Nevada
|
52-2340974
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
incorporation or organization)
|
Identification Number)
|
301 Carlson Parkway, Suite 103
|
|
Minneapolis, MN
|
55305
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer [ ]
|
Accelerated filer
|
[ ] | |
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
|
Smaller reporting company
|
[X] |
Page
|
||
ITEM 1.
|
BUSINESS.
|
ITEM 1A.
|
RISK FACTORS.
|
ITEM 1B.
|
UNRESOLVED STAFF COMMENTS.
|
ITEM 2.
|
PROPERTIES.
|
ITEM 3.
|
LEGAL PROCEEDINGS.
|
ITEM 4.
|
MINE SAFETY DISCLOSURES.
|
ITEM 5.
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
|
Year Ended December 31, 2011
|
||||||||
High
|
Low
|
|||||||
Quarter ended March 31
|
$
|
.04
|
$
|
.01
|
||||
Quarter ended June 30
|
$
|
.05
|
$
|
.01
|
||||
Quarter ended September 30
|
$
|
.03
|
$
|
.02
|
||||
Quarter ended December 31
|
$
|
.10
|
$
|
.01
|
||||
Year Ended December 31, 2012
|
||||||||
Quarter ended March 31
|
$
|
.10
|
$
|
.02
|
||||
Quarter ended June 30
|
$
|
.04
|
$
|
.02
|
||||
Quarter ended September 30
|
$
|
.05
|
$
|
.02
|
||||
Quarter ended December 31
|
$
|
.05
|
$
|
.02
|
ITEM 6.
|
SELECTED FINANCIAL DATA.
|
ITEM 7.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
ITEM 7A.
|
QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
ITEM 8.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|
2012
|
2011
|
|||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash
|
$
|
26
|
$
|
37
|
||||
Prepaid expenses
|
4
|
4
|
||||||
Total current assets
|
30
|
41
|
||||||
Total assets
|
$
|
30
|
$
|
41
|
||||
Liabilities and Stockholders' Deficit
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
5
|
$
|
4
|
||||
Accrued liabilities
|
41
|
42
|
||||||
Total current liabilities
|
46
|
46
|
||||||
Secured promissory notes from certain stockholders
|
150
|
50
|
||||||
Warrant liability | 33 |
--
|
||||||
Total liabilities
|
229
|
96
|
||||||
Stockholders' deficit:
|
||||||||
Common stock, $0.001 par value, 90,000,000 shares authorized, 52,519,896 shares issued and outstanding at December 31, 2012 and 2011
|
53
|
53
|
||||||
|
||||||||
Additional paid-in capital
|
6,403
|
6,502
|
||||||
Accumulated deficit
|
(6,655
|
)
|
(6,610
|
)
|
||||
Total stockholders' deficit
|
(199
|
)
|
(55)
|
|||||
Total liabilities and stockholders' deficit
|
$
|
30
|
$
|
41
|
2012
|
2011
|
|||||||
Revenue
|
$
|
--
|
$
|
--
|
||||
General and administrative expense
|
109
|
59
|
||||||
Loss from operations
|
(109
|
)
|
(59
|
)
|
||||
Other Income (expense):
|
||||||||
Interest expense
|
(4
|
)
|
(1)
|
|||||
Gain on fair value adjustment of warrant liability
|
68 | - | ||||||
Total other Income (expense)
|
64
|
|
(1)
|
|||||
Loss before income taxes
|
(45
|
)
|
(60
|
)
|
||||
Income tax expense
|
--
|
--
|
||||||
Net loss
|
$
|
(45
|
)
|
$
|
(60
|
)
|
||
Net loss per share - Basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
Weighted average common shares outstanding:
|
||||||||
Basic and diluted
|
52,519,896
|
52,519,896
|
|
Series A
convertible
preferred stock
|
Series B
convertible
preferred stock
|
Common
stock
|
Additional
paid-in
|
Accumulated
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||||||||
Balance at December 31, 2010
|
–
|
–
|
–
|
–
|
52,520
|
$ |
53
|
$ |
6,499
|
$ |
(6,550
|
)
|
$ |
2
|
||||||||||||||||||||||
Stock option compensation
|
3
|
3
|
||||||||||||||||||||||||||||||||||
Net loss for the year ended December 31, 2011
|
(60
|
)
|
(60
|
)
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2011
|
--
|
|
--
|
--
|
|
--
|
52,520
|
|
53
|
|
6,502
|
|
(6,610
|
)
|
|
(55
|
)
|
|||||||||||||||||||
Reclassification of warrant liability (see Note 6) | (101 | ) |
–
|
(101 | ) | |||||||||||||||||||||||||||||||
Stock option compensation
|
2
|
2
|
||||||||||||||||||||||||||||||||||
Net loss for the year ended December 31, 2012
|
(45
|
)
|
(45
|
)
|
||||||||||||||||||||||||||||||||
Balance at December 31, 2012
|
--
|
$
|
--
|
--
|
$
|
--
|
52,520
|
$
|
53
|
$
|
6,403
|
$
|
(6,655
|
)
|
$
|
(199
|
)
|
Year Ended
December 31,
2012
|
Year Ended
December 31,
2011
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(45
|
)
|
$
|
(60
|
)
|
||
Adjustments to reconcile net loss to net cash from operations:
|
||||||||
