NEVADA
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88-0277072
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1551 Eastlake Avenue East, Suite 100
Seattle, Washington
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98102
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(Address of principal executive offices)
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(Zip Code)
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(206) 504 7278
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(Issuer's telephone number)
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Description
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Page
|
Consolidated Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012
|
2
|
Interim Consolidated Statements of Operations for the Six Months Ended June 30, 2013 and 2012 and for the Period from July 27, 1999 (Date of Inception) to June 30, 2013 (Unaudited)
|
3
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Interim Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 and for the Period from July 27, 1999 (Date of Inception) to June 30, 2013 (Unaudited)
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4
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Notes to the Interim Consolidated Financial Statements (Unaudited)
|
5
|
March 31,
2013
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December 31,
2012
|
|||||||
(Unaudited)
|
(As restated)
|
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash
|
$ | 45,179 | $ | 33,839 | ||||
Due from government agency
|
1,028 | 1,077 | ||||||
Prepaid expenses and deposits
|
118,954 | 15,004 | ||||||
Deferred financing costs (Note 5)
|
20,145 | 37,452 | ||||||
185,306 | 87,372 | |||||||
$ | 185,306 | $ | 87,372 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current Liabilities
|
||||||||
Accounts payable and accrued liabilities (Note 12)
|
$ | 1,381,500 | $ | 1,941,716 | ||||
Research agreement obligations (Note 3)
|
492,365 | 415,998 | ||||||
Derivative liability – conversion option (Note 4)
|
127,100 | 867,575 | ||||||
Derivative liability – warrants (Note 4)
|
152,772 | 977,086 | ||||||
Convertible notes payable (Note 5)
|
2,250,207 | 1,376,230 | ||||||
Loans payable (Note 6)
|
10,000 | 10,000 | ||||||
Promissory notes (Note 7)
|
277,942 | 167,942 | ||||||
Due to related parties (Note 8)
|
263,846 | 373,346 | ||||||
4,955,732 | 6,129,893 | |||||||
Stockholders’ Deficit
|
||||||||
Capital stock (Note 9)
|
||||||||
Common stock, $0.001 par value, 150,000,000 shares authorized
|
||||||||
115,570,909 shares issued and outstanding (2012 – 76,402,958)
|
113,673 | 76,404 | ||||||
Additional paid-in capital
|
45,996,082 | 43,483,947 | ||||||
Shares and warrants to be issued (Note 9)
|
384,582 | 352,859 | ||||||
Deficit accumulated during the development stage
|
(51,206,320 | ) | (49,894,083 | ) | ||||
Accumulated other comprehensive loss
|
(58,443 | ) | (61,648 | ) | ||||
(4,770,426 | ) | (6,042,521 | ) | |||||
$ | 185,306 | $ | 87,372 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
July 27, 1999
(inception) to
June 30,
|
||||||||||||||||||
2013
|
2012
|
2013
|
2012
|
2013
|
||||||||||||||||
Expenses
|
||||||||||||||||||||
Consulting fees
|
$ | 36,367 | $ | 62,530 | $ | 66,367 | $ | 62,530 | $ | 2,287,867 | ||||||||||
Consulting fees – stock-based (Note 9)
|
15,956 | 2,039,925 | 83,768 | 2,173,833 | 8,122,140 | |||||||||||||||
Depreciation
|
- | - | - | - | 213,227 | |||||||||||||||
General and administrative
|
88,114 | 468,207 | 295,432 | 612,067 | 4,224,784 | |||||||||||||||
Interest and finance charges (Note 4)
|
291,212 | 100,246 | 626,100 | 196,972 | 7,202,187 | |||||||||||||||
Management fees (Note 8)
|
58,500 | 22,500 | 117,000 | 102,600 | 3,191,303 | |||||||||||||||
Management fees – stock-based
(Notes 8 and 9)
|
11,926 | 86,063 | 27,489 | 115,626 | 4,476,487 | |||||||||||||||
Professional fees
|
118,658 | 112,980 | 385,288 | 187,109 | 5,801,397 | |||||||||||||||
Research and development (Note 8)
|
54,398 | 245,763 | 188,778 | 361,228 | 7,157,373 | |||||||||||||||
Research and development
– stock-based
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- | - | - | - | 612,000 | |||||||||||||||
675,131 | 3,138,214 | 1,790,222 | 3,811,965 | 43,288,765 | ||||||||||||||||
Net Loss Before Other Items
|
(675,131 | ) | (3,138,214 | ) | (1,790,222 | ) | (3,811,965 | ) | (43,288,765 | ) | ||||||||||
Other Items
|
||||||||||||||||||||
Foreign exchange (loss) gain
|
(6,637 | ) | 17,280 | 5,896 | 9,497 | 51,583 | ||||||||||||||
Changes in fair value of derivative liabilities (Note 4)
|
781,321 | 352,129 | 1,878,489 | 423,191 | 6,182,881 | |||||||||||||||
Loss on debt financing
|
(96,000 | ) | - | - | - | (1,469,263 | ) | |||||||||||||
Gain (loss) on settlement of debt (Note 9)
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(874,358 | ) | 18,758 | (1,310,400 | ) | 28,688 | (13,001,201 | ) | ||||||||||||
Gain on extinguishment of derivative liabilities - warrants (Note 4)
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- | - | - | - | 290,500 | |||||||||||||||
Interest income
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- | - | - | - | 33,344 | |||||||||||||||
Loss on disposal of assets
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- | - | - | - | (5,399 | ) | ||||||||||||||
Net Loss for the Period
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$ | (870, 805 | ) | $ | (2,750,047 | ) | $ | (1,312,237 | ) | $ | (3,350,589 | ) | $ | (51,206,320 | ) | |||||
Basic and Diluted Net Loss per Share
|
$ | (0.01 | ) | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.06 | ) | ||||||||
Weighted Average Number of Common Shares Outstanding
|
100,088,149 | 61,966,500 | 90,444,988 | 57,218,349 |
Six Months Ended
June 30,
2012
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Six Months Ended
June 30,
2012
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Period from
July 27, 1999
(inception) to
June 30,
2013
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net loss
|
$ | (1,312,237 | ) | $ | (3,350,589 | ) | $ | (51,206,320 | ) | |||
Adjustments to reconcile net loss to
net cash from operating activities:
|
||||||||||||
Depreciation
|
- | - | 213,228 | |||||||||
Non-cash loss on debt financing
|
96,000 | - | 1,469,263 | |||||||||
Changes in fair value of derivative liabilities
|
(1,878,489 | ) | (423,191 | ) | (6,182,881 | ) | ||||||
Loss (gain) on settlement of debt
|
1,310,400 | (28,688 | ) | 13,001,201 | ||||||||
Gain on extinguishment of derivative liabilities - warrants
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- | - | (290,500 | ) | ||||||||
Loss on disposal of assets
|
- | - | 5,399 | |||||||||
Non-cash interest and financing charges
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- | - | 5,468,499 | |||||||||
Stock based compensation
|
111,257 | 2,289,459 | 13,226,877 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Due from government agency
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- | - | (1,055 | ) | ||||||||
Prepaid expenses and deposits
|
(103,950 | ) | 30,152 | (142,954 | ) | |||||||
Deferred financing costs
|
17,307 | 7,654 | 5,104 | |||||||||
Accounts payable and accrued liabilities
|
1,063,734 | 589,812 | 6,661,015 | |||||||||
Research agreement obligations
|
76,367 | 61,684 | 710,496 | |||||||||
NET CASH USED IN OPERATING ACTIVITIES
|
(619,611 | ) | (823,707 | ) | (17,062,628 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Issuance of shares, net
|
235,951 | 455,000 | 11,096,526 | |||||||||
Convertible notes, net
|
236,000 | - | 2,359,906 | |||||||||
Proceeds from promissory notes
|
- | 52,942 | - | |||||||||
Proceeds from loans payable
|
- | 18,000 | 428,000 | |||||||||
Notes and loans payable
|
- | - | 919,845 | |||||||||
Advances from (to) related parties
|
159,000 | 59,544 | 1,958,783 | |||||||||
Stock subscriptions
|
- | - | 140,000 | |||||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
