UNITED STATES
FORM 10-Q
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009 | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM ___________ TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934_____________.
Commission file number: 0-24921
POWER 3 MEDICAL PRODUCTS, INC.
New York | 65-0565144 | |
(State or other incorporation or organization) | (I.R.S. Employer Identification No.) |
3400 Research Forest Drive, Suite B2-3 | ||
Woodlands, Texas | ||
(Address of principal executive offices) |
(281) 466-1600 | |
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the issuerregistrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the pastpreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yesýo No¨x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§323.405 of this chapter) during the preceding 12 months (or shorter period that the registrant was required to submit and post such files).
o Yes ox No
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filero | Accelerated filero | ||||||
Non-accelerated filero (do not check | |||||||
company) | |||||||
Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act)? .
Yes¨o Noýo
The number of shares outstanding of the registrant’s common stock par value $.001 per share,outstanding as of November 19, 2008,May 14, 2009, was 149,859,290 shares
POWER 3 MEDICAL PRODUCTS, INC.
INDEX
PART I – FINANCIAL INFORMATION | 3 | ||
Item 1 – Financial Statements | 3 | ||
Item 2- Management’s Discussion And Analysis Of Financial Condition And Results Of Operations | 19 | ||
Item 3 | |||
21 | |||
Item 4 – Controls and Procedures | 21 | ||
PART II – OTHER INFORMATION | 22 | ||
Item 1 – Legal Proceedings | 22 | ||
Item 1A – Risk Factors | 22 | ||
Item 2 - Unregistered Sales of Equity Securities | 22 | ||
Item 3 – Defaults Upon Senior Securities | 26 | ||
Item 4 - Submission of Matters to a Vote of Security Holders | 26 | ||
Item 5 – Other Information | 26 | ||
Item 6 – Exhibits | 26 | ||
SIGNATURES | |||
27 |
PART I – FINANCIAL INFORMATION
ITEM 1 – FINANCIAL STATEMENTS
POWER 3 MEDICAL PRODUCTS, INC.
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| March 31, 2009 (Unaudited) |
| December 31, 2008 |
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ASSETS |
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Cash and equivalents |
| $ | 21,152 |
| $ | 8,331 |
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Other current assets |
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| 6,665 |
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| 6,645 |
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Total current assets |
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| 27,817 |
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| 14,976 |
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Furniture, fixtures and equipment, net of accumulated depreciation of $107,506 and $101,253 at March 31, 2009 and December 31, 2008, respectively |
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| — |
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| 6,253 |
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Deposits |
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| 5,450 |
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| 5,450 |
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Total non-current assets |
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| 5,450 |
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| 11,703 |
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TOTAL ASSETS |
| $ | 33,267 |
| $ | 26,679 |
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POWER 3 MEDICAL PRODUCTS, INC.
ASSETS | September 30, 2008 | December 31, 2007 | ||||||
CURRENT ASSETS | ||||||||
Cash and Cash Equivalents | $ | 1,850 | $ | 125,679 | ||||
Other Current Assets | 23,778 | 23,247 | ||||||
TOTAL CURRENT ASSETS | 25,628 | 148,926 | ||||||
OTHER ASSETS | ||||||||
Deferred Finance Costs, net of accumulated amortization of $319,149 and $176,952 at September 30, 2008 and December 31, 2007, respectively | — | 127,197 | ||||||
Furniture, Fixtures and Equipment, net of accumulated depreciation of $100,703 and $98,960 at September 30, 2008 and December 31, 2007, respectively | 6,853 | 5,799 | ||||||
Stock Held in Escrow | 190,000 | — | ||||||
Deposits | 5,450 | 21,598 | ||||||
TOTAL ASSETS | $ | 227,931 | $ | 303,520 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts Payable | $ | 979,720 | $ | 969,387 | ||||
Notes Payable – in default | 451,000 | 451,000 | ||||||
Notes Payable | 52,626 | 50,000 | ||||||
Notes Payable to Related Parties | 1,025,360 | 1,934,816 | ||||||
Convertible Debentures-in default, net of amortization of $1,524,555 and $1,178,865 at September 30, 2008 and December 31, 2007, respectively | 268,253 | 645,190 | ||||||
Convertible Debentures, net of amortization of $271,351 and $0 at September 30, 2008 and December 31, 2007, respectively | 271,351 | — | ||||||
Other Current Liabilities | 608,177 | 1,242,936 | ||||||
Derivative Liabilities | 648,183 | 3,794,305 | ||||||
TOTAL LIABILITIES | 4,304,670 | 9,087,634 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Preferred Stock - $0.001 par value; 50,000,000 shares authorized; 1,500,000 and 0 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively | 1,500 | — | ||||||
Common Stock - $0.001 par value; 150,000,000 shares authorized; 149,259,290 and 108,352,636 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively | 149,260 | 108,353 | ||||||
Additional Paid-In Capital | 63,837,341 | 60,191,104 | ||||||
Deficit Accumulated Before Entering Development Stage | (11,681,500 | ) | (11,681,500 | ) | ||||
Deficit Accumulated During Development Stage | (56,383,340 | ) | (57,402,071 | ) | ||||
TOTAL STOCKHOLDERS’ DEFICIT | (4,076,739 | ) | (8,784,114 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 227,931 | $ | 303,520 |
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| March 31, 2009 (Unaudited) |
| December 31, 2008 |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Accounts payable |
| $ | 1,015,499 |
| $ | 1,043,682 |
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Notes payable – in default |
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| 451,000 |
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| 451,000 |
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Notes payable – net of unamortized discounts of $43,841 at March 31, 2009 and December 31, 2008 |
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| 86,159 |
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| 64,174 |
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Notes payable to related parties |
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| 68,927 |
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| 68,927 |
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Convertible debentures-in default, net of unamortized discount of $-0- and $97,036 at March 31, 2009 and December 31, 2008, respectively |
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| 645,347 |
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| 767,974 |
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Convertible debentures, net of unamortized discount of $78,590 and $577,668 March 31, 2009 and December 31, 2008, respectively |
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| 51,410 |
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| 442,332 |
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Convertible debentures – related party, net of unamortized discount of $48,926 and $672,836 at March 31, 2009 and December 31, 2008, respectively |
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| 81,780 |
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| 696,599 |
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Other current liabilities |
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| 540,355 |
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| 617,486 |
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Derivative liabilities |
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| 2,098,591 |
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| 1,352,247 |
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Total current liabilities |
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| 5,039,068 |
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| 5,504,421 |
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TOTAL LIABILITIES |
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| 5,039,068 |
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| 5,504,421 |
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STOCKHOLDERS’ DEFICIT |
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Preferred Stock - $0.01 par value: 50,000,000 shares authorized; 1,500,000 shares issued and outstanding as of March 31, 2009 and December 31, 2008 |
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| 1,500 |
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| 1,500 |
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Common Stock-$0.001 par value: 600,000,000 shares authorized; 306,404,095 and 149,959,044 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively |
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| 306,405 |
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| 149,960 |
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Additional paid in capital |
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| 65,934,703 |
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| 63,499,938 |
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Stock held in escrow |
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| (40,000 | ) |
| (20,000 | ) |
Common stock payable |
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| 131,500 |
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| 123,286 |
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Common stock subscriptions receivable |
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| (197,166 | ) |
| — |
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Deficit accumulated before entering the development stage |
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| (11,681,500 | ) |
| (11,681,500 | ) |
Deficit accumulated during the development stage |
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| (59,461,243 | ) |
| (57,550,926 | ) |
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TOTAL STOCKHOLDERS’ DEFICIT |
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| (5,005,801 | ) |
| (5,477,742 | ) |
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ | 33,267 |
| $ | 26,679 |
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The accompanying notes are an integral part of these financial statements.