Stock-based compensation charges
|
2
|
3
|
||||||
Gain on fair value adjustment of warrant liability | (68 | ) | - | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts payable
|
1
|
2
|
||||||
Accrued liabilities
|
(1
|
)
|
4
|
|||||
Net cash used by operating activities
|
(111
|
)
|
(51
|
)
|
||||
Cash flows from investing activities:
|
- | - | ||||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of debt
|
100
|
50
|
||||||
Net cash provided by financing activities
|
100
|
50
|
||||||
Net decrease in cash and cash equivalents
|
(11
|
)
|
(1
|
)
|
||||
Cash at beginning of period
|
37
|
38
|
||||||
Cash at end of period
|
$
|
26
|
$
|
37
|
||||
Supplemental disclosures:
|
||||||||
Cash paid for interest
|
$
|
--
|
$
|
--
|
Year Ended December 31, | Amount | |||
2013 | $ | - | ||
2014 | 50,000 | |||
2015 | 100,000 | |||
$ | 150,000 |
December 31
|
||||||||
2012
|
2011
|
|||||||
Rent – disputed from 2007
|
27
|
27
|
||||||
Legal and accounting
|
8
|
14
|
||||||
Interest
|
6
|
1
|
||||||
$
|
41
|
$
|
42
|
Risk free interest rates
|
0.95 | % | ||
Expected dividend yield
|
0.0 | % | ||
Expected stock volatility
|
195.0 | % | ||
Expected term of warrants in years
|
6.4 |
Date
|
Description
|
Number of
Warrants
|
Warrant
Liability,
in thousands
|
|||||||
December 31, 2011
|
Balance of warrant liability at December 31, 2011
|
- | $ | - | ||||||
Fair value of warrants reclassified to warrant liability during 2012
|
1,686,510 | 101 | ||||||||
Change in fair value of warrant liability for the year ended December 31, 2012
|
- | (68 | ) | |||||||
December 31, 2012
|
Balance of warrant liability at December 31, 2012
|
1,686,510 | $ | 33 |
|
Level 1
|
-
|
Inputs use quoted prices in active markets for identical assets or liabilities.
|
|
Level 2
|
-
|
Inputs use other inputs that are observable, either directly or indirectly, other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
Level 3
|
-
|
Inputs are unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
|
Risk free interest rates
|
0.95 | % | ||
Expected dividend yield
|
0.0 | % | ||
Expected stock volatility
|
195.0 | % | ||
Expected term of warrants in years
|
6.4 |
Quoted
Prices in |
Significant
Other |
Significant
Unobservable |
Balance at
December 31, |
|||||||||||||
Warrant liability
|
$ | - | $ | - | $ | 33 | $ | 33 |
Balance, December 31, 2011
|
$ | - | ||
Fair value of warrants reclassified to liability
|
101 | |||
Gain on change in fair value of warrant liability recorded in other income
|
(68 | ) | ||
Balance, December 31, 2012
|
$ | 33 | ||
Gain recorded in other income, for Level 3 liability still held at December 31, 2012
|
$ | (68 | ) |
Number of
|
|
Exercise Price
|
Aggregate
Intrinsic
|
|||||||||||
Options
|
per Share
|
Value
|
||||||||||||
Outstanding at December 31, 2010
|
102,500
|
|
$.41
|
– |
2.75
|
|||||||||
Granted
|
- | |||||||||||||
Exercised
|
- | |||||||||||||
Canceled/ Forfeited
|
- | |||||||||||||
Outstanding at December 31, 2011
|
102,500
|
|
$0.41
|
– |
2.75
|
|
|
|||||||
Granted
|
- | |||||||||||||
Exercised
|
- | |||||||||||||
Canceled/Forfeited
|
- | |||||||||||||
Outstanding at December 31, 2012 | 102,500 | $ | 0.41 | - | 2.75 | |||||||||
Exercisable at end of year
|
102,500
|
|
$0.41
|
– |
2.75
|
0.00 |
Options Outstanding and Exercisable
|
||||||||||||||
Range of Exercise Prices
|
Number
|
Weighted
Average
Remaining
Contractual Life
(Years)
|
Weighted
Average
Exercise
Price
|
|||||||||||
$0.41 | - | $2.75 | 102,500 | 3.6 | $ | 1.38 |
Year Ended
December 31,
2012
|
Year Ended
December 31,
2011
|
|||||||
General and administrative
|
$
|
2
|
$
|
3
|
||||
Total stock-based compensation expense included in loss from operations
|
$
|
2
|
$
|
3
|
December 31
|
||||||||
2012
|
2011
|
|||||||
Tax computed at the federal statutory rate of 34%
|
$
|
(38)
|
$
|
(20)
|
||||
State income taxes, net of federal benefit
|
--
|
--
|
||||||
Permanent differences and other
|
--
|
1
|
||||||
State rate adjustment
|
--
|
6
|
||||||
Net operating loss forfeiture
|
--
|
370
|
||||||
Change in valuation allowance
|
38
|
(357
|
)
|
|||||
Income tax provision
|
$
|
--
|
$
|
--
|
December 31
|
||||||||
2012
|
2011
|
|||||||
Deferred tax assets:
|
||||||||
Accrued expenses - short term
|
$
|
14
|
$
|