630,951 | 585,486 | 16,903,060 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Purchase of furniture and equipment
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- | - | (218,626 | ) | ||||||||
Cash acquired on reverse acquisition
|
- | - | 423,373 | |||||||||
NET CASH PROVIDED BY INVESTING ACTIVITIES
|
- | - | 204,747 | |||||||||
INCREASE (DECREASE) IN CASH
|
11,340 | (238,221 | ) | 45,179 | ||||||||
CASH, BEGINNING OF PERIOD
|
33,839 | 250,234 | - | |||||||||
CASH, END OF PERIOD
|
$ | 45,179 | $ | 12,013 | $ | 45,179 |
As reported
|
Adjustment
|
As restated
|
|||||||||||
Balance sheet data — December 31, 2012
|
|||||||||||||
Cash
|
$ | 50,679 | $ | (16,840 | ) | $ | 33,839 | ||||||
Total Assets
|
104,212 | (16,840 | ) | 87,372 | |||||||||
Accounts payable and accrued liabilities
|
2,058,556 | (116,840 | ) | 1,941,716 | |||||||||
Derivative liability – conversion option
|
798,300 | 69,275 | 867,575 | ||||||||||
Derivative liability - warrants
|
677,086 | 300,000 | 977,086 | ||||||||||
Convertible notes payable
|
1,376,230 | 100,000 | 1,476,230 | ||||||||||
Due to related parties
|
366,697 | 6,649 | 373,346 | ||||||||||
Total liabilities
|
$ | 5,770,809 | $ | 359,084 | $ | 6,129,893 | |||||||
Additional paid-in capital
|
43,545,947 | (62,000 | ) | 43,483,947 | |||||||||
Deficit accumulated during the development stage
|
(49,580,159 | ) | (313,924 | ) | (49,894,083 | ) | |||||||
Stockholders’ deficiency
|
$ | (5,666,597 | ) | $ | (375,924 | ) | $ | (6,042,521 | ) |
As reported
|
Adjustment
|
As restated
|
|||||||||||
Consolidated Statement of Operations data For the year ended December 31, 2012
|
|||||||||||||
Management fees
|
$ | 295,600 | $ | 6,649 | $ | 302,249 | |||||||
Net Loss Before Other Items
|
(6,222,798 | ) | (6,649 | ) | (6,229,447 | ) | |||||||
Changes in fair value of derivative liabilities
|
536,527 | (307,375 | ) | 229,252 | |||||||||
NET LOSS
|
$ | (5,857,943 | ) | $ | (313,924 | ) | $ | (6,171,867 | ) | ||||
As reported
|
Adjustment
|
As restated
|
|||||||||||
Consolidated Statement of Operations data From July 27, 1999 (inception) to December 31, 2012
|
|||||||||||||
Management fees
|
$ | 3,067,654 | $ | 6,649 | $ | 3,074,303 | |||||||
Net Loss Before Other Items
|
(41,491,894 | ) | (6,649 | ) | (41,498,543 | ) | |||||||
Changes in fair value of derivative liabilities
|
4,611,667 | (307,375 | ) | 4,304,392 | |||||||||
NET LOSS
|
$ | (49,580,159 | ) | $ | (313,924 | ) | $ | (49,894,083 | ) |
December 31, 2012
|
June 30, 2013
|
|||||||
Expected Life (Years)
|
Risk free Rate
|
Dividend yield
|
Volatility
|
Expected Life (Years)
|
Risk free Rate
|
Dividend yield
|
Volatility
|
|
Share purchase warrants
|
0.08 to 3.78
|
0.02% to 0.36%
|
0.00%
|
199%
|
1.42 to 4.00
|
0.15% to 0.66%
|
0.00%
|
161.6% to199%
|
December 31, 2012
|
June 30, 2013
|
|||||||
Expected Life (Years)
|
Risk free Rate
|
Dividend yield
|
Volatility
|
Expected Life (Years)
|
Risk free Rate
|
Dividend yield
|
Volatility
|
|
Conversion Option
|
0.003 to 0.89
|
0.05% to 0.19%
|
0.00%
|
100.88% to 141.21%
|
0.26 to 0.99
|
0.04% to 0.15%
|
0.00%
|
108% to 156.41%
|
As of June 30, 2013
|
||||||||||||||||||||
Fair Value Measurements
|
||||||||||||||||||||
Carrying Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||||||
Derivative liability - warrants
|
$ | 152,772 | - | - | $ | 152,772 | $ | 152,772 | ||||||||||||
Derivative liability – conversion option
|
127,100 | - | - | 127,100 | 127,100 | |||||||||||||||
Total
|
$ | 279,872 | - | - | $ | 279,872 | $ | 279,872 |
As of December 31, 2012
|
|||||||||||||||||||||
Fair Value Measurements Using
|
|||||||||||||||||||||
Carrying Value
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||||||
Derivative liability - warrants
|
$ | 977,086 | - | - | $ | 977,086 | $ | 977,086 | |||||||||||||
Derivative liability – conversion option
|
867,575 | - | - | 867,575 | 867,575 | ||||||||||||||||
Total
|
$ | 1,844,661 | - | - | $ | 1,844,661 | $ | 1,844,661 |
Fair Value Measurements Using Level 3 Inputs
|
||||||||||||
Derivative liability - warrants
|
Derivative liability – conversion option
|
Total
|
||||||||||
Balance, December 31, 2011
|
$ | 1,317,834 | $ | - | $ | 1,317,834 | ||||||
Additions during the year
|
300,000 | 737,700 | 1,037,700 | |||||||||
Total unrealized (gains) or losses included in net loss
|
(597,127 | ) | 129,875 | (467,252 | ) | |||||||
Debt settlement
|
(43,621 | ) | - | (43,621 | ) | |||||||
Transfers in and/or out of Level 3
|
- | - | - | |||||||||
Balance, December 31, 2012
|
977,086 | 867,575 | 1,844,661 | |||||||||
Additions during the year
|
96,000 | 217,700 | 313,700 | |||||||||
Total unrealized (gains) or losses included in net loss
|
(920,314 | ) | (958,175 | ) | (1,878,489 | ) | ||||||
Transfers in and/or out of Level 3
|
- | - | - | |||||||||
Balance, June 30, 2013
|
$ | 152,772 | $ | 127,100 | $ | 279,872 |
Face Value
|
Principal Repayment/
Settlement
|
Unamortized
Note
Discount
|
Balance at
March 31,
2013
|
|||||||||||||
February 2011 Secured Convertible Notes
|
||||||||||||||||
Senior Secured Notes, due February 24, 2014
|
$ | 1,184,694 | $ | 203,836 | $ | 87,269 | $ | 893,589 | ||||||||
April 2011 Secured Convertible Notes
|
||||||||||||||||
Senior Secured Notes, due April 4, 2014
|
215,000 | - | 26,128 | 188,872 | ||||||||||||
June 2011 Secured Convertible Note
|
||||||||||||||||
Senior Secured Notes, due June 6, 2014
|
30,000 | - | 2,582 | 27,418 | ||||||||||||
August 8, 2012 Convertible Note
|
||||||||||||||||
Note due August 8, 2013
|
111,430 | 111,430 | - | - | ||||||||||||
August 12, 2012 Convertible Note
|
||||||||||||||||
Note became due November 12, 2012
|
27,500 | - | - | 27,500 | ||||||||||||
August 20, 2012 Convertible Note
|
||||||||||||||||
Note due August 20, 2013
|
20,000 | - | 2,795 | 17,205 | ||||||||||||
September 18, 2012 Convertible Note
|
||||||||||||||||
Note due October 1, 2013
|
82,500 | 70,000 | 3,051 | 9,449 | ||||||||||||
October 2012 Convertible Note
|
||||||||||||||||
Note due October 15, 2013
|
340,000 | - | 99,671 | 240,329 | ||||||||||||
October 9, 2012 Convertible Notes
|
100,000 | 100,000 | - | - | ||||||||||||
November 1, 2012 Convertible Note
|
||||||||||||||||
Note due April 30, 2013
|
31,471 | 31,471 | - | - | ||||||||||||
November 20, 2012 Convertible Note
|
||||||||||||||||
Note due November 20, 2013
|
55,710 | 17,540 | 14,954 | 23,216 | ||||||||||||
December 14, 2012 Convertible Note
|
||||||||||||||||
Note due April 18, 2013
|
189,210 | 189,210 | - | - | ||||||||||||
December 18, 2012 Convertible Note
|
||||||||||||||||
Note due December 14, 2013
|
50,000 | - | - | 50,000 | ||||||||||||
January 5, 2013 Convertible Notes
|
567,729 | - | - | 567,729 | ||||||||||||
February 27, 2013 Convertible Note
|
||||||||||||||||
Note due February 27, 2014
|
55,710 | - | 33,423 | 22,287 | ||||||||||||
April 2, 2013 Convertible Notes
|
80,967 | - | - | 80,967 | ||||||||||||
April 18, 2013 Convertible Note
|
||||||||||||||||
Note due December 18, 2013
|
60,000 | - | 22,654 | 37,346 | ||||||||||||
May 5, 2013 Convertible Notes
|
45,000 | - | - | 45,000 | ||||||||||||
May 14, 2013 Convertible Note
|
||||||||||||||||
Note due May 14, 2014
|
126,000 | - | 109,775 | 16,225 | ||||||||||||
June 27, 2013 Convertible Note
|
||||||||||||||||
Note due June 27, 2014
|
36,333 | - | 33,258 | 3,075 | ||||||||||||
Total
|
$ | 3,409,254 | $ | 723,487 | $ | 435,560 | $ | 2,250,207 |
|
(a)
|
incurred $178,500 (June 30, 2012 - $102,600) in management fees and $66,000 (June 30, 2012 - $45,000) in research and development services paid to officers and directors during the period;
|
|
(b)
|
recorded $14,925 (June 30, 2012 - $115,626) in stock based compensation for the fair value of options granted to management that were granted and or vested during the period;
|
|
(c)
|
converted $nil (June 30, 2012 - $50,000) of debt due to related parties during the period, which were settled with shares;
|
|
(d)
|
issued $nil (June 30, 2012 - $38,000) in promissory notes to an officer and director of the Company (Note 5).
