SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2014

Notes to Financial Statements

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FluoroPharma Medical, Inc., a Nevada corporation (the “Company”), is a molecular imaging company headquartered in Montclair, N.J. The Company was founded as FluoroPharma Inc. in 2003 to engage in the discovery, development and commercialization of proprietary products for the positron emission tomography (“PET”) market. The Company’s initial focus has been on the development of novel cardiovascular imaging agents that can more efficiently and effectively detect and assess acute and chronic forms of coronary artery disease (“CAD”). Molecular imaging pharmaceuticals are radiopharmaceuticals that enable early detection of disease through the visualization of subtle changes in biochemical and biological processes.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, FluoroPharma, Inc., a Delaware corporation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of FluoroPharma Medical, Inc. and Subsidiary have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the "SEC").  Accordingly, the unaudited condensed consolidated financial statements do not include all information and footnotes required by U.S. GAAP for complete annual financial statements.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for a fair presentation.  Certain prior year amounts in the condensed consolidated financial statements and notes thereto have been reclassified to conform to the current period’s presentation.  Interim operating results are not necessarily indicative of results that may be expected for the year ending December 31, 2014 or for any other interim period.  The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto as of and for the year ended December 31, 2013, as included in the Company's Form 10-K filed with the SEC on March 25, 2014. 

Development Stage Entity

In previous filings, the Company has reported as a “Development Stage Entity”.  However, in June 2014, the Financial Accounting Standards Board (FASB) published Accounting Standards Update 2014-10, “Development Stage Entities” (ASU 2014-10).  ASU 2014-10 removed the development stage entity guidance under Accounting Standards Codification Topic 915 (ASC 915), “Development Stage Entities”, thereby removing the financial reporting distinction between development stage entities and other reporting entities. In addition, ASU 2014-10 eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

Presentation and disclosure requirements under ASC 915 are no longer required for the first annual period beginning after December 15, 2014, including interim periods therein.  Earlier adoption of the new guidance for ASC 915 is permitted for any annual or interim period for which financial statements have not yet been issued for public business entities.  Accordingly, the Company has elected to adopt these changes effective with the filing of this 10-Q.

Investments

Investments that are purchased and held principally for the purpose of selling them in the near term are classified as “trading securities” and reflected on the balance sheet at fair value, with unrealized gains and losses included in earnings. All the Company’s investments are considered “trading securities” at December 31, 2013. Realized gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.  During the six months ended June 30, 2014, the Company has received cash proceeds of $568,852 from the sale of investments, and has recorded realized losses of $302,116 upon the sale of these securities.  As of June 30, 2014, the Company has sold all of such securities.

Intangible Assets

The Company’s intangible assets consist of technology licenses and are carried at the legal cost to obtain them. Intangible assets are amortized using the straight-line method over the estimated useful life. Useful lives on technology licenses are 5 to 15 years.

Fair Value of Financial Instruments

The Company groups its assets and liabilities measured at fair value, in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.  Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).

Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

The three levels of the fair value hierarchy are as follows:

 Level 1 – Valuation is based on quoted prices in active markets for identical assets or liabilities.  Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; 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 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the financial instrument.

The Company recognizes transfers between levels at the end of the reporting period as if the transfers occurred on the last day of the reporting period.

Assets and liabilities measured at fair value on a recurring basis at June 30, 2014 are summarized below:

	June 30, 2014
	Level 1			Level 2			Level 3			Fair Value
Current Liabilities:
Derivative warrant liability		$	-		$	-		$	3,289,284		$	3,289,284

Assets and liabilities measured at fair value on a recurring basis at December 31, 2013 are summarized below:

	December 31, 2013
	Level 1		Level 2		Level 3		Fair Value
Current Assets:
Trading securities	$	634,826	$	-	$	-	$	634,826
Current Liabilities:
Derivative warrant liability	$	-	$	-	$	2,549,196	$	2,549,196

The following table sets forth the changes in the estimated fair value during 2014 for our Level 3 classified derivative warrant liability:

	Six Months Ended
	June 30, 2014
Fair value at beginning of period	$	2,549,196
Modification and reclassification of outstanding warrants		114,923
Change in fair value		625,165
Fair value at end of period	$	3,289,284

At December 31, 2013, the Company measured at fair value on a nonrecurring basis certain equipment in accordance with ASC Topic 360-10-35. Fair value was determined to be $0 using certain Level 3 inputs and resulted in the Company recording a loss of $128,245 in 2013. Fair value was estimated using quantitative and qualitative considerations including the expected use and disposition of the equipment.

Net Loss per Common Share

Basic and diluted earnings per share were the same for all periods presented as including common stock equivalents in the calculation of diluted earnings per share would have been antidilutive. As of June 30, 2014, the Company had outstanding options exercisable for 4,644,428 shares of its common stock, warrants exercisable for 14,854,035 shares of its common stock, series A preferred stock (the “Series A Preferred Stock”) convertible into 1,598,660 shares of common stock, and series B preferred stock (the “Series B Preferred Stock”) convertible into 9,364,158 shares of common stock.  At June 30, 2013, the Company had outstanding options exercisable for 4,550,428 shares of its common stock, and warrants exercisable for 7,318,312 shares of common stock, and Series A Preferred Stock convertible into 2,234,673 shares of common stock.

Going concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has experienced net losses and negative cash flows from operations since its inception.  The Company has sustained cumulative losses attributable to common stockholders of $27,678,443 as of June 30, 2014.  The Company has historically financed its operations through issuances of equity and the proceeds of debt instruments. In the past, the Company has also provided for its cash needs by issuing common stock, options and warrants for certain operating costs, including consulting and professional fees.   During the six months ended June 30, 2014, the Company raised $203,055 in cash, net of offering costs, through the private placement of common stock and warrants (see Note 3).   In addition, during the six months ended June 30, 2014, various warrant holders exercised rights to purchase 180,750 shares of the Company’s common stock, with an average exercise price of $0.50 per share, pursuant to a cash exercise whereby the Company received cash proceeds of $90,375.  In addition, during the six months ended June 30, 2014, the Company received gross proceeds of $568,852 from the sale of freely tradable securities received as consideration in the Company’s 2013 private placement of its Series B Preferred Stock.  During the year ended December 31, 2013, the Company raised $1,370,190 in cash and converted notes and freely tradable securities valued at $3,495,384 (based upon the closing price of such securities on the day prior to closing), net of offering costs, through the through the private placements of common stock, Series B Preferred Stock and warrants .  As of December 31, 2013, the Company received gross proceeds of $1.8 million from the sale of a portion of such freely tradable securities received as consideration in the Company’s 2013 private placement of its Series B Preferred Stock.

The Company continues to actively pursue various funding options, including equity offerings, to obtain additional funds to continue the development of its products and bring them to commercial markets. Management continues to assess fund raising opportunities to ensure minimal dilution to its existing shareholder base and to obtain the best price for its securities (see Note 8). Management is optimistic based upon its ability to raise funds in prior years, through private placement offerings (see description of private placement offerings in Note 2), that it will be able to raise additional funds in the future.  If the Company is unable to raise additional capital as may be needed to meet its projections for operating expenses, it could have a material adverse effect on liquidity or require the Company to cease or significantly delay some of its clinical trials.  These financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.