POWER3 MEDICAL PRODUCTS, INC. | ||||||||||||||||||||
(A Development Stage Enterprise) | ||||||||||||||||||||
STATEMENTS OF OPERATIONS | ||||||||||||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007 and the period from May 18, 2004 (inception) through September 30, 2008 | ||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
For the three month period ended September 30, | For the nine month period ended September 30, | Period from May 18, 2004 through September 30, | ||||||||||||||||||
2008 | 2007 (restated) | 2008 | 2007 (restated) | 2008 (restated) | ||||||||||||||||
REVENUE | ||||||||||||||||||||
Sales | $ | - | $ | - | $ | - | $ | 121,724 | $ | 426,224 | ||||||||||
Total revenue | $ | - | $ | - | $ | - | $ | 121,724 | $ | 426,224 | ||||||||||
OPERATING EXPENSES | ||||||||||||||||||||
Employee compensation and benefits | 213,945 | 341,980 | 740,850 | 927,709 | 30,748,840 | |||||||||||||||
Professional and consulting fees | 106,783 | (146,835 | ) | 918,275 | 435,949 | 10,259,102 | ||||||||||||||
Impairment of goodwill | - | - | - | - | 13,371,776 | |||||||||||||||
Impairment of intangible assets | - | - | - | - | 179,788 | |||||||||||||||
Occupancy and equipment | 33,997 | 48,323 | 101,937 | 119,504 | 634,341 | |||||||||||||||
Travel and entertainment | 4,762 | 26,796 | 83,464 | 87,541 | 425,956 | |||||||||||||||
Write off lease | - | - | - | - | 34,243 | |||||||||||||||
Other selling, general and administrative expenses | 46,849 | 594,085 | 202,111 | 687,010 | 663,729 | |||||||||||||||
Total operating expenses | $ | 406,336 | $ | 864,349 | $ | 2,046,637 | $ | 2,257,713 | $ | 56,317,775 | ||||||||||
LOSS FROM OPERATIONS | $ | (406,336 | ) | $ | (864,349 | ) | $ | (2,046,637 | ) | $ | (2,135,989 | ) | $ | (55,891,551 | ) | |||||
OTHER INCOME AND (EXPENSE) | ||||||||||||||||||||
Derivative gain (loss) | $ | 1,235,262 | $ | 4,945,238 | $ | 3,656,122 | $ | (2,071,614 | ) | $ | 6,263,985 | |||||||||
Gain on legal settlement | - | - | 17,875 | - | 36,764 | |||||||||||||||
Interest income | 1,247 | 1,533 | 1,822 | 4,645 | 9,113 | |||||||||||||||
Mandatory prepayment penalty | - | - | - | (420,000 | ) | |||||||||||||||
Other expense | - | 398,317 | - | - | (196,176 | ) | ||||||||||||||
Gain on conversion of financial instruments | 382,784 | 472,878 | 380,400 | 1,565,892 | 1,924,976 | |||||||||||||||
Interest expense | (393,543 | ) | (712,678 | ) | (978,780 | ) | (2,171,826 | ) | (5,392,746 | ) | ||||||||||
Total other income (expense) | 1,225,750 | 5,105,288 | 3,077,439 | (2,672,903 | ) | 2,225,916 | ||||||||||||||
NET INCOME (LOSS) | $ | 819,414 | $ | 4,240,939 | $ | 1,030,802 | $ | (4,808,892 | ) | $ | (53,665,635 | ) | ||||||||
Deemed Dividend | - | - | (12,071 | ) | - | (29,707 | ) | |||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS | $ | 819,414 | $ | 4,240,939 | $ | 1,018,731 | $ | (4,808,892 | ) | $ | (53,695,342 | ) | ||||||||
NET INCOME (LOSS) PER SHARE BASIC AND DILUTED | $ | 0.01 | $ | 0.04 | $ | 0.01 | $ | (0.06 | ) | |||||||||||
Weighted average number of shares outstanding – Basic | 146,637,986 | 97,933,533 | 130,055,978 | 84,773,848 | ||||||||||||||||
Weighted average number of shares outstanding – Diluted | 148,543,647 | 106,789,359 | 136,364,780 | 84,773,848 |
POWER 3 MEDICAL PRODUCTS, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
(Unaudited)
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| Three months ended March 31, |
| Period from May 18, 2004 to March 31, |
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| 2009 |
| 2008 |
| 2009 |
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REVENUES |
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Sales revenues |
| $ | 132,766 |
| $ | — |
| $ | 560,015 |
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TOTAL REVENUES |
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| 132,766 |
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| 560,015 |
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OPERATING EXPENSES |
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Employee compensation and benefits |
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| 17,557 |
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| 283,921 |
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| 31,067,069 |
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Professional and consulting fees |
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| 80,817 |
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| 85,698 |
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| 11,383,757 |
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Impairment of goodwill |
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| — |
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| — |
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| 13,371,776 |
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Impairment of intangible assets |
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| — |
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| — |
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| 179,788 |
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Occupancy and equipment |
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| 14,699 |
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| 44,496 |
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| 683,174 |
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Travel and entertainment |
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| 729 |
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| 56,456 |
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| 427,113 |
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Write off lease |
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| — |
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| 34,243 |
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Other selling, general and administrative expenses |
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| 88,004 |
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| 107,173 |
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| 822,138 |
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Total operating expenses |
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| 201,806 |
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| 577,744 |
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| 57,969,058 |
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LOSS FROM OPERATIONS |
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| (69,040 | ) |
| (577,744 | ) |
| (57,409,043 | ) |
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OTHER INCOME/(EXPENSE) |
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Derivative gain/(loss) |
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| (746,344 | ) |
| 2,168,616 |
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| 6,276,629 |
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Gain on legal settlement |
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| — |
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| 17,875 |
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| 36,764 |
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Interest income |
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| — |
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| 1,051 |
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| 7,867 |
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Gain/(loss) on settlement of debt |
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| (883,734 | ) |
| — |
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| 1,125,712 |
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Mandatory prepayment penalty |
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| — |
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| — |
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| (420,000 | ) |
Other income/(expense) |
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| — |
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| — |
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| (194,886 | ) |
Interest expense |
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| (177,096 | ) |
| (388,616 | ) |
| (5,439,504 | ) |
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Total other income/(expense) |
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| (1,807,174 | ) |
| 1,798,926 |
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| 1,392,582 |
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NET INCOME/(LOSS) |
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| (1,876,214 | ) |
| 1,221,182 |
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| (56,016,461 | ) |
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Deemed dividend |
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| (34,103 | ) |
| (12,071 | ) |
| (63,809 | ) |
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Net income/(loss) attributable to common stockholders |
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| (1,910,317 | ) |
| 1,209,111 |
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| (56,080,270 | ) |
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Net income/(loss) per share - basic and diluted |
| $ | 0.00 |
| $ | 0.01 |
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Weighted average number of shares outstanding |
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| 200,466,378 |
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| 115,458,242 |
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The accompanying notes are an integral part of these financial statements.
POWER 3 MEDICAL PRODUCTS, INC.