14
|
||||
Stock compensation - long term | 19 | 18 | ||||||
Net operating loss carryforwards - long term
|
2,007
|
1,970
|
||||||
Valuation allowance
|
(2,040
|
)
|
(2,002
|
)
|
||||
Net deferred tax assets, net of valuation allowance
|
$
|
--
|
$
|
--
|
2012
|
2011
|
|||||||
Basic earnings (loss) per share calculation:
|
||||||||
Net loss to common shareholders
|
$
|
(45,000
|
)
|
$
|
(60,000
|
)
|
||
Weighted average of common shares outstanding
|
52,519,896
|
52,519,896
|
||||||
Basic net loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
Diluted earnings (loss) per share calculation:
|
||||||||
Net loss to common shareholders
|
$
|
(45,000
|
)
|
$
|
(60,000
|
)
|
||
Weighted average of common shares outstanding
|
52,519,896
|
52,519,896
|
||||||
Stock Options (1)
|
-
|
-
|
||||||
Warrants (2)
|
-
|
-
|
||||||
Diluted weighted average common shares
|
||||||||
Outstanding
|
52,519,896
|
52,519,896
|
||||||
Diluted net loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
(1)
|
At December 31, 2012 and 2011, there were common stock equivalents attributable to outstanding stock options of 102,500 common shares. The stock options are anti-dilutive at December 31, 2012 and 2011 and therefore have been excluded from diluted earnings per share.
|
(2)
|
At December 31, 2012 and 2011, there were common stock equivalents attributable to warrants of 1,686,510 common shares. The warrants are anti-dilutive for the years ended December 31, 2012 and 2011 and therefore have been excluded from diluted earnings per share.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|
ITEM 9A.
|
CONTROLS AND PROCEDURES.
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|
Name
|
Age
|
Position Held with the Company
|
||
Tony J. Christianson
|
61
|
Chairman of the Board of Directors
|
||
Gordon F. Stofer
|
66
|
Director, Chief Executive Officer
|
||
David G. Latzke
|
53
|
Chief Financial Officer and Secretary
|
||
John C. Bergstrom
|
53
|
Director
|
||
Kerry D. Rea
|
54
|
Director
|
ITEM 11.
|
EXECUTIVE COMPENSATION.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS.
|
Plan category
|
Number of
securities to
be issued
Upon
Exercise of
outstanding
Options,
Warrants
and
rights (1)
|
Weighted-
Average
Exercise
price of
outstanding
options,
Warrants
and
Rights
|
Number of
securities
remaining
available for
future
issuance
Under equity
compensation
plans(1)
|
|||||||||
Equity compensation plans approved by security holders
|
1,789,010
|
$
|
.11
|
404,248
|
||||||||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
|||||||||
Total
|
1,789,010
|
$
|
.11
|
404,248
|
Name of Beneficial Owner
|
Number of Shares
Beneficially Owned
|
Percent of
Class
|
Tony J. Christianson (1)
301 Carlson Parkway, Suite 103
Minneapolis, MN 55305
|
20,415,805
|
37.02%
|
Gordon F. Stofer (2)
301 Carlson Parkway, Suite 103
Minneapolis, MN 55305
|
20,415,805
|
37.02%
|
John C. Bergstrom
|
2,171,894
|
3.9%
|
Kerry D. Rea (3)
|
249,600
|
*
|
David G. Latzke
|
2,171,894
|
3.9%
|
All Executive Officers and Directors as a Group (5 persons)
|
45,424,996
|
82.4%
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE.
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES.
|
2012
|
2011
|
|||||||
Audit Fees
|
$
|
14,000
|
(1)
|
$
|
14,000
|
(1)
|
||
Audit-Related Fees
|
--
|
--
|
||||||
Tax Fees
|
--
|
--
|
||||||
All Other Fees
|
--
|
--
|
||||||
$
|
14,000
|
$
|
14,000
|
(1)
|
Moquist Thorvilson Kaufmann LLC, independent registered public accountant, billed $14,000 for first, second and third quarter and annual attest work for the years ended December 31, 2012 and 2011. On July 1, 2013, the practice of Moquist Thorvilson Kauffmann LLC ("MTK"), which was engaged as the independent registered public accounting firm of Znomics, Inc. (the "Company") was combined with BDO USA, LLP ("BDO") and the professional staff and partners of MTK joined BDO either as employees or partners of BDO. As a result of this transaction, MTK resigned as the Company's independent registered public accounting firm on July 22, 2013. On July 22, 2013, following the resignation of MTK, the Company, through and with the approval of its Board of Directors, appointed BDO as its independent registered public accounting firm.
|
ITEM 15.