|
|
(e)
|
converted $567,729 (2012 - $nil) of payable into convertible notes to officers, consultant and a director of the Company (Note 5).
|
Number of
Options
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Life
|
||||||||||
Balance, December 31, 2011
|
6,278,000 | $ | 0.18 | 6.85 | ||||||||
Issued
|
500,000 | 0.17 | 9.35 | |||||||||
Cancelled
|
(250,000 | ) | 0.35 | - | ||||||||
Balance, December 31, 2012
|
6,528,000 | $ | 0.18 | 6.05 | ||||||||
Issued
|
- | - | - | |||||||||
Cancelled/Forfeited
|
- | - | - | |||||||||
Balance, June 30, 2013
|
6,528,000 | $ | 0.18 | 5.55 |
Number of
Shares
|
Weighted Average
Grant-Date
Fair Value
|
|||||||
Unvested, December 31, 2012
|
379,575 | $ | 0.18 | |||||
Granted
|
- | - | ||||||
Vested
|
(226,797 | ) | 0.18 | |||||
Cancelled
|
- | - | ||||||
Unvested, June 30, 2013
|
152,778 | $ | 0.17 |
Number of
Warrants
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining Life
|
||||||||||
Balance, December 31, 2011
|
12,106,355 | $ | 0.56 | 2.81 | ||||||||
Issued
|
5,516,668 | 0.26 | 3.32 | |||||||||
Exercised, cancelled or expired
|
(714,400 | ) | 2.33 | - | ||||||||
Balance, December 31, 2012
|
16,908,623 | $ | 0.39 | 2.19 | ||||||||
Issued
|
5,470,709 | 0.07 | 2.52 | |||||||||
Exercised
|
(3,000,000 | ) | 0.25 | - | ||||||||
Extinguished or expired
|
(2,099,992 | ) | 0.50 | - | ||||||||
Balance, June 30, 2013
|
17,279,341 | $ | 0.29 | 1.92 |
Six Months Ended June 30, 2013
|
||||||||
Shares/warrants
|
Amount
|
|||||||
$ | ||||||||
Shares issued pursuant to consulting arrangements
|
350,000
|
38,935
|
||||||
Shares issued pursuant to debt settlement
|
18,464,921
|
510,572
|
||||||
Shares issued pursuant to notes conversion
|
14,733,733
|
561,687
|
||||||
Six Months Ended
June 30, 2012
|
||||||||
Shares/warrants
|
Amount
|
|||||||
$ | ||||||||
Shares issued pursuant to debt settlement agreements
|
1,626,447
|
$ |
254,187
|
|||||
Common shares issued pursuant to consulting service arrangements
|
14,035,179
|
$ |
1,924,000
|
Period Ended June 30,
|
||||||||
2013
|
2012
|
|||||||
Interest paid in cash
|
$ | - | $ | - | ||||
Income taxes paid
|
$ | - | $ | - |
2013 | $ | 465,247 | ||
2014 | 22,284 | |||
$ | 487,530 |
June 30, 2013
|
December 31, 2012
|
|||||||
$ | $ | |||||||
Trade accounts payable
|
980,444 | 1,663,315 | ||||||
Accrued liabilities
|
104,395 | 242,245 | ||||||
Employee payroll
|
132,916 | 61,458 | ||||||
Accrued interest
|
163,744 | 74,698 | ||||||
1,381,500 | 2,041,716 |
|
·
|
Consulting fees decreased to $36,000 during the three months ended June 30, 2013 from $63,000 during the prior period, due primarily to previous business development contracts ended during the current period.
|
|
·
|
Consulting fees – stock-based decreased to $16,000 during the three months ended June 30, 2012 from $2,040,000 during the prior period. The lower current period expense is primarily due to decreased share based payments to the consultants compared to the prior period.
|
|
·
|
General and administrative expenses decreased to $88,000 in the three months ended June 30, 2012 from $468,000 in the prior period, with the decrease resulting from reduced staffing costs at the Company’s Seattle office and lower travel related expense in the current period.
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|
·
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Interest and finance charges increased to $291,000 during the three months ended June 30, 2013 from $100,000 during the prior period. Current and prior period interest charges are primarily interest accruals and accretion of debt discounts.
|
|
·
|
Management fees increased to $59,000 during the three months ended June 30, 2013 from $23,000 during the prior period due to one additional person in management in the current period.
|
|
·
|
Management fees – stock-based decreased to $12,000 during the three months ended June 30, 2013 from $86,000 during the prior period. The current and prior period expense consists of the fair value of option grants earned during the period.
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|
·
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Professional fees increased to $119,000 during the three months ended June 30, 2013 from $113,000 during the prior period, due to higher legal fees incurred relating to debt issuance and other legal matters in the current period.
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|
·
|
Research and development decreased to $54,000 during the three months ended June 30, 2013 from $246,000 during the prior period. This was due to lower technology licensing fee and initiation of preclinical studies in the current period.
|
|
·
|
Consulting fees increased to $66,000 during the six months ended June 30, 2013 from $63,000 during the prior period, due primarily to increase in cash payments for a new business development contract entered into in May 2012.
|
|
·
|
Consulting fee - stock-based decreased to $84,000 during the six months ended June 30, 2013 from $2,174,000 during the prior period. The lower current period expense is primarily due to decreased share based payments to the consultants compared to the prior period.
|
|
·
|
General and administrative expenses decreased to $295,000 in the six months ended June 30, 2013 from $612,000 in the prior period, with the decrease resulting from reduced staffing costs at the Company’ Seattle office and lower travel related expense in the current period.
|
|
·
|
Interest and finance charges increased to $626,000 during the six months ended June 30, 2013 from $197,000 during the prior period. Current and prior period interest charges are primarily accretion of convertible debt notes.
|
|
·
|
Management fees increased to $117,000 during the six months ended June 30, 2013 from $103,000 during the prior period due to one additional person in management in the current period.
|
|
·
|
Management fees – stock-based decreased to $27,000 during the six months ended June 30, 2013 from $116,000 during the prior period. The current and prior period expense consists of the fair value of option grants earned during the period.
|
|
·
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Professional fees increased to $385,000 during the six months ended June 30, 2013 from $187,000 during the prior period, due to higher legal fees incurred relating to debt issuance and other legal matters in the current period.