Common Stock | Preferred Stock | Additional Paid In | Deferred Compensation | Retained | ||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Expense | Earnings | Equity | |||||||||||||||||||||||||
Balances as of beginning of development stage May 18, 2004 | 14,407,630 | $ | 14,407 | 3,870,000 | $ | 3,870 | $ | 14,225,974 | $ | — | $ | (11,681,500 | ) | $ | 2,562,751 | |||||||||||||||||
Issued shares for compensation | 27,945,000 | 27,945 | — | — | 25,423,555 | (25,451,500 | ) | — | — | |||||||||||||||||||||||
Issued shares for services | 4,910,000 | 4,910 | — | — | 4,850,090 | (535,000 | ) | — | 4,320,000 | |||||||||||||||||||||||
Issued shares for acquisition of equipment | 15,000,000 | 15,000 | — | — | 13,485,000 | — | — | 13,500,000 | ||||||||||||||||||||||||
Stock option expense | — | — | — | — | 626,100 | (626,100 | ) | — | — | |||||||||||||||||||||||
Issued shares for cash | 242,167 | 242 | — | — | 314,575 | — | — | 314,817 | ||||||||||||||||||||||||
Cancelled shares per cancellation of agreement | (160,000 | ) | (160 | ) | — | — | (71,840 | ) | — | — | (72,000 | ) | ||||||||||||||||||||
Issued shares to convert Series A preferred shares to common shares | 3,000,324 | 3,001 | (3,870,000 | ) | (3,870 | ) | 3,377,974 | — | (3,380,975 | ) | (3,870 | ) | ||||||||||||||||||||
Stock based compensation | — | — | — | — | — | 8,311,012 | — | 8,311,012 | ||||||||||||||||||||||||
Net reclassification of derivative liabilities | — | — | — | — | (3,347,077 | ) | — | — | (3,347,077 | ) | ||||||||||||||||||||||
Net loss (from May 18, 2004 to December 31, 2004) | — | — | — | — | — | — | (15,236,339 | ) | (15,236,339 | ) | ||||||||||||||||||||||
Balances, December 31, 2004 | 65,345,121 | $ | 65,345 | — | $ | — | $ | 58,884,351 | $ | (18,301,588 | ) | $ | (30,298,814 | ) | $ | 10,349,294 | ||||||||||||||||
Cancelled shares returned from employee | (1,120,000 | ) | (1,120 | ) | — | — | (1,307,855 | ) | — | — | (1,308,975 | ) | ||||||||||||||||||||
Issued shares for compensation | 140,000 | 140 | — | — | 41,860 | — | — | 42,000 | ||||||||||||||||||||||||
Issued shares for services | 850,000 | 850 | — | — | 155,150 | — | — | 156,000 | ||||||||||||||||||||||||
Amortize deferred compensation expense | — | — | — | — | — | 13,222,517 | — | 13,222,517 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (27,134,865 | ) | (27,134,865 | ) | ||||||||||||||||||||||
Balances, December 31, 2005 | 65,215,121 | $ | 65,215 | — | $ | — | $ | 57,773,506 | $ | (5,079,071 | ) | $ | (57,433,679 | ) | $ | (4,674,029 | ) | |||||||||||||||
Issued shares for services | 2,449,990 | 2,449 | — | — | 311,865 | — | — | 314,314 | ||||||||||||||||||||||||
Issued shares for cash | 2,452,746 | 2,452 | — | — | 222,548 | — | — | 225,000 | ||||||||||||||||||||||||
Issued shares for compensation | 1,253,098 | 1,254 | — | — | 176,763 | — | — | 178,017 | ||||||||||||||||||||||||
Adoption of FAS 123R | — | — | — | — | (475,324 | ) | 475,324 | — | — | |||||||||||||||||||||||
Amortize deferred compensation expense | — | — | — | — | — | 4,603,747 | — | 4,603,747 | ||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (6,415,968 | ) | (6,415,968 | ) | ||||||||||||||||||||||
Balances, December 31, 2006 | 71,370,955 | $ | 71,370 | — | $ | — | $ | 58,009,358 | $ | — | $ | (63,849,648 | ) | $ | (5,768,920 | ) | ||||||||||||||||
Issued shares for services | 1,810,000 | 1,810 | — | — | 282,390 | — | — | 284,200 | ||||||||||||||||||||||||
Issued shares for conversion of debt | 22,265,224 | 22,264 | — | — | 606,412 | — | — | 628,676 | ||||||||||||||||||||||||
Issued shares for warrants exercised | 5,270,832 | 5,272 | — | — | 336,396 | — | — | 341,668 | ||||||||||||||||||||||||
Issued shares for cash | 7,630,625 | 7,632 | — | — | 992,818 | — | — | 1,000,450 | ||||||||||||||||||||||||
Placement agent fees | — | — | — | — | (58,500 | ) | — | — | (58,500 | ) | ||||||||||||||||||||||
Stock received | — | — | — | — | 100 | — | — | 100 | ||||||||||||||||||||||||
Unreturned shares | 5,000 | 5 | — | — | 4,495 | — | — | 4,500 | ||||||||||||||||||||||||
Deemed dividend | — | — | — | — | 17,635 | — | (17,635 | ) | — | |||||||||||||||||||||||
Net loss | — | — | — | — | — | (5,216,288 | ) | (5,216,288 | ) | |||||||||||||||||||||||
Balances, December 31, 2007 | 108,352,636 | $ | 108,353 | — | $ | — | $ | 60,191,104 | $ | — | $ | (69,083,571 | ) | $ | (8,784,114 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
| Preferred Stock |
| Add’l Paid In |
| Other Equity |
| Retained |
|
|
| ||||||||||||
|
| Shares |
| Par Value |
| Shares |
| Par Value |
|
|
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balances as of beginning of development stage May 18, 2004 |
|
| 14,407,630 |
| $ | 14,407 |
|
| 3,870,000 |
| $ | 3,870 |
| $ | 14,225,974 |
| $ | — |
| $ | (11,681,500 | ) | $ | 2,562,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for compensation |
|
| 27,945,000 |
|
| 27,945 |
|
| — |
|
| — |
|
| 25,423,555 |
|
| (25,451,500 | ) |
| — |
|
| — |
|
Issued shares for services |
|
| 4,910,000 |
|
| 4,910 |
|
| — |
|
| — |
|
| 4,850,090 |
|
| (535,000 | ) |
| — |
|
| 4,320,000 |
|
Issued shares for acquisition of equipment |
|
| 15,000,000 |
|
| 15,000 |
|
| — |
|
| — |
|
| 13,485,000 |
|
| — |
|
| — |
|
| 13,500,000 |
|
Stock option expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 626,100 |
|
| (626,100 | ) |
| — |
|
| — |
|
Issued shares for cash |
|
| 242,167 |
|
| 242 |
|
| — |
|
| — |
|
| 314,575 |
|
| — |
|
| — |
|
| 314,817 |
|
Cancelled shares per cancellation agreement |
|
| (160,000 | ) |
| (160 | ) |
| — |
|
| — |
|
| (71,840 | ) |
| — |
|
| — |
|
| (72,000 | ) |
Issued shares to convert Series A preferred shares to common shares |
|
| 3,000,324 |
|
| 3,001 |
|
| (3,870,000 | ) |
| (3,870 | ) |
| 3,377,974 |
|
| — |
|
| (3,380,975 | ) |
| (3,870 | ) |
Stock based compensation |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,311,012 |
|
| — |
|
| 8,311,012 |
|
Net reclassification of derivative liabilities |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (3,347,077 | ) |
| — |
|
| — |
|
| (3,347,077 | ) |
Net loss 05/18/04 to 12/31/04 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (15,236,339 | ) |
| (15,236,339 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2004 |
|
| 65,345,121 |
| $ | 65,345 |
|
| — |
| $ | — |
| $ | 58,884,351 |
| $ | (18,301,588 | ) | $ | (30,298,814 | ) | $ | 10,349,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled shares returned from employee |
|
| (1,120,000 | ) |
| (1,120 | ) |
| — |
|
| — |
|
| (1,307,855 | ) |
| — |
|
| — |
|
| (1,308,975 | ) |
Issued shares for compensation |
|
| 140,000 |
|
| 140 |
|
| — |
|
| — |
|
| 41,860 |
|
| — |
|
| — |
|
| 42,000 |
|
Issued shares for services |
|
| 850,000 |
|
| 850 |
|
| — |
|
| — |
|
| 155,150 |
|
| — |
|
| — |
|
| 156,000 |
|
Amortize deferred compensation expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 13,222,517 |
|
| — |
|
| 13,222,517 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (27,134,865 | ) |
| (27,134,865 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2005 |
|
| 65,215,121 |
| $ | 65,215 |
|
| — |
| $ | — |
| $ | 57,773,506 |
| $ | (5,079,071 | ) | $ | (57,433,679 | ) | $ | (4,674,029 | ) |
1. A more detailed description of the Other Equity Items in this statement can be found at the end of the Statement of Shareholders’ Deficit
POWER 3 MEDICAL PRODUCTS, INC.
