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Description of Business and Basis of Presentation
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
Note 1. Description of Business and Basis of Presentation

Overview

 

The Company has developed and ultimately intends to commercialize its innovative PAD based products for the OTC and laboratory markets based on its patented technology platforms, and its genomic diagnostics, based on its patented PadKit® technology for the worldwide healthcare industry. These platforms include: inSync®, Unique™, PadKit®, and OEM branded OTC and laboratory testing products based on the Company’s core intellectual property related to its PAD technology.  These products are intended for the treatment of hemorrhoids, minor vaginal infection, urinary incontinence, general catamenial uses and other medical needs. 

 

The Company’s efforts to commercialize its products are currently contingent on the receipt of additional financing required to execute its business and operating plan, which is currently focused on the commercialization of the Company’s PAD technology either directly or through a joint venture or other relationship intended to increase shareholder value.  In the interim, the Company has had nominal operations, focused principally on the limited online sale of our Unique® Miniform PAD product and maintaining compliance with the public company reporting requirements.   No assurances can be given that the Company will obtain financing, or otherwise successfully develop a business and operating plan or enter into an alternative relationship to commercialize the Company’s PAD technology.

  

On June 20, 2012, the Company formed a wholly-owned subsidiary, QX Labs, Inc. (“QX”), to convey and transfer to QX all intellectual property and assets related to the Company’s diagnostic testing business ("Diagnostics Business"). The Diagnostic Business is based principally on the Company’s proprietary PadKit® technology, which the Company believes provides a patented platform technology for genomic diagnostics, including fetal genomics. Following the transfer of the Diagnostics Business to QX, which the Company intends to affect during the current fiscal year, the Company’s other business line will consist of its over-the-counter business, including the InSync feminine hygienic interlabial pad, the Unique® Miniform for hemorrhoid application, and other treated miniforms (the “OTC Business”), as well as established and continuing licensing relationships related to the OTC Business. Management believes the creation of QX permits the Company to more efficiently explore different options to maximize the value of the Diagnostics Business and the OTC Business (collectively, the “Businesses”), with the objective of maximizing the value of the Businesses for the benefit of the Company and its stakeholders.

 

The Company’s current focus is to obtain additional working capital necessary to continue as a going concern, and develop a longer term financing and operating plan to: (i) leverage its broad-based intellectual property (“IP”) and patent portfolio to develop new and innovative diagnostic products; (ii) commercialize its OTC Business and its Diagnostics Business either directly or through joint ventures, mergers or similar transactions intended to capitalize on commercial opportunities presented by each of the Businesses; (iii) contract manufacturing to third parties while maintaining control over the manufacturing process; and (iv) maximize the value of the Company’s investments in non-core assets.  As a result of its current financial condition, however, the Company’s efforts in the short-term will be focused on limited online sale of our Unique® Miniform PAD product, and obtaining financing necessary to maintain the Company as a going concern.

 

The Company follows the accounting guidance outlined in the Financial Accounting Standards Board Codification guidelines. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted principles for interim financial information and with the instructions to Form 10-Q of Regulation S-K.  They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2014.  The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K.  In the opinion of Management, all adjustments considered necessary for a fair presentation, which unless otherwise disclosed herein, consisting primarily of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. 

 

Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation. These reclassifications had no effect on previously reported losses, total assets or stockholders equity.

 

Recent Developments

 

Issuance of Notes

 

During the three months ended March 31, 2014, the Company issued two promissory notes to two investors in the principal amounts of $100,000, and $36,000, respectively (together, the “2014 Notes”). As additional consideration for the purchase of the 2014 Notes, the Company issued an aggregate total of 272,000 shares of common stock to the investors. The Company recorded debt discount of $18,769 related to the 2014 Notes and will amortize the expense over the life of the 2014 Notes. During the three months ended March 31, 2014, the Company recorded $1,292 of interest expense related to the debt discount on the 2014 Notes.

 

The 2014 Notes are due and payable on June 30, 2014 (the “Maturity Date), and, prior to the Maturity Date, accrue interest at a rate of 8% annually. Following the Maturity Date, the 2014 Notes accrue interest at a rate of 12% annually. The 2014 Notes are convertible at the option of the holder into shares of the Company's common stock at a conversion price equal to $0.10 per share. In addition, the holder may exchange the 2014 Notes for common stock in the event the Company consummates a qualified financing (the “Qualified Financing”), which is defined in the 2014 Notes as a financing resulting in gross proceeds to the Company of at least $500,000. While the Company intends to pay the 2014 Notes using proceeds from a Qualified Financing, such Qualified Financing may not occur prior to the date the holder of the 2014 Notes demands repayment.

 

The Company presently intends to issue additional promissory notes to finance its current working capital needs. However, there can be no assurance that the Company will be able to issue additional promissory notes.