|
EXHIBITS, FINANICAL STATEMENTS AND SCHEDULES.
|
(1) Financial Statements. The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:
|
||
Report of BDO USA, LLP on Financial Statements as of and for the year ended December 31, 2012
|
||
Report of Moquist Thorvilson Kaufmann & Pieper LLC on Financial Statements as of and for the year ended December 31, 2011 | ||
Balance Sheets as of December 31, 2012 and 2011
|
||
Statements of Operations for the years ended December 31, 2012 and 2011
|
||
Statements of Shareholders’ Equity (Deficit) for the years ended December 31, 2012 and 2011
|
||
Statements of Cash Flows for the years ended December 31, 2012 and 2011
|
||
Notes to Financial Statements
|
By:
|
/s/ David G. Latzke
|
Name:
|
David G. Latzke
|
Title:
|
Chief Financial Officer
|
Date:
|
August 14, 2013
|
Signature
|
Title
|
Date
|
||
/s/ Tony J. Christianson
|
Chairman of the Board of Directors
|
August 14, 2013
|
||
Tony J. Christianson
|
||||
/s/ Gordon F. Stofer
|
President and Chief Executive Officer (Principal Executive Officer)
|
August 14, 2013
|
||
Gordon F. Stofer
|
||||
/s/ David G. Latzke
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
August 14, 2013
|
||
David G. Latzke
|
||||
/s/ John C. Bergstrom
|
Director
|
August 14, 2013
|
||
John C. Bergstrom
|
||||
/s/ Kerry D. Rea
|
Director
|
August 14, 2013
|
||
Kerry D. Rea
|
Incorporation by Reference Herein
|
||||||
Exhibit
|
||||||
Number
|
Description
|
Form
|
Filing Date
|
|||
2.1
|
Stock Purchase Agreement by and among Znomics, Inc. and Purchasers Identified therein, dated as of February 10, 2010
|
Exhibit 2.1 to Current Report on Form 8-K (File No. 333-136372)
|
February 11, 2010
|
|||
2.2
|
Agreement and Plan of Merger between Pacific Syndicated Resources, Inc. and Znomics Acquisition, Inc., dated November 5, 2007
|
Exhibit 2.1 to Current Report on Form 8-K, as amended (File No. 333-107300)
|
November 8, 2007
|
|||
3.1 | Certificate of Incorporation | Exhibit 3.3 to Registration Statement on Form SB-2, as amended (File No. 333-136372) | August 7, 2006 | |||
3.2
|
Bylaws of Pacific Syndicated Resources, Inc.
|
Exhibit 3.3 to Registration Statement on Form S-2, as amended (File No. 333-136372)
|
August 7, 2006
|
|||
4.1*
|
Form of Common Stock Purchase Warrant
|
Exhibit 99.1 to Current Report on Form 8-K (File No. 333-107300)
|
June 1, 2009
|
|||
4.2*
|
Amended Form of 2009 Warrant
|
Exhibit 4.1 to Current Report on Form 8-K (File No. 333-136372)
|
February 11, 2010
|
|||
10.1*
|
2002 Stock Incentive Plan
|
Exhibit 10.1 to Current Report on Form 8-K (File No. 333-136372)
|
November 8, 2007
|
|||
10.5*
|
Form of Stock Option Agreement
|
Exhibit 99.1 to Current Report on Form 8-K (File No. 333-136372)
|
September 23, 2008
|
|||
10.20
|
Form of Officer/Director Acknowledgement, effective February 10, 2010
|
Exhibit 10.3 to Current Report on Form 8-K (File No. 333-136372)
|
February 11, 2010
|
|||
10.21
|
Registration Rights Agreement among Znomics, Inc. and the Investors named therein, dated February 10, 2010
|
Exhibit 10.4 to Current Report on Form 8-K (File No. 333-136372)
|
February 11, 2010
|
|||
10.22
|
Form of Discretionary Note governing discretionary advances from each Purchaser to Znomics, Inc., dated February 10, 2010
|
Exhibit 10.5 to Current Report on Form 8-K (File No. 333-136372)
|
February 11, 2010
|
|||
10.23
|
Engagement Agreement between Znomics, Inc. and Cherry Tree & Associates, LLC, dated February 10, 2010
|
Exhibit 10.6 to Current Report on Form 8-K (File No. 333-136372)
|
February 11, 2010
|
|||
14.1
|
Code of Ethics and Business Conduct
|
Incorporated by reference to Exhibit 14.1 of the registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
|
March 31, 2009
|
23 | Consent from Moquist Thorvilson Kaufmann LLC, formerly known as Moquist Thorvilson Kaufmann & Pieper LLC |
Filed herewith
|
||||
31.1
|
Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
|
Filed herewith
|
||||
31.2
|
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
|
Filed herewith
|
||||
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Filed herewith
|
||||
101**
|
The following materials from this report, formatted in Extensible Business Reporting Language (XBRL): (i) balance sheets, (ii) statements of operations, (iii) statements of stockholders’ equity (deficit), (iv)statements of cash flows, and (v) notes to financial statements
|
Filed herewith
|
|
*
|
Denotes management compensatory plan or contract
|
|
**
|
Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 shall be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.