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·
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Research and development decreased to $189,000 during the six months ended June 30, 2013 from $361,000 during the prior period. This was due to lower technology licensing fee and initiation of preclinical studies in the current period.
|
Exhibit Number
|
Description of Exhibit
|
|
31.1
|
Certification of Principal Executive Officer and Acting Principal Accounting Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1933, as amended.
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|
32.1
|
Certification of Principal Executive Officer and Acting Principal Accounting Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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/s/ Glynn Wilson
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Glynn Wilson
Chairman, Chief Executive Officer, Principal Executive Officer and Chief Financial Officer
Date: August 19, 2013.
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(1)
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I have reviewed this Report on Form 10-Q for the quarterly period ended June 30, 2013 of TapImmune Inc.;
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(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:
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|
(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;
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|
(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 assurances regarding the reliability of financial reporting in the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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|
(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; and
|
|
(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
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(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.
|
/s/ Glynn Wilson
|
|
Glynn Wilson
Chairman, Chief Executive Officer,
Principal Executive Officer and Acting Principal Accounting Officer
|
CONTINGENCIES AND COMMITMENTS
|
3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2013
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Notes to Financial Statements | |||||||||||||||||||||
CONTINGENCIES AND COMMITMENTS |
Note 11: ContingencIES AND COMMITMENTs Contingencies Tax Filings The Company has not filed income tax returns for several years in certain operating jurisdictions (Note 10), and may be subject to possible compliance penalties and interest. Management is currently not able to make a reliably measurable provision for possible liability for penalties and interest, if any, at this time, and the Company may be liable for such amounts upon assessment. Penalties and interest, if assessed in the future, will be recorded in the period such amounts are determinable. Commitments Combined Research and Operating Obligations Effective May 25, 2010, the Company entered into a research and license Option Agreement with the Mayo Clinic for the development and possible commercial use of a cancer vaccine. Subject to the approval and guidance of the United States Food and Drug Administration (FDA) the Mayo Clinic plans to conduct a Phase I human clinical trial (Phase I Trial) to test and develop the Companys technology. The Company has agreed that, during the period of the option and upon approval of FDA to conduct Phase I Trials, will pay all the costs incurred by the Mayo Clinic, not to exceed a total of $841,000, of which, $510,572 has been paid and $50,000 accrued as of June 30, 2013. Both Parties agree that within 30 days after the Mayo Clinic informs the Company in writing about the receipt of FDA approval, the parties shall enter into an a formal research agreement. Management anticipates that Phase 1 Trials will begin in the second quarter of 2013. An initial payment of $250,000 will be required within 30 days of receiving notice from the Mayo Clinic that the Phase 1 Trial will commence.
Management Services Agreement
In February 2011, the Company approved an employment agreement with Dr. Wilson with an initial term of 2 years, which may be automatically extended for successive one-year terms. This employment agreement provides for annual compensation of $180,000 and the grant of an option to acquire 2,000,000 shares of the Companys common stock at $0.19 per share, 50% of which vested on March 16, 2011, while the remainder will vest monthly over a period of two years (41,667 per month). The options shall be exercisable for at least five years. Consultant Agreements In April 2012, the Company entered into an investors relation consulting agreement for a one year term, with a one-time right to terminate the agreement at its six month anniversary. The consulting agreement provides for the Company to issue 620,690 shares to the consultant and a monthly payment of $7,500. In April 2012, the Company entered into financial consulting service agreements, which included compensation of 14,000,000 shares of common stock, whereby the Company agreed to issue additional shares to the consultants to restore their holdings to 24.8% of fully diluted capitalization of the Company if the Company completes a re-organization, re-capitalization or a liquidity event during the eighteen months commencing with the signing of these agreements. In May 2013, the Company recovered 2,800,000 of 14,000,000 common shares issued to the consultant during the year ended December 31, 2012, under a settlement agreement. In May 2012, the Company entered into a one year consulting services agreement superseding the previous management consulting agreement with Mr. Corin to provide expertise in the areas of finance and corporate development to the Management and Board of TapImmune. The consulting services agreement provides for a consulting fee of $12,000 per month from May 2012 to December 2012 and $10,000 for the following four months. The Company also granted 250,000 options to Mr. Corin, vesting equally over twelve months at an exercise price of $0.17 with a ten year term. Rental Lease Agreement In December 2011, the Company entered into a lease agreement, to start in January 2012 for a two year period. The Company will pay a monthly basic rent of $7,152 and additional rent for operating costs of 2.20% of total operating expenses of the property. The Company has obligations under various research and consulting agreements through December 31, 2014. The aggregate minimum annual payments for the years ending December 31 are as follows:
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Statements of Operations (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | 167 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
|
Expenses | |||||
Consulting fees | $ 36,367 | $ 62,530 | $ 66,367 | $ 62,530 | $ 2,287,867 |
Consulting fees – stock-based (Note 9) | 15,956 | 2,039,925 | 83,768 | 2,173,833 | 8,122,140 |
Depreciation | 213,227 | ||||
General and administrative | 88,114 | 468,207 | 295,432 | 612,067 | 4,224,784 |
Interest and finance charges (Note 4) | 291,212 | 100,246 | 626,100 | 196,972 | 7,202,187 |
Management fees (Note 8) | 58,500 | 22,500 | 117,000 | 102,600 | 3,191,303 |
Management fees – stock-based (Notes 8 and 9) | 11,926 | 86,063 | 27,489 | 115,626 | 4,476,487 |
Professional fees | 118,658 | 112,980 | 385,288 | 187,109 | 5,801,397 |
Research and development (Note 8) | 54,398 | 245,763 | 188,778 | 361,228 | 7,157,373 |
Research and development – stock-based | 612,000 | ||||
Net Expenses | 675,131 | 3,138,214 | 1,790,222 | 3,811,965 | 43,288,765 |
Net Loss Before Other Items | (675,131) | (3,138,214) | (1,790,222) | (3,811,965) | (43,288,765) |
Other Items | |||||
Foreign exchange (loss) gain | (6,637) | 17,280 | 5,896 | 9,497 | 51,583 |
Changes in fair value of derivative liabilities (Note 4) | 781,321 | 352,129 | 1,878,489 | 423,191 | 6,182,881 |
Loss on debt financing | (96,000) | (1,469,263) | |||
Gain (loss) on settlement of debt (Note 9) | (874,358) | 18,758 | (1,310,400) | 28,688 | (13,001,201) |
Gain on extinguishment of derivative liabilities - warrants (Note 4) | 290,500 | ||||
Interest income | 33,344 | ||||
Loss on disposal of assets | (5,399) | ||||
Net Loss for the Period | (870,805) | (2,750,047) | (1,312,237) | (3,350,589) | (51,206,320) |
Basic and Diluted Net Loss per Share | $ (0.01) | $ (0.04) | $ (0.01) | $ (0.06) | |
Weighted Average Number of Common Shares Outstanding | $ 100,088,149 | $ 61,966,500 | $ 90,444,988 | $ 57,218,349 |
DERIVATIVE WARRANT AND CONVERSION OPTION LIABILITY AND FAIR VALUE
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3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE WARRANT AND CONVERSION OPTION LIABILITY AND FAIR VALUE |
