit matures on
January 17, 2014
, and
bears interest at the prime rate plus one percent, with a minimum annual rate of
5.0
% (currently 5%).
The Central Bank facilities (the “Central Loans”) are guaranteed by an individual investor (see Note 7 for consideration paid to the guarantor in the form of equity). On the renewal dates, it was determined that a substantial modification of the terms of the Central Loans was made as the present value of the cash flows under the new promissory notes were greater than 10% higher than the present value of the cash flows under the original note. Accordingly, the value of the warrants issued pursuant to this arrangement were recorded as recorded as debt issuance cost and are being expensed as debt extinguishment expense as they are earned. The Company recognized $
16,321
of debt extinguishment expense related to the Central Loans during the six months ended June 30, 2013.
Note 6. Notes Payable.
The following summarizes notes payable balances at June 30, 2013 and December 31, 2012.
|
|
June 30,
|
|
December 31,
|
|
|
|
2013
|
|
2012
|
|
Convertible Debt:
|
|
|
|
|
|
|
|
Secured Convertible Debt, related parties:
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $1.30
|
|
$
|
250,000
|
|
$
|
250,000
|
|
per share and matures September 20, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $0.50
|
|
|
275,000
|
|
|
275,000
|
|
per share and matures December 26, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $1.30
|
|
|
200,000
|
|
|
200,000
|
|
per share and matures March 31,2014
|
|
|
|
|
|
|
|
Subtotal
|
|
|
725,000
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
Secured Convertible debt, other:
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $1.30
|
|
|
225,000
|
|
|
225,000
|
|
per share and matures September 20, 2013
|
|
|
|
|
|
|
|
Bears interest at 6%, convertible at $1.00
|
|
|
300,000
|
|
|
300,000
|
|
per share and matures October 10, 2013
|
|
|
|
|
|
|
|
Subtotal
|
|
|
525,000
|
|
|
525,000
|
|
Total Secured Convertible Debt
|
|
|
1,250,000
|
|
|
1,250,000
|
|
|
|
|
|
|
|
|
|
Unsecured Convertible Debt:
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $0.50
|
|
|
6,400
|
|
|
6,400
|
|
per share and matures December 28, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $1.30
|
|
|
57,500
|
|
|
60,000
|
|
per share and matured January 31, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $1.00
|
|
|
65,698
|
|
|
65,698
|
|
per share and matures August 10, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, convertible at $1.00
|
|
|
11,018
|
|
|
11,018
|
|
per share and matures August 11, 2013
|
|
|
|
|
|
|
|
Total Unsecured Convertible Debt
|
|
|
140,616
|
|
|
143,116
|
|
Total Convertible Debt
|
|
$
|
1,390,616
|
|
$
|
1,393,116
|
|
|
|
|
|
|
|
|
|
Other Unsecured Debt:
|
|
|
|
|
|
|
|
Insurance policy financing, bears
|
|
|
99,312
|
|
|
33,266
|
|
interest at 3.32%, payments of $11,188
|
|
|
|
|
|
|
|
per month, matures March 31, 2014
|
|
|
|
|
|
|
|
Bears interest at 10%, matures
|
|
|
40,000
|
|
|
40,000
|
|
August 22, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, matured
|
|
|
21,000
|
|
|
21,000
|
|
March 22, 2013
|
|
|
|
|
|
|
|
Bears interest at 10%, matured
|
|
|
15,000
|
|
|
15,000
|
|
March 29, 2013
|
|
|
|
|
|
|
|
Total Other Debt
|
|
$
|
175,312
|
|
$
|
109,266
|
|
On May 8, 2013, the Company refinanced $
250,000
of short term notes with Jeanne Rudelius, a relative of Director Robert Rudelius. Under the terms of the new note, the loan matures on
December 26, 2013
, bears interest at
10
% per year, and the principal and accrued interest thereon is convertible into the Company’s common stock at $
0.50
per share (see Note 7 for consideration paid to the lender in the form of warrants).
Page 9
Note 7. Shareholders’ Equity.
Stock and Stock Options
On January 4, 2013, the Company issued
20,000
shares of its common stock to Larry Getlin, who at the time was a director, in lieu of $
12,800
of accrued consulting fees. On March 26, 2013, the Company issued
80,000
shares of its common stock to a consultant in lieu of $
34,000
of accrued consulting fees.