|
(a)
|
Except to the extent that the materials enumerated in (1) and/or (2) below are specifically incorporated into this Form by reference (in which case see Rule 12b-23(d)), every registrant which files an annual report on this Form pursuant to Section 15(d) of the Act shall furnish to the Commission for its information, at the time of filing its report on this Form, four copies of the following:
|
||
(1)
|
Any annual report to security holders covering the registrant's last fiscal year; and
|
||
(2)
|
Every proxy statement, form of proxy or other proxy soliciting material sent to more than ten of the registrant's security holders with respect to any annual or other meeting of security holders.
|
||
(b)
|
The foregoing material shall not be deemed to be "filed" with the Commission or otherwise subject to the liabilities of Section 18 of the Act, except to the extent that the registrant specifically incorporates it in its annual report on this Form by reference.
|
||
(c)
|
As of the date of this report, no annual report or proxy material has been sent to security holders.
|
(1)
|
I have reviewed this annual report on Form 10-K of Znomics, Inc.;
|
||
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:
|
||
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
||
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
||
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
(1)
|
I have reviewed this annual report on Form 10-K of Znomics, Inc.;
|
||
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:
|
||
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
||
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
||
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of the internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
||
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
(1)
|
the annual Report on Form 10-K of Znomics, Inc. for the year ended December 31, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
the information contained in the annual Report on Form 10-K for the year ended December 31, 2012, fairly presents in all material respects, the financial condition and results of operations of Znomics, Inc.
|
Note 11 - Subsequent Events
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] |
NOTE 11.
SUBSEQUENT EVENTS
On May 10, 2013,
subsequent to year end, additional advances of $25,000 were
received under the Discretionary Notes and remain
oustanding. In addition, on July 1, 2013, the
stockholders who have made the above noted advances
contributed $50,000 in exchange for 2,625,996 shares of
Znomics common stock.
|
A Development Stage Company - Statements of Operations (USD $)
In Thousands, except Share data, unless otherwise specified |
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
General and administrative expense | $ 109 | $ 59 |
Loss from operations | (109) | (59) |
Interest expense | (4) | (1) |
Gain on fair value adjustment of warrant liability | 68 | |
Total other Income (expense) | 64 | (1) |
Loss before income taxes | (45) | (60) |
Income tax expense | 0 | 0 |
Net loss | $ (45) | $ (60) |
Net loss per share - Basic and diluted (in Dollars per share) | $ 0.00 | $ 0.00 |
Basic and diluted (in Shares) | 52,519,896 | 52,519,896 |
Note 4 - Accrued Liabilities
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable and Accrued Liabilities Disclosure [Text Block] |
NOTE
4. ACCRUED LIABILITIES
Accrued
liabilities consist of the following, in thousands:
|
Note 9 - Income Taxes (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Tax Assets and Liabilities [Table Text Block] |
|
Accounting Policies, by Policy (Policies)
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | Nature
of Business
Znomics
Inc. ("the Company") was previously engaged in the business
of drug discovery with a cutting-edge biotechnology platform
that leveraged medicinal chemistry with the unique attributes
of the zebrafish. In April 2009, the Company
terminated its operations. The Company subsequently
disposed of this developmental stage business in 2009 and
2010 prior to it having generated any significant
revenues. As the Company is no longer developing any
specific business, it no longer refers to itself as a
development stage company and accordingly, no longer presents
cumulative financial information. The Company is now
considered a public shell company with no current business
activity.
The
Company has now focused its efforts on seeking a
new business opportunity. The Company will attempt to
locate and negotiate with a business entity for the merger of
that target company into the Company. In certain instances, a
target company may wish to become a subsidiary of the Company
or may wish to contribute assets to the Company rather than
merge. No assurances can be given that the Company will be
successful in locating or negotiating with any target
company. The Company will provide a method for a private
company to become a reporting (“Public”) company
whose securities are qualified for trading in the United
States secondary market. |
Use of Estimates, Policy [Policy Text Block] | Estimates
The
preparation of financial statements in conformity with
accounting principles generally accepted in the United States
of America (“GAAP”) requires us to make certain
estimates, assumptions and judgments that affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues
and expenses during the reporting period. We
update these estimates, assumptions and judgments as
appropriate, which in most cases is at least
quarterly. We use our technical accounting
knowledge, cumulative business experience, judgment and other
factors in the selection and application of our accounting
policies. While we believe the estimates,
assumptions and judgments we use in preparing our financial
statements are appropriate, they are subject to factors and
uncertainties regarding their outcome and therefore, actual
results may materially differ from these estimates. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash
and Cash Equivalents
For
purposes of balance sheet presentation and reporting of cash
flows, the Company considers all unrestricted demand deposits
and highly liquid debt instruments with a maturity of less
than 90 days to be cash and cash equivalents. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair
Value of Financial Instruments
The
Company's financial instruments consist of cash, accounts
payable, accrued expenses and notes payable. Fair value
estimates are made at a specific point in time, based on
relevant market information about the financial instrument.