Note 4: DERIVATIVE WARRANT AND CONVERSION OPTION LIABILITY AND FAIR VALUE The Company has evaluated the application ASC 480-10 Distinguishing liabilities from equity, ASC 815-40 Contracts in an Entitys Own Equity and ASC 718-10 Compensation Stock Compensation to the issued and outstanding warrants to purchase common stock that were issued with the convertible notes, private placements, consulting agreements, and various debt settlements during 2009 through 2013. Based on the guidance, management concluded these instruments are required to be accounted for as derivatives either due to a ratchet down protection feature available on the exercise price (Note 5) or a holders right to put the warrants back to the Company for cash under certain conditions or a conversion option feature with conversion into variable number of shares. Under ASC 815-40-25, the Company records the fair value of these warrants and conversion options (derivatives) on its balance sheet, at fair value, with changes in the values reflected in the statements of operations as Changes in fair value of derivative liabilities. The fair value of the share purchase warrants are recorded on the balance sheet under Derivative liability warrants and the fair value of the conversion options are recorded on the balance sheet under Derivative liability conversion option. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820-10 describes three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities; Level 2 Observable inputs 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; and Level 3 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. The Companys Level 3 liabilities consist of the derivative liabilities associated with the warrants issued with the convertible notes during the year ended December 31, 2011. At December 31, 2012, all of the Companys derivative liabilities were categorized as Level 3 fair value liabilities. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Level 3 Valuation Techniques Financial liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial liabilities consist of the notes and warrants for which there is no current market for these securities such that the determination of fair value requires significant judgment or estimation. Determining fair value of share purchase warrants and conversion options, given the Companys stage of development and financial position, is highly subjective and identifying appropriate measurement criteria and models is subject to uncertainty. There are several generally accepted pricing models for warrants and options and derivative provisions. The Company has chosen to value the warrants and conversion option on the notes that contain ratchet down provisions using the Binomial model under the following assumptions:
The foregoing assumptions are reviewed quarterly and are subject to change based primarily on managements assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations. Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Derivative liability warrants and Derivative liability conversion option:
The table below provides a summary of the changes in fair value, including net transfers, in and/or out, of financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the six months ended June 30, 2013 and the year ended December 31, 2012:
The fair value of the warrants is determined using a Binomial option pricing model. The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of common stock, the historical volatility of the stock price, risk-free rates based on U.S. Treasury security yields, the expected term of the warrants and dividend yield. Changes in these assumptions can materially affect the fair value estimate. The Company could ultimately incur amounts to settle the warrant at a cash settlement value that is significantly different than the carrying value of the liability on the financial statements. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability. Changes in the fair value of the common stock warrants liability are recognized as a component of other income (expense) in the statement of operations. The net cash settlement value at the time of any future Fundamental Transaction will depend upon the value of the following inputs at that time: the consideration value per share of the Companys common stock, the volatility of the Companys common stock, the remaining term of the warrant from announcement date, the risk-free interest rate based on U.S. Treasury security yields, and the Companys dividend yield. The warrant requires use of a volatility assumption equal to the greater of 100% and the 100-day volatility function determined as of the trading day immediately following announcement of a Fundamental Transaction. |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
Note 12: accounts payable and accrued liabilities
Accounts Payable and Accrued Liabilities
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RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Notes to Financial Statements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS |
NOTE 1A: RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
We have restated our consolidated financial statements as of and for the year ended December 31, 2012 relating to the Companys accounting for derivative liabilities and other accounts. We had recorded the derivative liabilities without accurately reflecting the effect of conversion of certain convertible notes and proper classification of some of the liabilities.
The impact of the restatement on the consolidated financial statements as of and for the year ended December 31, 2012, is shown in the following table:
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UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR AN INTERIM PERIOD
|
3 Months Ended |
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Mar. 31, 2013
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Notes to Financial Statements | |
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR AN INTERIM PERIOD |
Note 2: UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR AN INTERIM PERIOD Basis of Presentation In the opinion of management, the accompanying balance sheets and related interim statements of operations and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses. Significant areas requiring managements estimates and assumptions include deferred taxes and related tax balances and disclosures, determining the fair value of stock-based compensation and stock based transactions, the fair value of the components of the convertible notes payable, foreign exchange gains and losses, allocation of costs to research and development and accrued liabilities. Matters impacting the companys ability to continue as a going concern and contingencies also involve the use of estimates and assumptions. Interim results are not necessarily indicative of results for a full year. The information included in this quarterly report on Form 10-Q should be read in conjunction with information included in the Companys annual report on Form 10-K filed on May 15, 2013, with the U.S. Securities and Exchange Commission. |
CONVERTIBLE NOTES PAYABLE
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Mar. 31, 2013
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CONVERTIBLE NOTES PAYABLE |
Note 5: CONVERTIBLE NOTES PAYABLE The following is a summary of debt instrument transactions that are relevant to the current year:
February 2011 Secured Convertible Notes On February 24, 2011, the Company entered into a securities purchase agreement with accredited investors to place Senior Secured Convertible Notes (the February 2011 Notes) with a maturity date of three years after the issuance thereof in the aggregate principal amount of $1,184,694. Consideration under the notes consisted of $944,694 in cash proceeds, including accrued interest, and $240,000 was subscribed for by two of the holders of outstanding and demandable 2010 secured convertible notes (the 2010 Notes). The holders of the 2010 Notes returned their Series A, Series B and Series C warrants to the Company for cancellation. In connection with the issuance of the February 2011 Notes, the Company entered into a 2011 Security Agreement with the note holders securing the February 2011 Notes with all of the Companys assets. One year after the issuance of the February 2011 Notes, the note holders have the option to convert a portion or all of the outstanding balance of the February 2011 Notes including any accrued interest into shares of the Companys common stock at a conversion rate of $0.15 per share. The February 2011 Notes bear interest at the rate of 10% per annum except in case of default, in which case they bear interest at the rate of 20% per annum. The interest is due on the February 2011 Notes at the end of each three month period, starting three months from their issuance. One year after the issuance of the February 2011 Notes, the Company may elect to prepay a portion of the principal. If the Company makes such an election, the holders may elect to receive such prepayment in cash or in shares of the Companys common stock, at a conversion rate of $0.15 per share, or in a combination thereof. The Company paid a finders fee of $41,500. The finders fee was accounted for as deferred financing costs, and is being amortized over the term of the notes. At June 30, 2013, $8,148 of the $23,794 in deferred financing costs relates to the February 2011 Notes which remains unamortized, and is presented in the current assets on the Companys Balance Sheet. In connection with the issuance of the February 2011 Notes, the Company issued 2,369,388 warrants, exercisable into common stock at $0.25 with five year terms. The Company may force the exercise of the warrants at any time that the average volume weighted average price of the Companys common stock over the prior ten trading days is greater than $0.50, the average daily dollar volume of the Companys common stock sold over those ten trading days is greater than $25,000 and there is an effective registration statement covering the resale of the shares underlying the warrants. The Company has allocated the net proceeds to the warrants based on the calculated fair value at the date of issuance. The fair value of the warrants was recorded at $483,355 and recognized as derivative liabilities and the debt was recorded at $701,339. The fair value of the warrants was calculated using the Binomial option pricing model under the following assumptions: estimated life of five years, risk free rate of 2.06%, dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the three year term of the February 2011 Notes using the effective interest rate method. During the year ended December 31, 2012, one of the investors settled the principal amount of $203,836 and accrued interest of $16,419 of the February 2011 Notes in exchange for December 14, 2012 Convertible Note (the December 14, 2012 Note). For the six months ended June 30, 2013, accretion of the debt discount of $66,090 was recorded for the February 2011 Notes. April 2011 Secured Convertible Notes On April 4, 2011, the Company entered into a securities purchase agreement with accredited investors to place Senior Secured