On May 16, 2013 the Company entered into a consulting agreement with Alan Shuler, its Interim Chief Financial Officer. Under terms of the consulting agreement Mr. Shuler will be paid 1/3 of his consulting fees, on a monthly basis, in common stock of the Company. The value of the shares issued will be determined based upon the volume weighted trading average of the Company’s common stock for all the trading days during the month. Accordingly, the Company issued
35,430
shares of stock in June and July 2013, with a value of $
11,175
for the months of May and June, 2013. On June 5, 2013 the company issued
11,424
shares of common stock to Alan Shuler, the Interim Chief Financial Officer, as partial compensation for his consulting services. The value of the stock was determined to be $
3,850
based upon the 30 day volume weighted trading average of the stock for the months ended May 31, 2013.
No stock options were granted during the six months ended June 30, 2013 and 2012.
Stock-based compensation expense related to options and warrants for the periods ended June 30, 2013 and 2012, and the period from August 17, 1999 (inception) to June 30, 2013, is outlined below. The Company estimates the amount of future stock-based compensation expense related to currently outstanding options to be approximately $
23,958
for the remaining part of the year for the year ending December 31, 2013. Shares issued upon the exercise of stock options are newly issued from the Company’s authorized shares.
|
|
Six months ended June 30,
|
|
August 17, 1999 (Inception) to
|
|
|
|
2013
|
|
2012
|
|
June 30, 2013
|
|
|
|
Expense
|
|
Per Share
|
|
Expense
|
|
Per Share
|
|
Expense
|
|
Per Share
|
|
Stock-based compensation
|
|
$
|
11,730
|
|
$
|
0.00
|
|
$
|
107,585
|
|
$
|
0.01
|
|
$
|
2,774,391
|
|
$
|
0.50
|
|
Warrants
On May 8, 2013, the Company issued
327,600
warrants to certain consultants with a value of $
81,900
. The five-year warrants issued will vest upon the Company’s first commercial sale of product or upon a change of control of the Company, and are exercisable at $
0.50
per share.
Between March 12 and June 30, 2013, officers, directors, and other related parties made cash advances to the Company totaling $
216,341
. On May 8, 2013, the Company issued
698,046
warrants to certain of these parties in lieu of cash repayment of $116,341. The warrants issued are five-year warrants and immediately exercisable at $
0.50
per share.
On May 8, 2013, the Company executed a consulting agreement with its interim CEO, Stan Myrum, effective as of April 23, 2013. Under the terms of his consulting agreement Mr. Myrum will earn an hourly fee to be paid in cash, and was issued a commitment fee of
150,000
warrants to purchase our common stock. The agreement contains successive two month extension periods unless either party terminates the agreement and has been automatically extended through September 2013. Mr. Myrum will be eligible for an undetermined, mutually agreed upon bonus upon entering each extension period. The warrants will vest upon the first to occur of (a) the first commercialization (i.e. sale, lease, procedure payment or other activity in which monies are received by the Company but excluding any placements at KOL sites for post-market studies) by the Company or (b) a Change in Control of the Company. The warrants issued are immediately exercisable, five-year warrants exercisable at $0.50 per share.
Page 10
Common stock and warrants issued as consideration for loans and loan guarantees
The Company issues stock and warrants to various lenders and loan guarantors in consideration for their making or guaranteeing certain loans to the Company. Depending on the terms, cash flows, and other characteristics of the each loan or loan renewal, consideration paid in the form of stock and warrants is recorded as debt issuance cost or original issue discount, and amortized over the corresponding term of each loan as either interest expense or debt extinguishment expense.
Crown Note consideration (see Note 5)
As of December 31, 2012, the Company had accrued for issuance
80,460
shares of its common stock valued at $
62,760
as consideration to the two guarantors of the Crown Note for the guarantee period from November 1, 2012 through December 31, 2012. On May 8, 2013, the guarantors agreed to accept as consideration warrants instead of common shares. Accordingly, the Company issued a total of
583,340
immediately vested warrants with a fair value determined using the Black-Scholes pricing model of $
163,336
for the guarantee period from November 1, 2012 through March 31, 2013. At the same time the Company issued a total of
590,626
warrants valued at $
165,375
as consideration to the guarantors for the period from April 1, 2013 to February 15, 2014.
The warrants will vest as to 28,125 shares on the first of each month from April 2013 to January, 2014, and as to 14,063 shares on February 1, 2014, subject to adjustment if the amount of the loan guaranteed should change.
All the warrants issued are five-year warrants exercisable at $
0.50
per share.