These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and
therefore cannot be determined with precision. The Company
considers the carrying values of its financial instruments in
the financial statements to approximate fair value as
interest rates on the notes payable approximate current rates
and the current assets and liabilities are short-term
in nature |
Derivatives, Policy [Policy Text Block] | Derivative
Financial Instruments
The
Company has a derivative liability which is accounted for
at fair value. The fair value of the
Company’s derivative liability is estimated at each
balance sheet date and changes in fair value are reflected
as a gain or loss in the statement of
operations. The Company utilizes a Black-Scholes
option pricing model to estimate fair values of its
derivative liability.
This
derivative liability is also marked-to-market prior to any
related exercises, modifications, or extinguishments with
any necessary changes in fair value from the prior balance
sheet date being reflected as a gain or loss in the
statement of operations. The carrying value of
the liability is eliminated upon extinguishment, converted
to equity upon an exercise, or adjusted as may be necessary
in a modification. |
Revenue Recognition, Policy [Policy Text Block] | Revenue
Recognition
The
Company has no current revenues |
Income Tax, Policy [Policy Text Block] | Income
Taxes
Income
taxes are provided for using the liability method of
accounting. A deferred tax asset or liability is recorded for
all temporary differences between financial and tax
reporting. Temporary differences are the
differences between the reported amounts of assets and
liabilities and their tax basis. Deferred tax
assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are
adjusted for the effect of changes in tax laws and rates on
the date of enactment.
We
account for income taxes pursuant to Financial Accounting
Standards Board guidance. This guidance prescribes
a recognition threshold and a measurement attribute for the
financial statement recognition and measurement of tax
positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax
position must be more-likely-than not to be sustained upon
examination by taxing authorities. We believe our income tax
filing positions and deductions will be sustained upon
examination and, accordingly, no reserves, or related
accruals for interest and penalties have been recorded at
December 31, 2012 and 2011. In accordance with the
guidance, the Company has adopted a policy under which, if
required to be recognized in the future, interest related to
the underpayment of income taxes will be classified as a
component of interest expense and any related penalties will
be classified in operating expenses in the statements of
operations. The Company has three open years of tax
returns subject to examination from 2009 and forward. |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Stock-Based
Compensation
The
Company recognizes the cost of stock-based compensation plans
and awards in operations on a straight-line basis over the
respective vesting period of the awards. The
Company measures and recognizes compensation expense for all
stock-based payment awards made to employees and directors.
The compensation expense for the Company's stock-based
payments is based on estimated fair values at the time of the
grant.
The
Company estimates the fair value of stock-based payment
awards on the date of grant using an option pricing model.
This option pricing model involves a number of assumptions,
including the expected lives of stock options, the volatility
of the public market price for the Company's common stock and
interest rates. The Company is using the Black-Scholes option
pricing model to estimate the fair value of its options.
Stock-based compensation expense recognized during the period
is based on the value of the portion of stock-based payment
awards that are ultimately expected to vest. |
Earnings Per Share, Policy [Policy Text Block] | Net
Income (Loss) Per Share
Basic
net income (loss) per share is calculated by dividing the net
income (loss) for the period by the weighted-average number
of common shares outstanding during the period. Diluted net
income (loss) per share is calculated by dividing net income
(loss) for the period by the weighted-average number of
common shares outstanding during the period, increased by
potentially dilutive common shares ("dilutive securities")
that were outstanding during the period. Dilutive securities
include options granted pursuant to the Company's stock
option plan and stock warrants.
For
the years ended December 31, 2012 and 2011, options and
warrants exercisable representing potential common stock
equivalents were excluded from the calculation of the diluted
net loss per share as their effect would have been
anti-dilutive. |
Comprehensive Income, Policy [Policy Text Block] | Comprehensive
Income (Loss)
Comprehensive income (loss) includes net
income (loss) and items defined as other comprehensive income
(loss). Items defined as other comprehensive income
(loss) include items such as foreign currency translation
adjustments and unrealized gains and losses on certain
marketable securities. For the years ended December 31,
2012 and 2011, there were no adjustments to net loss to
arrive at comprehensive loss. |
Description of New Accounting Pronouncements Not yet Adopted [Text Block] | Recent
Accounting Pronouncements
None
that are applicable. |
Note 8 - Stock Options and Warrants (Details) - Summary of present stock options and warrants awarded and unexercised: (USD $)
Share data in Thousands, except Per Share data, unless otherwise specified |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