Convertible Notes (the April 2011 Notes) with a maturity date of three years after the issuance thereof in the aggregate principal amount of $215,000. Consideration under the notes consisted of $190,000 in cash proceeds, and $25,000 was subscribed for by a holder of 2010 Notes in exchange for the extinguishment of the Series A, Series B and Series C warrants related to the 2010 Notes. In connection with the issuance of the April 2011 Notes, the Company entered into a 2011 Security Agreement with the note holders securing the April 2011 Notes with a secondary security interest in all of the Companys assets. One year after the issuance of the April 2011 Notes, the note holders have the option to convert a portion or all of the outstanding balance of the April 2011 Notes including any accrued interest into shares of the Companys common stock at a conversion rate of $0.15 per share. The April 2011 Notes bear interest at the rate of 10% per annum except in case of default, in which case they bear interest at the rate of 20% per annum. The interest is due on the April 2011 Notes at the end of each three month period, starting three months from their issuance. One year after the issuance of the April 2011 Notes, the Company may elect to prepay a portion of the principal. If the Company makes such an election, the holders may elect to receive such prepayment in cash or in shares of the Companys common stock, at a conversion rate of $0.15 per share, or in a combination thereof. The Company paid a finders fee of $4,550. The finders fee was accounted for as deferred financing costs, and is being amortized over the term of the notes. At June 30, 2013, $1,139 of the $23,794 in deferred financing costs relates to the April 2011 Notes which remains unamortized, and is presented in the current assets on the Companys Balance Sheet. In connection with the issuance of the April 2011 Notes, the Company issued 430,000 warrants, exercisable into common stock at $0.25 with 2 year terms. The Company may force the exercise of the warrants at any time that the average volume weighted average price of the Companys common stock over the prior ten trading days is greater than $0.50, the average daily dollar volume of the Companys common stock sold over those ten trading days is greater than $25,000 and there is an effective registration statement covering the resale of the shares underlying the warrants. The Company has allocated the net proceeds to the warrants based on the calculated fair value. The fair value of the warrants was recorded at $130,720 and recognized as derivative liabilities and the debt was recorded at $84,280. The fair value of the warrants was calculated using the Binomial option pricing model under the following assumptions: estimated life of two years, risk free rate of 0.77%, dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the three year term of the April 2011 Notes using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $17,011 was recorded for the April 2011 Notes. June 2011 Secured Convertible Note On June 6, 2011, the Company entered into a securities purchase agreement with accredited investors to place Senior Secured Convertible Note (the June 2011 Note) with a maturity date of three years after the issuance thereof in the aggregate principal amount of $30,000. In connection with the issuance of the June 2011 Note, the Company entered into a 2011 Security Agreement with the note holder securing the June 2011 Note with a secondary security interest in all of the Companys assets. One year after the issuance of the June 2011 Note, the note holder has the option to convert a portion or all of the outstanding balance of the June 2011 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.15 per share. The June 2011 Note bears interest at the rate of 10% per annum except in case of default, in which case it bears interest at the rate of 20% per annum. The interest is due on the June 2011 Note at the end of each three month period, starting three months from its issuance. One year after the issuance of the June 2011 Note, the Company may elect to prepay a portion of the principal. If the Company makes such an election, the holders may elect to receive such prepayment in cash or in shares of the Companys common stock, at a conversion rate of $0.15 per share, or in a combination thereof. In connection with the issuance of the June 2011 Note, the Company issued 60,000 warrants, exercisable into common stock at $0.25 with two year terms. The Company may force the exercise of the warrants at any time that the average volume weighted average price of the Companys common stock over the prior ten trading days is greater than $0.50, the average daily dollar volume of the Companys common stock sold over those ten trading days is greater than $25,000 and there is an effective registration statement covering the resale of the shares underlying the warrants. The Company has allocated the net proceeds to the warrants based on the calculated fair value. The fair value of the warrants was recorded at $8,280 and recognized as derivative liabilities and the debt was recorded at $21,720. The fair value of the warrants was calculated using the Binomial option pricing model under the following assumptions: estimated life of two years, risk free rate of 0.43%, dividend yield of 0% and volatility of 199%. The debt discount is being accreted over the three year term of the June 2011 Note using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $1,371 was recorded for the June 2011 Note. August 8, 2012 Convertible Note On August 8, 2012, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the August 8, 2012 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $111,430. Consideration under the notes consisted of $92,000 in cash proceeds after $8,000 payment of finders fee and an original issue discount of $11,430. The note holder has the option to convert a portion or all of the outstanding balance of the August 8, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 70% of the lowest traded price in the 25 trading days prior to conversion. The August 8, 2012 Note carries no interest if the Company repays the note within 90 days from issuance. If the Company does not repay the note within 90 days, a one-time interest of 5% shall apply to the principal sum. During the six months ended June 30, 2013, the investor converted the principal amount of $111,430 and accrued interest of the August 8, 2012 Note into common shares (Note 9). The finders fee of $8,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, $nil of the $23,794 in deferred financing costs relates to the August 8, 2012 Note which has been fully expensed during the current period with the conversion of the debt. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $155,700 and recognized as a derivative liability and the debt was recorded at $nil. The transaction resulted in an accounting loss on debt financing of $55,700. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.19%, dividend yield of 0% and volatility of 139.77%. The debt discount has been accreted up to the dates of conversion of the August 8, 2012 Note using the effective interest rate method and the balance of unamortized debt discount of $34,681has been accounted for as loss on settlement of debt. For the six months ended June 30, 2013, accretion of the debt discount of $32,482 was recorded for the August 8, 2012 Note.
August 12, 2012 Convertible Note On August 12, 2012, the Company entered into a securities purchase agreement with accredited investors to place a Convertible Note (the August 12, 2012 Note) with a maturity date of three months after the issuance thereof in the aggregate principal amount of $27,500. Consideration under the notes consisted of $25,000 in cash proceeds after an original issue discount of $2,500. The note holder has the option to convert a portion or all of the outstanding balance of the August 8, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or on similar terms as of any future financings with more favorable terms. The agreement provides for the Company to issue 50,000 shares to the note holder as risk premium. The 50,000 shares were valued at $6,250 and recorded as loss on debt financing and obligation to issue shares. The August 12, 2012 Note bears interest at the rate of 10% per annum. The Company allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $31,100 and recognized as a derivative liability and the debt was recorded at $nil. The transaction resulted in an accounting loss on debt financing of $6,100. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of three months, risk free rate of 0.11%, dividend yield of 0% and volatility of 138.31%. The debt discount is being accreted over the three month term of the August 12, 2012 Note using the effective interest rate method. The Company has not repaid the August 12, 2012 Note as of June 30, 2013, which is in default. August 20, 2012 Convertible Note On August 20, 2012, the Company entered into a securities purchase agreement with accredited investors to place a Convertible Note (the August 20, 2012 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $20,000. The note holder has the option to convert a portion or all of the outstanding balance of the August 8, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 70% of the lowest traded price in the 25 trading days prior to conversion. The August 20, 2012 Note bears interest at the rate of 8% per annum. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $36,100 and recognized as a derivative liability and the debt was recorded at $nil. The transaction resulted in an accounting loss on debt financing of $16,100. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.19%, dividend yield of 0% and volatility of 140.11%. The debt discount is being accreted over the one year term of the August 20, 2012 Note using the effective interest rate method. For the three months ended June 30, 2013, accretion of the debt discount of $9,918 was recorded for the August 20, 2012 Note. September 18, 2012 Convertible Note On September 18, 2012, the Company entered into a securities purchase agreement with accredited investors to place a Convertible Note (the September 18, 2012 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $82,500. Consideration under the notes consisted of $69,000 in cash proceeds after $6,000 payment of finders fee and an original issue discount of $7,500. The note holder has the option to convert a portion or all of the outstanding balance of the September 18, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 70% of the lowest traded price in the 20 trading days prior to conversion. The September 18, 2012 Note carries no interest other than the amortization of the original issue discount. The finders fee of $6,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, $nil of the $20,145 in deferred financing costs relates to the September, 2012 Note which has been fully amortized. During the six months ended June 30, 2013, the investor converted the principal amount of $70,000 and accrued interest of the September 18, 2012 Note into common shares (Note 9). The balance remaining on the September 18, 2012 Note as on June 30, 2013 was $20,750. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $76,400 and recognized as a derivative liability and the debt was recorded at $nil. The transaction resulted in an accounting loss on debt financing of $1,400. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.20%, dividend yield of 0% and volatility of 141.43%. The debt discount is being accreted over the one year term of the September, 2012 Note using the effective interest rate method and an amount of unamortized debt discount of $39,681has been accounted for as loss on settlement of debt. For the six months ended June 30, 2013, accretion of the debt discount of $17,009 was recorded for the September, 2012 Note. October 2012 Convertible Note On October 15, 2012, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the October 2012 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $340,000. Consideration under the notes consisted of $310,000 in cash proceeds after $10,000 payment of legal fee and an original issue discount of $30,000. The note holder has the option to convert a portion or all of the outstanding balance of the October 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.12 per share or to a new lower issuance price if the Company issues shares (or reduces the conversion or exercise price for outstanding debt or warrants) for less than $0.12. The October 2012 Note carries an interest rate of 8% per year. There are seven installment payments due on the note beginning on the seventh month after its issuance and each month thereafter until maturity. The legal fee of $10,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, $2,932 of the $23,794 in deferred financing costs relates to the October 2012 Note which remains unamortized, and is presented in current assets on the Companys Balance Sheet. Provided that there is sufficient volume in the trading of the Companys common stock and other criteria are met, the Company may elect to make any payment due on an installment date in shares of common stock. If the Company elects to make a payment in shares of common stock, the number of shares that the Company issues will be equal to the amount to be converted divided by the lesser of the conversion price or 70% of the average of the three lowest closing bid prices of the shares of common stock during the prior twenty consecutive trading days. If the Company elects to pay the full amount of the note in common shares (excluding any interest that becomes due thereon), the holder shall receive at a minimum 2,833,333 shares of the Companys common stock, but this amount could be substantially higher. Unless otherwise agreed in writing by both parties, at no time will the holder convert any amount of the debenture into common stock that would result in the holder owning more than 4.99% of the common stock outstanding. As part of the agreement, the Company also issued 3,000,000 warrants to the note holder exercisable at $0.25/share expiring on October 31, 2016. The warrants include price adjustment provisions whereby the exercise price will be adjusted downwards based on future grants, which results in a share issuance at a per share amount less than $0.25 per share, or repricing of any existing warrants to a lower price. During the six months ended June 30, 2013, the investor converted the 3,000,000 warrants under a cashless exercise provision for 1,898,588 shares of common stock (Note 9). The Company has allocated the net proceeds to the conversion option and equity based on the calculated fair value. The fair value of the conversion option was recorded at $248,000 and recognized as a derivative liability and the equity was recorded at $62,000. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.19%, dividend yield of 0% and volatility of 139.16%. The debt discount is being accreted over the one year term of the October 2012 Note using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $168,603 was recorded for the October 2012 Note. October 9, 2012 Convertible Note On October 9, 2012, the Company converted accounts payable of $100,000 into convertible notes (the October 9, 2012 Note). The note holder has the option to convert a portion or all of the outstanding balance of the October 9, 2012 Note into shares of the Companys common stock at a conversion rate of $0.09 per share. The note has no terms of repayment and no interest charges. Only under certain events of default the note will incur an interest rate of 20% per year. During the six months ended June 30, 2013, the note was amended and assigned to a third party with price adjustment features ratified by the Company and converted into 5,368,956 shares of the Company, of which, 318,823 shares have yet to be issued. The Company recorded $135,527 as loss on settlement of debt (Note 9). November 1, 2012 Convertible Note During the year, the Company converted a promissory note of $100,000 (Note 7) with an accredited investor into three convertible notes of $105,000 cumulatively. The three convertible notes were assigned to a third party, of which, two notes were converted into equity. In November and December 2012, the Note holder converted $73,737 of principal and interest into 1,262,727 shares. The fair value of the shares was determined to be $140,538 based on the quoted market prices. The Company recorded $66,801 as loss on settlement of debt (Note 9). The third Convertible Note (the November 1, 2012 Note) was issued with a maturity date of six months in the aggregate principal amount of $31,471. The note holder has the option to convert a portion or all of the outstanding balance of the November 1, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 65% of the lowest bid price in the 20 trading days prior to conversion. The November 1, 2012 Note bears interest at the rate of 10% per annum starting on November 15, 2012. If the Company is in default under certain events, the November 1, 2012 Note shall incur interest at the rate of 20% per annum retroactively. The Company had allocated $31,471 of the balance of the November 1, 2012 Note to the conversion option and debt based on the calculated fair value. The fair value of the conversion option was recorded at $27,300 and recognized as a derivative liability and the debt was recorded at $4,171. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of 0.49 year, risk free rate of 0.09%, dividend yield of 0% and volatility of 127.26%. The debt discount is being accreted over the 0.49 year term of the November 1, 2012 Note using the effective interest rate method. During the six months ended June 30, 2013, the investor converted the November 1, 2012 Note and accrued interest into 512,822 common shares (Note 9). For the six months ended June 30, 2013, accretion of the debt discount of $7,921 was recorded for the November 1, 2012 Note. November 20, 2012 Convertible Note On November 20, 2012, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the November 20, 2012 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $55,710. Consideration under the notes consisted of $50,000 in cash proceeds after $4,000 payment of finders fee and an original issue discount of $5,710. The note holder has the option to convert a portion or all of the outstanding balance of the November 20, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 70% of the lowest traded price in the 25 trading days prior to conversion. The November 20, 2012 Note carries no interest if the Company repays the note within 90 days from issuance. If the Company does not repay the note within 90 days, a one-time interest of 5% shall apply to the principal sum. The finders fee of $4,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, 1,567 of the $23,794 in deferred financing costs relates to the November 20, 2012 Note which remains unamortized, and is presented in current assets on the Companys Balance Sheet. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $69,000 and recognized as a derivative liability and the debt was recorded at $nil. The transaction resulted in an accounting loss on debt financing of $19,000. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.16%, dividend yield of 0% and volatility of 134.71%. The debt discount is being accreted over the one year term of the November 20, 2012 Note using the effective interest rate method. During the six months ended June 30, 2013, the investor converted the principal amount of $17,540 and accrued interest of the November 20, 2012 Note into 2,000,000 common shares (Note 9). The balance remaining on the November 20, 2012 Note as on June 30, 2013 was $$38,170. For the six months ended June 30, 2013, accretion of the debt discount of $26,577 was recorded for the November 20, 2012 Note.