Central Loans consideration (see Note 5)
As of December 31, 2012, the Company had accrued for issuance
11,774
shares of its common stock valued at $
10,892
as consideration to the guarantor of the Central Loans for the guarantee period from July 17, 2012 through December 31, 2012. On May 8, 2013, the guarantor agreed to accept as consideration warrants instead of common shares. Accordingly, the Company issued to the guarantor
25,000
immediately vested warrants with a fair value of $
7,000
for the guarantee period from July 17, 2012 through January 17, 2013 in the case of the Central Bank promissory note, and
25,000
immediately vested warrants with a fair value of $
7,000
for the guarantee period from November 12, 2012 through May 12, 2013 in the case of the Central Bank line of credit. The Company also issued
50,000
warrants with a fair value of $
14,000
for the period from January 17, 2013 to January 16, 2014 in the case of the Central Bank promissory note and
33,333
warrants valued at $
9,333
for the period from May 12, 2013 to January 16, 2014 in the case of the Central Bank line of credit. These warrants will vest ratably on a monthly basis over the term of the loans, subject to adjustment if the amount of the loan amounts guaranteed should change. All the warrants issued are five-year warrants exercisable at $
0.50
per share.
Consideration for $250,000 short term related party note (see Note 6)
On May 8, 2013, the lender of $
250,000
pursuant to short term notes agreed to refinance the note with a new convertible note that matures on December 26, 2013. As consideration to the lender, the Company issued a warrant for
150,000
shares with immediate vesting and a fair value of $
42,000
, which were expensed on a straight line basis over the refinancing period. The warrants issued are five-year warrants exercisable at $
0.50
per share.
Consideration for other short term notes (see Note 6)
Pursuant to existing terms of several other loans with an aggregate principal amount of $
76,000
, the Company accrued for issuance a total of
142,500
warrants with a fair value of $
99,600
during the three months ended March 31, 2013. The Company also accrued for issuance a total of
71,250
warrants with a fair value of $
49,800
during the three months ended June 30, 2013. All the warrants will vest upon issuance, are due upon repayment of the related loans, and will be exercisable for five years at $
.50
per share
Page 11
Note 8. Income Taxes.
The Company has generated net operating loss carryforwards of approximately $
10.8
million. The Company has also generated approximately $
13.9
million of built-in losses in the form of start-up expenses. Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards and built-in losses in the event of a change in ownership of the Company that constitutes an “ownership change,” as defined by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). Although a formal study has not been completed, the Company has analyzed its equity ownership changes and believes that such an ownership change occurred upon the completion of its 2009 public offering. Federal net operating losses of approximately $
5.4
million and built-in losses of $
7.7
million incurred prior to the 2009 public offering are limited to a total of approximately $
1.1
million, consisting of annual amounts of approximately $
104,000
per year for each of the years
2013-2023
. We believe that approximately $
12
.0 million of combined net operating losses and built-in losses will expire unused due to IRC Section 382 limitations. These limitations could be further restricted if additional ownership changes occur in future years.
Net federal and state operating loss carryforwards of approximately $
5
.0 million generated subsequent to the Company’s 2009 public offering will begin to expire in
2025
. The net operating loss carryforwards are subject to examination until they expire.
The Company had no significant unrecognized tax benefits as of December 31, 2012 and 2011 and, likewise, no significant unrecognized tax benefits that, if recognized, would affect the effective tax rate. The Company had no positions for which it deemed that it is reasonably possible that the total amounts of the unrecognized tax benefit will significantly increase or decrease. The Company has adopted the policy of classifying income tax related interest and penalties as interest expense and general and administrative expense, respectively.
The tax years that remain subject to examination by major tax jurisdictions currently are:
Federal 2009 - 2012
State of Minnesota 2009 - 2012
Note 9. Commitments and Contingencies
Due to funding limitations, the Company’s former executive officers did not receive their salaries for an extended time. In April, 2013, our former officers ceased to be statutory employees of the Company, and now provide consulting services to the Company as requested by the current executive officers. Approximately $
215,000
of unpaid payroll and benefits have been accrued and are included in accrued expenses as of June 30, 2013. The Company has made no arrangements to pay these amounts.
Note 10. Subsequent Events.
From July 12, 2013 through August 5, 2013 the Company received $
77,500
in deposits under the Company’s “Bridge Loan” offering. The lenders under this program were issued a one-year convertible note bearing interest at
10
% and are convertible at $.50 per share. Each lender also received a three-year warrant for 4 shares for each dollar loaned that is exercisable at $.50 per share.
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