STATEMENT OF SHAREHOLDERS’ DEFICIT
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
| Preferred Stock |
| Add’l Paid In |
| Other Equity |
| Retained |
|
|
| ||||||||||||
|
| Shares |
| Par Value |
| Shares |
| Par Value |
|
|
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Issued shares for services |
|
| 2,449,990 |
|
| 2,449 |
|
| — |
|
| — |
|
| 311,865 |
|
| — |
|
| — |
|
| 314,314 |
|
Issued shares for cash |
|
| 2,452,746 |
|
| 2,452 |
|
| — |
|
| — |
|
| 222,548 |
|
| — |
|
| — |
|
| 225,000 |
|
Issued shares for compensation |
|
| 1,253,098 |
|
| 1,254 |
|
| — |
|
| — |
|
| 176,763 |
|
| — |
|
| — |
|
| 178,017 |
|
Adoption of FAS 123R |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (475,324 | ) |
| 475,324 |
|
| — |
|
| — |
|
Amortize deferred compensation expense |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,603,747 |
|
| — |
|
| 4,603,747 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (6,415,969 | ) |
| (6,415,969 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2006 |
|
| 71,370,955 |
| $ | 71,370 |
|
| — |
| $ | — |
| $ | 58,009,358 |
| $ | — |
| $ | (63,849,648 | ) | $ | (5,768,920 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for services |
|
| 1,810,000 |
|
| 1,810 |
|
| — |
|
| — |
|
| 282,390 |
|
| — |
|
| — |
|
| 284,200 |
|
Issued shares for conversion of debt |
|
| 22,265,224 |
|
| 22,264 |
|
| — |
|
| — |
|
| 606,412 |
|
| — |
|
| — |
|
| 628,676 |
|
Issued shares for warrants exercised |
|
| 5,270,832 |
|
| 5,272 |
|
| — |
|
| — |
|
| 336,396 |
|
| — |
|
| — |
|
| 341,668 |
|
Issued shares for cash |
|
| 7,630,625 |
|
| 7,632 |
|
| — |
|
| — |
|
| 992,818 |
|
| — |
|
| — |
|
| 1,000,450 |
|
Placement agent fees |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (58,500 | ) |
| — |
|
| — |
|
| (58,500 | ) |
Stock received |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 100 |
|
| — |
|
| — |
|
| 100 |
|
Unreturned shares |
|
| 5,000 |
|
| 5 |
|
| — |
|
| — |
|
| 4,495 |
|
| — |
|
| — |
|
| 4,500 |
|
Deemed dividend |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 17,635 |
|
| — |
|
| (17,635 | ) |
| — |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (5,216,288 | ) |
| (5,216,288 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2007 |
|
| 108,352,636 |
| $ | 108,353 |
|
| — |
| $ | — |
| $ | 60,191,104 |
| $ | — |
| $ | (69,083,571 | ) | $ | (8,784,114 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for services |
|
| 7,482,910 |
|
| 7,483 |
|
| — |
|
| — |
|
| 584,858 |
|
| — |
|
| — |
|
| 592,341 |
|
Issued shares for cash |
|
| 7,492,875 |
|
| 7,493 |
|
| — |
|
| — |
|
| 639,911 |
|
| — |
|
| — |
|
| 647,404 |
|
Issued shares for conversion of debt |
|
| 22,172,536 |
|
| 22,173 |
|
| — |
|
| — |
|
| 1,568,626 |
|
| — |
|
| — |
|
| 1,590,799 |
|
Issued shares for lawsuit settlement |
|
| 325,000 |
|
| 325 |
|
| — |
|
| — |
|
| 30,550 |
|
| — |
|
| — |
|
| 30,875 |
|
Issued shares for payables |
|
| 2,133,333 |
|
| 2,133 |
|
| — |
|
| — |
|
| 186,867 |
|
| — |
|
| — |
|
| 189,000 |
|
Stock held in escrow |
|
| 2,000,000 |
|
| 2,000 |
|
| — |
|
| — |
|
| 18,000 |
|
| (20,000 | ) |
| — |
|
| — |
|
Issued preferred shares |
|
| — |
|
| — |
|
| 1,500,000 |
|
| 1,500 |
|
| 357,000 |
|
| — |
|
| — |
|
| 358,500 |
|
Deemed dividend |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 12,071 |
|
| — |
|
| (12,071 | ) |
| — |
|
Loss on related party debt conversion |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (89,049 | ) |
| — |
|
| — |
|
| (89,049 | ) |
Common stock payable |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 123,286 |
|
| — |
|
| 123,286 |
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (136,784 | ) |
| (136,784 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2008 |
|
| 149,959,290 |
| $ | 149,960 |
|
| 1,500,000 |
| $ | 1,500 |
| $ | 63,499,938 |
| $ | 103,286 |
| $ | (69,232,426 | ) | $ | (5,477,742 | ) |
1. A more detailed description of the Other Equity Items in this statement can be found at the end of the Statement of Shareholders’ Deficit
POWER 3 MEDICAL PRODUCTS, INC.
(A Development Stage Enterprise)
STATEMENT OF SHAREHOLDERS’ DEFICIT
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
| Preferred Stock |
| Add’l Paid In |
| Other Equity |
| Retained |
|
|
| ||||||||||||
|
| Shares |
| Par Value |
| Shares |
| Par Value |
|
|
|
| Total |
| |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
BALANCE, DECEMBER 31, 2008 |
|
| 149,959,290 |
| $ | 149,960 |
|
| 1,500,000 |
| $ | 1,500 |
| $ | 63,499,938 |
| $ | 103,286 |
| $ | (69,232,426 | ) | $ | (5,477,742 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for conversion of debt |
|
| 119,956,737 |
|
| 118,756 |
|
| — |
|
| — |
|
| 2,957,229 |
|
| 8,256 |
|
| — |
|
| 3,084,241 |
|
Common stock payable |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 22,500 |
|
| — |
|
| 22,500 |
|
Issued shares upon exercise of warrants |
|
| 6,883,332 |
|
| 6,883 |
|
| — |
|
| — |
|
| 61,949 |
|
| (27,166 | ) |
| — |
|
| 41,666 |
|
Issued shares for services |
|
| 900,000 |
|
| 900 |
|
| — |
|
| — |
|
| 17,100 |
|
| — |
|
| — |
|
| 18,000 |
|
Issued shares for cash |
|
| 24,285,714 |
|
| 24,286 |
|
| — |
|
| — |
|
| 145,714 |
|
| (170,000 | ) |
| — |
|
| — |
|
Issued shares for payables |
|
| 5,619,022 |
|
| 5,620 |
|
| — |
|
| — |
|
| 92,475 |
|
| (14,286 | ) |
| — |
|
| 83,809 |
|
Stock rescinded for debt |
|
| (1,200,000 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| (8,256 | ) |
| — |
|
| (8,256 | ) |
Revaluation of stock held in escrow |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 20,000 |
|
| (20,000 | ) |
| — |
|
| — |
|
Deemed dividends |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 34,103 |
|
| — |
|
| (34,103 | ) |
| — |
|
Loss on related-party debt conversions |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (893,805 | ) |
| — |
|
| — |
|
| (893,805 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (1,876,214 | ) |
| (1,876,214 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, MARCH 31, 2009 |
|
| 306,404,095 |
| $ | 306,405 |
|
| 1,500,000 |
| $ | 1,500 |
| $ | 65,934,703 |
| $ | (105,666 | ) | $ | (71,142,743 | ) | $ | (5,005,801 | ) |
1. A more detailed description of the Other Equity Items in this statement can be found at the end of the Statement of Shareholders’ Deficit
The accompanying notes are an integral part of these financial statements.
POWER 3 MEDICAL PRODUCTS, INC.