December 14, 2012 Convertible Note On December 14, 2012, the Company converted part of the February 2011 Notes in the amount of $220,255 into a Convertible Note (the December 14, 2012 Note) with a maturity date of four months after the issuance thereof in the aggregate principal amount of $252,280. Consideration under the notes consisted of $220,255 from February 2011 Notes, $10,000 payment of legal fee and an original issue discount of $22,025. The December 14, 2012 Note is repayable in four equal installments with accrued interest, starting on January 18, 2013 and subsequently, the same day on each of the following calendar months. The Company can elect to pay the installments in cash or shares of Companys common stock. The December 14, 2012 Note bears interest at the rate of 8% per annum. In the event of default under certain conditions, the interest will accrue at the rate of 18% per annum. The note holder has the option to convert a portion or all of the outstanding balance of the December 14, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of 70% of the three lowest closing bid prices in the 20 trading days prior to conversion. In December 2012, the December 14, 2012 Note was assigned to a third party and the Company paid the first installment of $65,032 consisting of principal and interest in 1,078,477 shares. The fair value of the shares was determined to be $96,523 based on the quoted market price of $0.09 per share. The Company recorded $31,491 as loss on settlement of debt (Note 9). The Company has allocated $189,210 of the balance of the December 14, 2012 Note to the conversion option and debt based on the calculated fair value. The fair value of the conversion option was recorded at $94,100 and recognized as a derivative liability and the debt was recorded at $95,110. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of 0.35 year, risk free rate of 0.06%, dividend yield of 0% and volatility of 100.88%. The debt discount is being accreted over the 0.45 year term of the December 14, 2012 Note using the effective interest rate method. During the six months ended June 30, 2013, the investor converted the remaining balance of the note of $189,210 and accrued interest on the December 14, 2012 Note into common shares (Note 9). December 18, 2012 Convertible Note On December 18, 2012, the Company entered into a securities purchase agreement with accredited investors to place convertible notes (the December 18, 2012 Notes) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $50,000. The note holders have the option to convert a portion or all of the outstanding balance of the November 20, 2012 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.10 per share. The December 18, 2012 Notes carry an interest rate of 9%, due and payable on the maturity date. January 5, 2013 Convertible Notes On January 5, 2013, the Company exchanged amounts due to related parties into convertible notes (the January 5, 2013 Notes) with no terms of repayment and no interest charges in the aggregate principal amount of $567,729. The related parties have the option to convert a portion or all of the outstanding balance of the January 5, 2013 Notes into shares of the Companys common stock at a conversion rate of $0.08 per share. February 27, 2013 Convertible Note On February 27, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the February 27, 2013 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $55,710. Consideration under the notes consisted of $46,000 in cash proceeds after $4,000 payment of finders fee and an original issue discount of $5,710. The note holder has the option to convert a portion or all of the outstanding balance of the February 27, 2013 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 70% of the lowest traded price in the 25 trading days prior to conversion. The February 27, 2013 Note carries no interest if the Company repays the note within 90 days from issuance. If the Company does not repay the note within 90 days, a one-time interest of 5% shall apply to the principal sum. The finders fee of $4,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, $2,652 of the $23,794 in deferred financing costs relates to the February 27, 2013 Note which remains unamortized, and is presented in current assets on the Companys Balance Sheet. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $44,700 and recognized as a derivative liability and the debt was recorded at $5,300. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.17%, dividend yield of 0% and volatility of 123.76%. The debt discount is being accreted over the one year term of the February 27, 2013 Note using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $16,987 was recorded for the February 27, 2013 Note. April 2, 2013 Convertible Note On April 2, 2013, the Company exchanged accounts payable into convertible notes (the April 2, 2013 Note) in the aggregate principal amount of $80,967. The note holder has the option to convert a portion or all of the outstanding balance of the April 2, 2013 Note into shares of the Companys common stock at a conversion rate of $0.07 per share. The note will incur an interest rate of 8% per year unless the Company defaults under certain conditions, in which case, the note will incur an interest rate of 20% per year. April 18, 2013 Convertible Note Note due December 18, 2013 On April 18, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the April 18, 2013 Note) with a maturity date of eight months after the issuance thereof in the aggregate principal amount of $60,000. Consideration under the notes consisted of $50,000 in cash proceeds after $5,000 payment of transaction costs and an original issue discount of $5,000. The note holder has the option to convert a portion or all of the outstanding balance of the April 18, 2013 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.12 per share or 70% of the average of the lowest closing bidding price in the 20 trading days prior to conversion. The April 18, 2013 Note carries an interest rate of 8% per year unless the note is in default under certain conditions, in which case, the interest rate would be 18% per year. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $27,800 and recognized as a derivative liability and the debt was recorded at $27,200. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of eight months, risk free rate of 0.10%, dividend yield of 0% and volatility of 115.82%. The debt discount is being accreted over the eight month term of the April 18, 2013 Note using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $10,146 was recorded for the April 18, 2013 Note. May 5, 2013 Convertible Note On May 5, 2013, the Company exchanged accounts payable into convertible notes (the May 5, 2013 Note) in the aggregate principal amount of $45,000. The note holder has the option to convert a portion or all of the outstanding balance of the May 5, 2013 Note into shares of the Companys common stock at a conversion rate of $0.07 per share. The note will incur an interest rate of 8% per year unless the Company defaults under certain conditions, in which case, the note will incur an interest rate of 20% per year. May 14, 2013 Convertible Note Note due May 14, 2014 On May 14, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the May 14, 2013 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $126,000. The Company also issued 2,000,000 warrants to the note holder, exercisable at $0.06 per share with a four year term. Consideration under the notes consisted of $110,000 in cash proceeds after $5,000 payment of finders fee and an original issue discount of $11,000. The note holder has the option to convert a portion or all of the outstanding balance of the May 14, 2013 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.072 per share or 70% of the average of the lowest closing bid prices in the 20 trading days prior to conversion. The May 14, 2013 Note carries an interest rate of 8% per year unless the note is in default, in which case, the note will incur an interest rate of 18% per year. The finders fee of $5,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, $4,356 of the $23,794 in deferred financing costs relates to the May 14, 2013 Note which remains unamortized, and is presented in current assets on the Companys Balance Sheet. The Company has allocated the net proceeds to the conversion option and warrants based on the calculated fair values. The fair value of the conversion option was recorded at $115,000 and fair value of the warrants was recorded as $96,000 recognized as a derivative liabilities and the debt was recorded at $nil. The transaction resulted in an accounting loss on debt financing of $96,000. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.15%, dividend yield of 0% and volatility of 149.87%. The debt discount has being accreted of the May 14, 2013 Note using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $16,225 was recorded for the May 14, 2013 Note. June 27, 2013 Convertible Note Note due June 27, 2014 On June 27, 2013, the Company entered into a securities purchase agreement with an accredited investor to place a Convertible Note (the June 27, 2013 Note) with a maturity date of one year after the issuance thereof in the aggregate principal amount of $36,333. Consideration under the notes consisted of $30,000 in cash proceeds after $3,000 payment of finders fee and an original issue discount of $3,333. The note holder has the option to convert a portion or all of the outstanding balance of the June 27, 2013 Note including any accrued interest into shares of the Companys common stock at a conversion rate of $0.09 per share or 70% of the lowest traded price in the 25 trading days prior to conversion. The June 27, 2013 Note carries no interest if the Company repays the note within 90 days from issuance. If the Company does not repay the note within 90 days, a one-time interest of 5% shall apply to the principal sum. The finders fee of $3,000 was accounted for as deferred financing costs, and is being amortized over the term of the note. At June 30, 2013, 3,000 of the $23,794 in deferred financing costs relates to the June 27, 2013 Note which remains unamortized, and is presented in current assets on the Companys Balance Sheet. The Company has allocated the net proceeds to the conversion option based on the calculated fair value. The fair value of the conversion option was recorded at $30,200 and recognized as a derivative liability and the debt was recorded at $2,800. The fair value of the conversion option was calculated using the Binomial option pricing model under the following assumptions: estimated life of one year, risk free rate of 0.15%, dividend yield of 0% and volatility of 156.41%. The debt discount is being accreted over the one year term of the June 27, 2013 Note using the effective interest rate method. For the six months ended June 30, 2013, accretion of the debt discount of $276 was recorded for the June 27, 2013 Note. |
RESEARCH AGREEMENTS
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3 Months Ended |
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Mar. 31, 2013
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Notes to Financial Statements | |
RESEARCH AGREEMENTS |
Note 3: Research Agreements Crucell Holland B.V. (Crucell) Research License and Option Agreement Effective August 7, 2003, Crucell and the Companys subsidiary GPI entered into a five-year research license and option agreement whereby Crucell granted to GPI a non-exclusive worldwide license for the research use of its adenovirus technology. The Company was required to make certain payments over the five-year term totaling Euro 450,000 (approximately $510,100). At December 31, 2008, $243,598 (172,801) was owing to Crucell under this agreement. During the year ended December 31, 2009, management negotiated a settlement of the outstanding balance requiring a 17,000 cash payment (paid) and the issuance of 265,000 shares of the Companys common stock. In addition, retroactively effective August 7, 2008, the Company negotiated an amended license agreement for the use of Crucells adenovirus technology. The Company is required to make annual license payments on the anniversary of the effective date for the three year term equal to 75,000 per annum. As at June 30, 2013, the Company had accrued $492,365 (378,384) under the amended agreement, inclusive of interest on outstanding amounts. The Company is currently delinquent on making its first annual license payment under the amended license agreement. Crucell has the right to cancel the agreement however, to date, the Company has not received any notice terminating the license agreement. Management plans to negotiate an amended payment structure with Crucell that, if successful, would allow the Company to maintain the license agreement in good standing. However, there is no certainty that the license agreement will be maintained or that management will successfully negotiate new terms. Mayo Clinic License Option Agreement For details regarding the license option agreement with Mayo Clinic, please refer to Note 11. |