Dec. 31, 2012
Minimum [Member]
|
Dec. 31, 2011
Minimum [Member]
|
Dec. 31, 2012
Maximum [Member]
|
Dec. 31, 2011
Maximum [Member]
|
|
Note 8 - Stock Options and Warrants (Details) - Summary of present stock options and warrants awarded and unexercised: [Line Items] | |||||||
Outstanding at December 31, 2010 (in Shares) | 102,500 | 102,500 | 102,500 | ||||
Outstanding at December 31, 2010 | $ 1.38 | $ 0.41 | $ 2.75 | ||||
Outstanding at December 31, 2010 | $ 1.38 | $ 2.75 | |||||
Number of Options (in Shares) | 102,500 | 102,500 | 102,500 | ||||
Exercise Price per Share | $ 0.41 | $ 0.41 | $ 2.75 | $ 2.75 | |||
Aggregate Intrinsic Value | $ 0.41 | $ 0.41 | $ 2.75 | $ 2.75 | |||
Exercisable at end of year (in Shares) | 102,500 | ||||||
Exercisable at end of year | $ 0.41 | $ 2.75 | |||||
Exercisable at end of year (in Dollars) | $ 0.00 | ||||||
Exercisable at end of year | $ 0.41 | $ 2.75 |
Note 3 - Discretionary Advance Secured Promissory Notes (Details) (USD $)
|
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Feb. 10, 2010
|
|
Debt Disclosure [Abstract] | |||
Debt Instrument, Interest Rate, Stated Percentage | 5.00% | ||
Proceeds from Related Party Debt | $ 150,000 | ||
Interest Expense, Debt | $ 4,000 | $ 1,000 |
Note 2 - Going Concern (Details) (USD $)
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Going Concern [Abstract] | |
Retained Earnings (Accumulated Deficit) | $ (6,700,000) |
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest | $ (109,000) |
Note 10 - Earnings (Loss) Per Share (Details) - Reconciliation of the numerators and denominators: (USD $)
In Thousands, except Per Share data, unless otherwise specified |
12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|||||||
Basic earnings (loss) per share calculation: | ||||||||
Net loss to common shareholders (in Dollars) | $ (45,000) | $ (60,000) | ||||||
Weighted average of common shares outstanding | 52,519,896 | 52,519,896 | ||||||
Basic net loss per share (in Dollars per share) | $ 0.00 | $ 0.00 | ||||||
Diluted earnings (loss) per share calculation: | ||||||||
Net loss to common shareholders (in Dollars) | $ (45,000) | $ (60,000) | ||||||
Weighted average of common shares outstanding | 52,519,896 | 52,519,896 | ||||||
Diluted net loss per share (in Dollars per share) | $ 0.00 | $ 0.00 | ||||||
Employee Stock Option [Member]
|
||||||||
Diluted earnings (loss) per share calculation: | ||||||||
Dilutive shares | [1] | [1] | ||||||
Warrant [Member]
|
||||||||
Diluted earnings (loss) per share calculation: | ||||||||
Dilutive shares | [2] | [2] | ||||||
|
Note 6 - Fair Value Measurements (Details) - Liabilities measured at fair value on a recurring basis (USD $)
|
Dec. 31, 2012
|
---|---|
Note 6 - Fair Value Measurements (Details) - Liabilities measured at fair value on a recurring basis [Line Items] | |
Warrant liability | $ 33,000 |
Fair Value, Inputs, Level 3 [Member]
|
|
Note 6 - Fair Value Measurements (Details) - Liabilities measured at fair value on a recurring basis [Line Items] | |
Warrant liability | $ 33,000 |
Note 8 - Stock Options and Warrants (Details) - Summary of stock-based compensation expense: (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Summary of stock-based compensation expense: [Abstract] | ||
Stock-based compensation expense | $ 2 | $ 3 |
Note 5 - Warrant Liability (Details) - Warrant valuation inputs
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Warrant valuation inputs [Abstract] | |
Risk free interest rates | 0.95% |
Expected dividend yield | 0.00% |
Expected stock volatility | 195.00% |
Expected term of warrants in years | 6 years 146 days |
Note 9 - Income Taxes (Details) - Summary differences in the provision for income taxes reconcilitation to statutory federal rate: (Parentheticals)
|
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Summary differences in the provision for income taxes reconcilitation to statutory federal rate: [Abstract] | ||
Tax computed at the federal statutory rate | 34.00% | 34.00% |
Note 10 - Earnings (Loss) Per Share (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block] |
|
A Development Stage Company - Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | |
---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
|
Cash flows from operating activities: | ||
Net loss | $ (45) | $ (60) |
Stock-based compensation charges | 2 | 3 |
Gain on fair value adjustment of warrant liability | (68) | |
Accounts payable | 1 | 2 |
Accrued liabilities | (1) | 4 |
Net cash used by operating activities | (111) | (51) |
Cash flows from financing activities: | ||
Proceeds from issuance of debt | 100 | 50 |
Net cash provided by financing activities | 100 | 50 |
Net decrease in cash and cash equivalents | (11) | (1) |
Cash at beginning of period | 37 | 38 |
Cash at end of period | $ 26 | $ 37 |
Note 2 - Going Concern
|
12 Months Ended |
---|---|
Dec. 31, 2012
|
|
Going Concern [Abstract] | |
Going Concern [Text Block] |
NOTE
2. GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business. We have incurred substantial losses since our inception. As of December 31, 2012, our accumulated deficit was approximately $6.7 million. Financial results for 2012 reflect a loss from operations of $109,000. We expect to continue to incur net losses as we incur expenses related to seeking a business opportunity and our ongoing costs of being a public reporting company. Because we have no revenues, we plan to use our current cash reserves, which came from the cash received from advances under the Discretionary Notes (see Note 3), as well as potential future advances under the Discretionary Notes to fund our ongoing operating costs.