Common Stock | Preferred Stock | Additional Paid In | Deferred Compensation | Retained | ||||||||||||||||||||||||||||
Shares | Par Value | Shares | Par Value | Capital | Expense | Earnings | Equity | |||||||||||||||||||||||||
Balances, December 31, 2007 | 108,352,636 | $ | 108,353 | — | $ | — | $ | 60,191,104 | $ | — | $ | (69,083,571 | ) | $ | (8,784,114 | ) | ||||||||||||||||
Issued shares for services | 7,082,910 | 7,083 | — | — | 569,258 | — | — | 576,341 | ||||||||||||||||||||||||
Issued shares for cash | 7,492,875 | 7,493 | — | — | 639,911 | — | — | 647,404 | ||||||||||||||||||||||||
Issued shares for conversion of debt | 22,172,536 | 22,173 | — | — | 1,676,280 | — | — | 1,698,453 | ||||||||||||||||||||||||
Issued shares for lawsuit settlement | 325,000 | 325 | — | — | 30,550 | — | — | 30,875 | ||||||||||||||||||||||||
Issued shares for payables | 1,833,333 | 1,833 | — | — | 173,167 | — | — | 175,000 | ||||||||||||||||||||||||
Stock held in escrow | 2,000,000 | 2,000 | — | — | 188,000 | — | — | 190,000 | ||||||||||||||||||||||||
Issued preferred shares | — | — | 1,500,000 | 1,500 | 357,000 | — | — | 358,500 | ||||||||||||||||||||||||
Deemed dividend | — | — | — | — | 12,071 | — | (12,071 | ) | — | |||||||||||||||||||||||
Net income | — | — | — | — | — | — | 1,030,802 | 1,030,802 | ||||||||||||||||||||||||
Balances, September 30, 2008 | 149,259,290 | $ | 149,260 | 1,500,000 | $ | 1,500 | $ | 63,837,341 | $ | — | $ | (68,064,840 | ) | $ | (4,076,739 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Deferred Compensation Expense |
| Stock Held in Escrow |
| Common Stock Payable |
| Treasury Stock |
| Subscriptions Receivable |
| Total Other Equity Items |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balances as of beginning of development stage May 18, 2004 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for compensation |
|
| (25,451,500 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| (25,451,500 | ) |
Issued shares for services |
|
| (535,000 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| (535,000 | ) |
Stock option expense |
|
| (626,100 | ) |
| — |
|
| — |
|
| — |
|
| — |
|
| (626,100 | ) |
Issued shares for cash |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
Stock based compensation |
|
| 8,311,012 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 8,311,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2004 |
| $ | (18,301,588 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (18,301,588 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortize deferred compensation expense |
|
| 13,222,517 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 13,222,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2005 |
| $ | (5,079,071 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | (5,079,071 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adoption of FAS 123R |
|
| 475,324 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 475,324 |
|
Amortize deferred compensation expense |
|
| 4,603,747 |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,603,747 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2006 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2007 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock held in escrow |
|
| — |
|
| (20,000 | ) |
| — |
|
| — |
|
| — |
|
| (20,000 | ) |
Common stock payable |
|
| — |
|
| — |
|
| 123,286 |
|
| — |
|
| — |
|
| 123,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, DECEMBER 31, 2008 |
| $ | — |
| $ | (20,000 | ) | $ | 123,286 |
| $ | — |
| $ | — |
| $ | 103,286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued shares for conversion of debt |
|
| — |
|
| — |
|
| — |
|
| 8,256 |
|
| — |
|
| 8,256 |
|
Common stock payable |
|
| — |
|
| — |
|
| 22,500 |
|
| — |
|
| — |
|
| 22,500 |
|
Issued shares upon exercise of warrants |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (27,166 | ) |
| (27,166 | ) |
Issued shares for cash |
|
| — |
|
| — |
|
| — |
|
| — |
|
| (170,000 | ) |
| (170,000 | ) |
Issued shares for payables |
|
| — |
|
| — |
|
| (14,286 | ) |
| — |
|
| — |
|
| (14,286 | ) |
Stock rescinded for debt |
|
| — |
|
| — |
|
| — |
|
| (8,256 | ) |
| — |
|
| (8,256 | ) |
Revaluation of stock held in escrow |
|
| — |
|
| (20,000 | ) |
| — |
|
| — |
|
| — |
|
| (20,000 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, MARCH 31, 2009 |
| $ | — |
| $ | (40,000 | ) | $ | 131,500 |
| $ | — |
| $ | (197,166 | ) | $ | (105,666 | ) |
The accompanying notes are an integral part of these financial statements.
POWER 3 MEDICAL PRODUCTS, INC.
September 30, 2008 | September 30, 2007 (restated) | Period from May 18, 2004 through September 30, 2008 | ||||||||||
Operating Activities: | ||||||||||||
Net income (loss) | $ | 1,030,802 | $ | (4,808,892 | ) | $ | (52,972,661 | ) | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||||||
Gain on conversion of financial instruments | (380,400 | ) | (1,565,892 | ) | (1,924,974 | ) | ||||||
Impairment of goodwill | — | — | 13,371,776 | |||||||||
Impairment of intangible assets | — | — | 179,788 | |||||||||
Loss on previously capitalized lease | — | — | 34,243 | |||||||||
Amortization of debt discounts and deferred finance costs | 774,238 | 1,795,921 | 3,300,980 | |||||||||
Change in derivative liability, net of bifurcation | (3,656,122 | ) | 2,071,614 | (5,110,084 | ) | |||||||
Stock based compensation | 576,341 | 236,200 | 33,232,386 | |||||||||
Stock issued for settlement of lawsuit | 30,875 | — | 30,875 | |||||||||
Depreciation expense | 1,744 | 13,212 | 100,704 | |||||||||
Other non cash items | — | — | (34,933 | ) | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Prepaid expenses and other current assets | (14,384 | ) | (14,508 | ) | 155,553 | |||||||
Accounts payable and other liabilities | 343,470 | 516,468 | 2,958,278 | |||||||||
Net cash used in operating activities | (1,293,436 | ) | (1,755,877 | ) | (6,678,069 | ) | ||||||
Investing Activities: | ||||||||||||
Capital expenditures, net | (2,797 | ) | (1,984 | ) | (141,800 | ) | ||||||
Increase in other assets | — | — | (179,786 | ) | ||||||||
Net cash used in investing activities | (2,797 | ) | (1,984 | ) | (321,586 | ) | ||||||
Financing Activities: | ||||||||||||
Proceeds from sale of common stock | 647,404 | 650,000 | 2,264,171 | |||||||||
Borrowings on notes payable related party | 45,000 | 107,770 | 75,376 | |||||||||
Borrowings on notes payable | 600,000 | 875,000 | 3,628,430 | |||||||||
Principal payments on notes payable related party | (30,000 | ) | (17,300 | ) | (47,300 | ) | ||||||
Principal payments on notes payable | (90,000 | ) | (20,000 | ) | (122,478 | ) | ||||||
Proceeds from CD, warrants and rights net of issuance cost | — | 306,667 | 1,200,710 | |||||||||
Net cash provided by financing activities | 1,172,404 | 1,902,137 | 6,998,909 | |||||||||
Net change in cash and cash equivalents | (123,829 | ) | 144,276 | (746 | ) | |||||||
Cash and cash equivalents, beginning of period | 125,679 | 40,602 | 2,596 | |||||||||
Cash and cash equivalents, end of period | $ | 1,850 | $ | 184,878 | $ | 1,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period from May 18, 2004 to March 31, 2009 |
| |||||
|
| Three Months Ended March 31, |
|
| ||||||
|
| 2009 |
| 2008 |
|
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
Net income/(loss) |
| $ | (1,876,214 | ) | $ | 1,221,182 |
| $ | (56,016,461 | ) |
Adjustments to reconcile net income/(loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
Gain/(loss) on conversion of financial instruments |
|
| 854,988 |
|
| — |
|
| (1,151,256 | ) |
Impairment of goodwill |
|
| — |
|
| — |
|
| 13,371,776 |
|
Impairment of intangible assets |
|
| — |
|
| — |
|
| 179,788 |
|
Loss on previously capitalized lease |
|
| — |
|
| — |
|
| 34,243 |
|
Amortization of debt discounts and deferred finance costs |
|
| 146,532 |
|
| 327,200 |
|
| 3,871,962 |
|
Change in derivative liability, net of bifurcation |
|
| 746,344 |
|
| (2,168,616 | ) |
| (5,122,728 | ) |
Stock based compensation |
|
| 69,071 |
|
| 250 |
|
| 33,439,743 |
|
Debt issued for compensation and services |
|
| — |
|
| — |
|
| 1,028,927 |
|
Stock issued for settlement of lawsuit |
|
| — |
|
| 30,875 |
|
| 30,875 |
|
Depreciation expense |
|
| 6,253 |
|
| 548 |
|
| 107,507 |
|
Other non cash items |
|
| — |
|
| (17,875 | ) |
| (34,933 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| — |
|
| 2,793 |
|
| 186,084 |
|
Inventory |
|
| — |
|
| — |
|
| 16,602 |
|
Accounts payable and other liabilities |
|
| (4,075 | ) |
| 4,577 |
|
| 3,169,133 |
|
|
|
|
|
| ||||||
Net cash used in operating activities |
|
| (57,101 | ) |
| (599,066 | ) |
| (6,888,738 | ) |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
Capital expenditures, net |
|
| — |
|
| (2,798 | ) |
| (141,750 | ) |
Increase in other assets |
|
| — |
|
| — |
|
| (179,786 | ) |
|
|
|
|
| ||||||
Net cash used in investing activities |
|
| — |
|
| (2,798 | ) |
| (321,536 | ) |
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of common stock |
|
| 41,666 |
|
| 489,910 |
|
| 2,305,837 |
|
Borrowings on notes payable related party |
|
| 8,256 - |
|
| — |
|
| 83,632 |
|
Borrowings on notes payable |
|
| 20,000 |
|
| — |
|
| 3,808,430 |
|
Principal payments on notes payable related party |
|
| — |
|
| — |
|
| (47,300 | ) |
Principal payments on notes payable |
|
| — |
|
| — |
|
| (122,478 | ) |
Proceeds from CD, warrants and rights net of issuance cost |
|
| — |
|
| 1,200,709 |
|
|
|
|
|
|
|
|
| ||||||
Net cash provided by financing activities |
|
| 69,922 |
|
| 489,910 |
|
| 7,228,830 |
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and equivalents |
| $ | 12,821 |
| $ | (111,954 | ) | $ | 18,556 |
|
Cash and equivalents, beginning of period |
| $ | 8,331 |
| $ | 125,679 |
| $ | 2,596 |
|
Cash and equivalents, end of period |
| $ | 21,152 |
| $ | 13,725 |
| $ | 21,152 |
|
The accompanying notes are an integral part of these financial statements.
POWER 3 MEDICAL PRODUCTS, INC.
September 30, 2008 | September 30, 2007 (restated) | Period from May 18, 2004 through September 30, 2008 | ||||||||||
Supplemental disclosures of cash flow information | ||||||||||||
Cash paid for: | ||||||||||||
Interest | $ | — | $ | — | $ | 59,840 | ||||||
Income taxes | $ | — | $ | — | $ | — | ||||||
Non-cash transactions | ||||||||||||
Restatement of notes payable to notes payable related parties | $ | — | $ | — | $ | 1,393,346 | ||||||
Exchange of convertible notes for stock | $ | 1,995,894 | $ | 2,156,937 | $ | 3,555,698 | ||||||
Stock issued for settlement of payables | $ | 175,000 | $ | — | $ | 181,697 | ||||||
Deemed dividend | $ | 12,071 | $ | 17,635 | $ | 29,706 | ||||||
Exchange of convertible preferred stock for common stock | $ | — | $ | — | $ | 3,380,975 | ||||||
Preferred stock issued for payables | $ | 360,000 | $ | — | $ | 360,000 | ||||||
Stock held in escrow | $ | 190,000 | $ | — | $ | 190,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Period from May 18, 2004 to March 31, 2009 |
| |||
|
| Three Months Ended March 31, |
|
| ||||||
|
| 2009 |
| 2008 |
|
| ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ | — |
| $ | — |
| $ | 59,840 |
|
Cash paid for income taxes |
| $ | — |
| $ | — |
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
|
|
Stock for conversion of debt, related party |
| $ | 661,101 |
| $ | — |
| $ | 1,676,034 |
|
Stock for subscriptions receivable |
| $ | 170,000 |
| $ | — |
| $ | 170,000 |
|
Warrants exercised for subscriptions receivable |
| $ | 27,166 |
| $ | — |
| $ | 27,166 |
|
Stock for common stock payable |
| $ | 14,286 |
| $ | — |
| $ | 14,286 |
|
Exchange of debt, related party |
| $ | — |
| $ | — |
| $ | 214,075 |
|
Exchange of convertible notes for stock |
| $ | — |
| $ | 342,400 |
| $ | 2,525,070 |
|
Stock issued in settlement of payables |
| $ | 55,238 |
| $ | — |
| $ | 250,935 |
|
Deemed dividend |
| $ | 34,103 |
| $ | 12,071 |
| $ | 63,809 |
|
Exchange of convertible preferred stock for common stock |
| $ | — |
| $ | — |
| $ | 3,380,975 |
|
Preferred stock issued for payables |
| $ | — |
| $ | — |
| $ | 358,500 |
|
Stock held in escrow |
| $ | 20,000 |
| $ | 120,000 |
| $ | 40,000 |
|
The accompanying notes are an integral part of these financial statements.
POWER 3 MEDICAL PRODUCTS, INC.
Net Income (Numerator) | Shares (Denominator) | Per-Share Amount | ||||||||||
For the three month period ended September 30, 2008 | ||||||||||||
Net Income | $ | 819,414 | ||||||||||
Basic EPS | ||||||||||||
Income available to common stockholders | $ | 819,414 | 146,637,986 | $ | 0.01 | |||||||
Effective Dilutive EPS * | ||||||||||||
Income available to common stockholders | $ | 819,414 | 148,543,647 | $ | 0.01 | |||||||
For the nine month period ended September 30, 2008 | ||||||||||||
Net Income | $ | 1,030,802 | ||||||||||
Basic EPS | ||||||||||||
Income available to common stockholders | $ | 1,018,731 | 130,055,978 | $ | 0.01 | |||||||
Effective Dilutive EPS * | ||||||||||||
Income available to common stockholders | $ | 1,018,731 | 136,364,780 | $ | 0.01 |
Exercise Price | Number Of Shares Issuable | Proceeds | ||||||
For the three month period ended September 30, 2008 | ||||||||
$ 0.03 | 1,666,667 | $ | 41,667 | |||||
0.06 | 9,200,000 | 552,000 | ||||||
0.08 | — | — | ||||||
0.09 | — | — | ||||||
10,866,667 | $ | 593,667 | ||||||
For the nine month period ended September 30, 2008 | ||||||||
$ 0.03 | 1,666,667 | $ | 41,667 | |||||
0.06 | 9,200,000 | 552,000 | ||||||
0.08 | 12,845,829 | 1,027,666 | ||||||
0.09 | 833,333 | 75,000 | ||||||
24,545,829 | $ | 1,696,333 |
Convertible Debentures: | As of September 30, 2008 | As of December 31, 2007 | |||||
Securities Purchase Agreement Holders | $ | 115,010 | $ | 515,010 | |||
Discount | — | (86,844 | ) | ||||
Note 3: | |||||||
Chosid | — | 200,000 | |||||
Wood | — | 120,000 | |||||
Seyburn | 100,000 | 100,000 | |||||
Discount on Note 3 | — | (210,417 | ) | ||||
Note 4: | |||||||
NeoGenomics | 200,000 | 200,000 | |||||
Discount on Note 4 | (146,757 | ) | (192,559 | ) | |||
Note 5: | |||||||
Able Income Fund | 200,000 | — | |||||
Discount on Note 5 | (116,808 | ) | — | ||||
Note 6: | |||||||
Able Income Fund | 250,000 | — | |||||
Discount on Note 5 | (61,841 | ) | — | ||||
Totals | $ | 539,604 | $ | 645,190 |
Derivative Liabilities: | September 30, 2008 | December 31, 2007 | ||||||
Common stock warrants | $ | 147,443 | $ | 1,563,183 | ||||
Embedded conversion feature | 468,103 | 1,205,719 | ||||||
Additional investment rights | — | 642,792 | ||||||
Other derivative instruments | 32,637 | 382,611 | ||||||
$ | 648,183 | $ | 3,794,305 |
As of September 30, 2008 | As of December 31, 2007 | |||||||
Notes payable in default: | ||||||||
Cordillera I | $ | 251,000 | $ | 251,000 | ||||
Cordillera II | $ | 200,000 | $ | 200,000 | ||||
Totals | $ | 451,000 | $ | 451,000 | ||||
Notes payable: | ||||||||
Kazanowski | $ | 80,000 | $ | 50,000 | ||||
Discount on Kazanowski note | (28,687 | ) | — | |||||
Kraniak | $ | 30,000 | $ | — | ||||
Discount on Kraniak note | $ | (28,687 | ) | $ | — | |||
$ | 52,626 | $ | 50,000 | |||||
Notes payable - related parties: | ||||||||
Rash | $ | 15,000 | $ | 924,456 | ||||
Goldknopf | $ | 975,360 | $ | 975,360 | ||||
Rosinski | $ | 35,000 | $ | 35,000 | ||||
1,025,360 | 1,934,816 | |||||||
Totals | $ | 1,528,986 | $ | 2,435,816 |
NOTE 4. OTHER SIGNIFICANT EQUITY TRANSACTIONS
Following is a summary of the unaudited restatement adjustments:Information Regarding Forward-Looking Statements
As Reported (unaudited) | Adjustment | As Restated (unaudited) | ||||||||
ASSETS | ||||||||||
CURRENT ASSETS | ||||||||||
Cash and Cash Equivalents | $ | 184,878 | $ | — | $ | 184,878 | ||||
Other Current Assets | 900 | — | 900 | |||||||
TOTAL CURRENT ASSETS | 185,778 | — | 185,778 | |||||||
OTHER ASSETS | ||||||||||
Deferred Finance Costs, net of amortization | 166,511 | — | 166,511 | |||||||
Intellectual Property | 179,788 | — | 179,788 | |||||||
Furniture, Fixtures and Equipment, net of accumulated depreciation | 5,146 | — | 5,146 | |||||||
Deposits | 19,508 | — | 19,508 | |||||||
TOTAL ASSETS | $ | 556,731 | — | $ | 556,731 | |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||
CURRENT LIABILITIES | ||||||||||
Accounts Payable | $ | 970,948 | — | $ | 970,948 | |||||
Notes Payable – in default | 601,000 | — | 601,000 | |||||||
Notes Payable to Related Parties | 1,784,816 | — | 1,784,816 | |||||||
Convertible Debentures-in default, net of amortization | 423,386 | (40,038 | ) (a) | 383,348 | ||||||
Other Current Liabilities | 1,017,744 | 181,934 | (b) | 1,199,678 | ||||||
Derivative Liabilities | 3,720,990 | 689,751 | (a) | 4,410,741 | ||||||
TOTAL LIABILITIES | 8,518,884 | 831,647 | 9,350,531 | |||||||
STOCKHOLDERS’ DEFICIT | ||||||||||
Preferred Stock | — | — | — | |||||||
Common Stock | 102,741 | — | 102,741 | |||||||