Our
ability to continue as a going concern is dependent on our
success at finding an acquisition candidate in a timely
manner. We believe our cash position at December
31, 2012 and advances expected under the Discretionary
Notes and equity sales of our common stock, should
allow us to fund operations for at least the next 12
months, and through the date a target company merges into
the Company.
However,
the current financing environment in the United States is
challenging and we can provide no assurances that we could
raise capital either to continue our operations or to
finance an acquisition. The sale of our securities or the
expectation that we will sell additional securities may
have an adverse effect on the trading price of our common
stock. Further, notwithstanding the Discretionary Notes, we
cannot be certain that additional financing will be
available when and as needed. If financing is available, it
may be on terms that adversely affect the interests of our
existing stockholders. If adequate financing is not
available, we may need to reduce or eliminate our efforts
to find an acquisition opportunity. These factors could
significantly limit our ability to continue as a going
concern and cause us to investigate other strategic
options, including bankruptcy. The
financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
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Note 5 - Warrant Liability
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Text Block] |
NOTE
5. WARRANT LIABILITY
The
Company re-reviewed the provisions on all of its
outstanding warrants issued originally in 2009 and amended
in 2010 and determined that because such warrants could
potentially be settled in cash upon a Fundamental
Transaction (as defined in the applicable warrant
agreement), they should have been accounted for as a
derivative liability at fair value with changes in fair
value reflected in operating results. Cumulatively
since the date of issuance to December 31, 2012, the fair
value of these warrants decreased by $68,000 to a December
31, 2012 fair value of $33,000. The Company recorded
a fourth quarter 2012 adjustment for all of its prior
accounting treatment for these warrants. No periods
since issuance through December 31, 2012 were materially
impacted by the previous accounting.
At
issuance and each balance sheet date, the Company estimates
the fair value of these warrants using the Black-Scholes
option pricing model. Changes in fair value are
recorded as a non-cash valuation adjustment in the
Company's statement of operations. The
Black-Scholes valuation model inputs for year ended
December 31, 2012 are as follows:
Expected
volatility is based upon the observed historical trades of
the Company’s common stock. The expected term of the
warrants is based on the remaining terms of the warrants.
The risk-free rate of return is based on the U.S. Treasury
security rates for maturities consistent with the expected
term of the warrants.
Potential
future increases in the estimated fair value of these
warrants will result in losses being recognized in our
statement of operations in future
periods. Conversely, potential future declines
in the estimated fair value of these warrants will result
in gains being recognized in our statement of operations in
future periods. Neither of these potential gains
or losses will have any impact on our cash balance,
liquidity or cash flows from operations.
The
following table sets forth the changes in the Company's
derivative warrant liability for the year ended December
31, 2012:
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Note 3 - Discretionary Advance Secured Promissory Notes
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12 Months Ended | |||||||||||||||||||||||||
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Dec. 31, 2012
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||
Debt Disclosure [Text Block] |
NOTE
3. DISCRETIONARY ADVANCE SECURED PROMISSORY NOTES
On
February 10, 2010, the Company executed Discretionary Advance
Secured Promissory Notes (the “Discretionary
Notes”) in favor of various stockholders of the
Company, who may make advances to the Company from time to
time. The amounts due under the Discretionary Notes accrue
interest at an annual rate of 5% and are due on the earlier
to occur of a business combination between the Company and an
operating business and three years from each loan advance, or
upon the Company’s insolvency or a material breach of
the Stock Purchase Agreement. The Discretionary Notes are
secured by all of the Company’s
assets. Advances totaling $150,000 have been
received under the Discretionary Notes and remain outstanding
at December 31, 2012. Interest expense was $4,000 and
$1,000 for the years ended December 31, 2012 and 2011,
respectively. See also Note 11, Subsequent
Events.
Notes Payable maturities are as
follows:
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Note 9 - Income Taxes (Details) (USD $)
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Dec. 31, 2012
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Dec. 31, 2011
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Income Tax Disclosure [Abstract] | ||
Deferred Tax Assets, Valuation Allowance | $ 2,040,000 | $ 2,002,000 |
Operating Loss Carryforwards | $ 5,900,000 | |
Equity Method Investment, Ownership Percentage | 50.00% |
Note 3 - Discretionary Advance Secured Promissory Notes (Details) - Notes Payable maturities are as follows: (USD $)
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Dec. 31, 2012
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Dec. 31, 2011
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Notes Payable maturities are as follows: [Abstract] | ||
2014 | $ 50,000 | |
2015 | 100,000 | |
$ 150,000 | $ 50,000 |
Note 5 - Warrant Liability (Details) - Changes in derivative warrant liability (USD $)
In Thousands, unless otherwise specified |
12 Months Ended |
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Dec. 31, 2012
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Changes in derivative warrant liability [Abstract] | |
(in Shares) | 1,686,510 |
$ 101 | |
(68) | |
December 31, 2012 (in Shares) | 1,686,510 |
December 31, 2012 | $ 33 |