Additional Paid-In Capital | 60,831,214 | (1,051,580 | ) (c) | 59,779,634 | ||||||
Deficit Accumulated Before Entering Development Stage | (11,681,500 | ) | — | (11,681,500 | ) | |||||
Deficit Accumulated During Development Stage | (57,214,608 | ) | 219,933 | (d) | (56,994,675 | ) | ||||
TOTAL STOCKHOLDERS’ DEFICIT | (7,962,153 | ) | (831,647 | ) | (8,793,800 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ | ||||||||||
DEFICIT | $ | 556,731 | — | $ | 556,731 |
For the three months ended September 30, 2007 SUMMARY STATEMENT OF OPERATIONS | Three Months Ended September 30, 2007 | Three Months Ended September 30, 2007 | ||||||||
(unaudited) | As Reported (unaudited) | Adjustments (unaudited) | As Restated (unaudited) | |||||||
REVENUE | ||||||||||
Sales | $ | — | $ | — | $ | — | ||||
Total revenue | — | — | — | |||||||
OPERATING EXPENSES | ||||||||||
Employee compensation and benefits | 341,146 | 834 | (a) | 341,980 | ||||||
Professional and consulting fees | 169,112 | (315,947 | ) (a) | (146,835 | ) | |||||
Occupancy and equipment | 53,654 | (5,331 | ) (a) | 48,323 | ||||||
Travel and entertainment | 26,796 | — | 26,796 | |||||||
Other selling, general and administrative expenses | 10,158 | 583,927 | (a) | 594,085 | ||||||
Total operating expenses | 600,866 | 263,483 | 864,349 | |||||||
LOSS FROM OPERATIONS | (600,866 | ) | (263,483 | ) | (864,349 | ) | ||||
OTHER INCOME AND (EXPENSE) | ||||||||||
Derivative gain | 2,169,466 | 2,775,772 | (b) | 4,945,238 | ||||||
Interest income | 1,533 | — | 1,533 | |||||||
Mandatory prepayment penalty | 230,900 | (230,900 | ) (c) | — | ||||||
Other expense | 531,062 | (132,745 | ) (a) | 398,317 | ||||||
Loss on conversion of financial instruments | (442,373 | ) | 915,251 | (b) | 472,878 | |||||
Interest expense | (48,244 | ) | (664,434 | ) (b) | (712,678 | ) | ||||
Total other income | 2,442,344 | 2,662,944 | 5,105,288 | |||||||
NET INCOME | $ | 1,841,478 | $ | 2,399,461 | $ | 4,240,939 | ||||
NET INCOME PER SHARE BASIC AND DILUTED | $ | 0.02 | $ | 0.02 | $ | 0.04 | ||||
Weighted average number of shares outstanding | 83,793,113 | 14,140,420 | 97,933,533 |
For the nine months ended September 30, 2007 SUMMARY STATEMENT OF OPERATIONS | Nine Months Ended September 30, 2007 | Nine Months Ended September 30, 2007 | ||||||||
(unaudited) | As Reported (unaudited) | Adjustments (unaudited) | As Restated (unaudited) | |||||||
REVENUE | ||||||||||
Sales | $ | 121,724 | $ | — | $ | 121,724 | ||||
Total Revenue | 121,724 | — | 121,724 | |||||||
OPERATING EXPENSES | ||||||||||
Employee compensation and benefits | 927,709 | — | 927,709 | |||||||
Professional and consulting fees | 550,896 | (114,947 | ) (a) | 435,949 | ||||||
Occupancy and equipment | 128,036 | (8,532 | ) (b) | 119,504 | ||||||
Travel and entertainment | 87,541 | — | 87,541 | |||||||
Other selling, general and administrative expenses | 99,881 | 587,129 | (c) | 687,010 | ||||||
Total operating expenses | 1,794,063 | 463,650 | 2,257,713 | |||||||
LOSS FROM OPERATIONS | (1,672,339 | ) | (463,650 | ) | (2,135,989 | ) | ||||
OTHER INCOME AND (EXPENSE) | ||||||||||
Derivative gain (loss) | (1,639,641 | ) | (431,973 | ) (d) | (2,071,614 | ) | ||||
Interest income | 4,645 | — | 4,645 | |||||||
Mandatory prepayment penalty | 230,900 | (230,900 | ) (e) | — | ||||||
Gain on conversion of financial instruments | (840,244 | ) | 2,406,136 | (c) | 1,565,892 | |||||
Interest expense | (1,129,780 | ) | (1,042,046 | ) (d) | (2,171,826 | ) | ||||
Total other income (expense) | (3,374,120 | ) | 701,217 | (2,672,903 | ) | |||||
NET LOSS | $ | (5,046,459 | ) | $ | 237,567 | $ | (4,808,892 | ) | ||
NET LOSS PER SHARE BASIC AND DILUTED | $ | (0.06 | ) | $ | (0.00 | ) | $ | (0.06 | ) | |
Weighted average number of shares outstanding | 84,773,848 | — | 84,773,848 |
This report contains “forward-looking statements”. Allforward-looking statements other than statements of historical fact are “forward-looking statements” for purposes of federalthat involve risks and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include theuncertainties. We generally use words such as “believe,” “may,” “could,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate”“anticipate,” “plan,” and other similar words.
History
Power3 Medical Products, Inc hasInc. was incorporated in New York in May 1993. We have been a development stage company since May 2004, with our primary business activities focused on the development of our intellectual property assets in the area of diagnoses for breast cancer, ALS, Alzheimer’s disease and Parkinson’s disease. In September 2008, Steven B. Rash, our Chief Executive Officer and Chairman of the Board at the time, resigned formfrom all of his positions with us. Ira L. Goldknopf, our sole remaining director and Chief Scientific Officer, was appointed as President and interimInterim Chairman of the Board. Helen R. Park was appointed Interim Chief Executive Officer. Under the direction of our restructured management team, we implemented a new strategy focusing on commercialization of our intellectual property assets, with less emphasis on research and development. In connection with our new focus, and in an effort to preserve cash and reduce operating costs, we reduced the amount of space we occupied and implemented a reduction in force.
Prior to May 2004, we were engaged in product development, sales, distribution and services for the healthcare industry. We transitioned to being a development stage company on May 18, 2004, when we completed the acquisition of certain intellectual property assets from Advanced Bio/Chem, Inc. and began focusing on research and development relating to those assets. On September 12, 2003, we completed a one-for-fifty reverse stock split and changed our name from Surgical Safety Products, Inc. to
NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of Power3 Medical Products, Inc.
Use of Estimates
The preparation of financial statements in conformity with results from additional protein chemistry analysis to identify the specific protein biomarker. This processgenerally accepted accounting principles requires a great deal of experience and expertise in protein biochemistrymanagement to make an accurate identification. This isestimates and assumptions that affect the most critical finding for scalabilityreported amounts of Power3’s diagnostic tests. The Company delivers significant discoveries, exhibiting validated, reproducible,assets and reliable biomarkers, over a broad quantitative rangeliabilities and linearity which translates into usable diagnostic assays.
Blood serum collection is a routine procedure performed by a clinician. A small sample of blood is drawn from a vein, the serum separated and collected, then frozen and transported to the Power3 Medical CLIA certified laboratory, utilizing pre-approved carriers/delivery services, where sample preparation and analysis begins.
General and administrative | $ | 1,800,000 | ||
Patent filings and intellectual property | 100,000 | |||
Capital expenditures and research agreements | 650,000 | |||
Total | $ | 2,550,000 |
Power3 valued the conversion features in their convertible notes using a lattice valuation model, with the assistance of a valuation consultant. The lattice model values the embedded derivatives based on a probability weighted discounted cash flow model. This model is based on future projections of the five primary alternatives possible for settlement of the features included within the embedded derivative, including: (1) payments are made in cash, (2) payments are made in stock, (3) the holder exercises its right to convert the debentures, (4) Power3 exercises its right to convert the debentures and (5) Power3 defaults on the debentures. Power3 uses the model to analyze (a) the underlying economic factors that influence which of these events will occur, (b) when they are likely to occur, and (c) the common stock price and specific terms of the debentures such as interest rate and conversion price that will be in effect when they occur. Based on the analysis of these factors, Power3 uses the model to develop a set of potential scenarios. Probabilities of each scenario occurring during the remaining term of the debentures are determined based on management'smanagement’s projections. These probabilities are used to create a cash flow projection over the term of the debentures and determine the probability that the projected cash flow will be achieved. A discounted weighted average cash flow for each scenario is then calculated and compared to the discounted cash flow of the debentures without the compound embedded derivative in order to determine a value for the compound embedded derivative.
Black−Scholes Valuation Model
Power3 uses the Black−Scholes pricing model to determine the fair values of its warrants. The model uses market sourced inputs such as interest rates, stock prices, and option volatilities, the selection of which requires management'smanagement’s judgment, and which may impact net income or loss. In particular, Power3 uses volatility rates based upon the closing stock price of Power3’s common stock. Power3 uses a risk free interest rate which is the U.S. Treasury bill rate for a security with a maturity that approximates the estimated expected life of the derivative or security.
Net Loss Per Share
Basic and diluted net loss per share calculations are calculated on the basis of the weighted average number of common shares outstanding during the year. The per share amounts include the dilutive effect of common stock equivalents in years with net income. Basic and diluted loss per share is the same for the three months ended March 31, 2009 and 2008 as the effect of our potential common stock equivalents would be anti-dilutive.
Stock Based Compensation
Effective January 1, 2006, Power3 began recording compensation expense associated with stock options and other forms of equity compensation in accordance with Statement of Financial Accounting Standards (SFAS) 123R, “Share−Based Payment,” as interpreted by SEC Staff Accounting Bulletin No. 107. Prior to January 1, 2006, Power3 had accounted for stock options according to the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, and therefore no related compensation expense was recorded for awards granted with no intrinsic value. Power3 adopted the modified prospective transition method provided for under SFAS 123R, and, consequently, has not retroactively adjusted results from prior periods.
Stock issued to employees is recorded at the fair value of the shares granted based upon the closing market price of Power3’s stock at the measurement date and recognized as compensation expense over the applicable requisite service period. Warrants granted to non-employees are recorded at the estimated fair value of the options granted using the Black-Scholes pricing model and recognized as general and administrative expense over the applicable requisite service period.
As of March 31, 2009, the Company has not granted options to employees.
All of the Company’s accounting policies are not included in this Form 10-Q. A more comprehensive set of accounting policies adopted by the Company are included in our Form 10-K as of December 31, 2008 and are herein incorporated by reference.
Recent Accounting Pronouncements
Power3 does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.
NOTE 3 – GOING CONCERN
As shown in the accompanying financial statements, Power3 incurred net loss chargeable to common shareholders of $1,910,317 for the three months ended March 31, 2009 and has total accumulated deficits of $71,142,743 as of that date. These conditions create an uncertainty as to Power3’s ability to continue as a going concern. Management is trying to raise additional capital through various funding arrangements. If the Company is unable to successfully obtain additional financing, it will not have sufficient cash to continue operations. As of March 31, 2009, the Company had $21,152 in cash and cash equivalents. The Company needs additional capital immediately to fund its liquidity requirements. The Company is seeking between $3 million and $5 million in new financing during 2009. The Company believes that $3 million is the minimum amount of financing it needs to repay existing obligations and to continue funding its new business strategy for at least 12 months following the date of this report. The Company will need to raise additional funds from either one or a combination of additional financings or otherwise obtain capital, in order to satisfy its future liquidity requirements. The financial statements do not include any adjustment that might be necessary if Power3 is unable to continue as a going concern.
NOTE 4 – OTHER CURRENT LIABILITIES
Other liabilities and accrued expenses consisted of the following at March 31, 2009 and December 31, 2008:
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|
|
| 03/31/09 |
| 12/31/08 |
| ||
|
|
|
| ||||
Accrued rent |
|
| 17,854 |
|
| 28,566 |
|
Accrued interest |
|
| 319,727 |
|
| 335,033 |
|
Prepayment penalty |
|
| 25,000 |
|
| 25,000 |
|
Accrued payroll taxes |
|
| 20,870 |
|
| 44,347 |
|
Accrued liabilities |
|
| 10,939 |
|
| 33,575 |
|
Salaries payable |
|
| 145,965 |
|
| 150,965 |
|
Totals |
| $ | 540,355 |
| $ | 617,486 |
|
NOTE 5 – RELATED PARTY TRANSACTIONS
As is more fully explained in Note 7 to these financial statements, we issued 46,910,896 common shares to our President, Chief Scientific Officer and Interim Board Chairman to retire a portion of his convertible note in the amount of $1,097,940 and accrued interest.
Also as is more fully explained in Note 7, we issued 9,571,429 common shares to our Interim Chief Executive Officer to retire a convertible note in the amount of $150,000 and accrued interest.
Also as is more fully explained in Note 7, we received 1,200,000 shares of common stock from our President, Chief Scientific Officer and Interim Board Chairman in exchange for a one-year convertible note payable to him in the amount of $8,256 with interest payable at 12% and warrants to purchase 1,200,000 shares at $0.04 per share. The note itself is convertible into 1,200,000 shares of common stock (or $0.00688 per share).
NOTE 6 – OTHER COMMITMENTS AND CONTINGENCIES
A summary of our commitments and contingencies can be found in Note 8 to the financial statements filed on Form 10-K as of December 31, 2008.
There have been no changes to these commitments and contingencies since the filing of that report.
NOTE 7 - EQUITY
We are authorized to issue up to 600 million shares of $0.001 voting common stock and up to 50 million shares of $0.01 par value preferred stock.
Capital Stock Transactions
We began 2009 with 149,959,290 shares issued and outstanding. During the three months ended March 31, 2009, we undertook the following with our common stock:
On January 13, 2009, we received 1,200,000 shares of common stock from our President, Chief Scientific Officer and Interim Board Chairman in exchange for a one-year convertible note payable to him in the amount of $8,256 with interest payable at 12% and warrants to purchase 1,200,000 shares at $0.04 per share. The note itself is convertible into 1,200,000 shares of common stock (or $0.00688 per share).
On January 20, 2009, we issued 1,200,000 common shares to Able Income Fund, LLC (“Able”) to convert $8,256 of our obligation to them into equity. We recorded a loss of $3,744 upon conversion.
On February 20, 2009, we issued 14,117,270 common shares to Able to convert $130,000 of our obligation to them into equity. We recorded a loss of $22,345 upon conversion.
On March 2, 2009, the board granted a holder of 300,000 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.98 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.018; Exercise price of options: $0.98 (old) and $0.01 (new); option term: 0.25 years, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $3,895. The exercise entitles the Company to receive $3,000 in cash. As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.
Also on March 2, 2009, we issued 12,680,952 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301. Per the terms of the conversion feature of the note, the principal balance was convertible into 9,166,667 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $218,738.
Also on March 2, 2009 we issued 11,428,571 shares to an accredited investor for a subscription of $80,000. At March 31, 2009, the subscription remains unpaid by the investor.
Also on March 2, 2009, we issued 12,085,714 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301. Per the terms of the conversion feature of the note, the principal balance was convertible into 9,166,667 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $206,833.
Also on March 2, 2009 we issued 12,857,143 shares to an accredited investor for a subscription of $90,000. At March 31, 2009, the subscription remains unpaid by the investor.
Also on March 2, 2009, we issued 13,390,476 common shares to retire a convertible note in the amount of $340,000 and accrued interest of $13,973. Per the terms of the conversion feature of the note, the principal balance was convertible into 11,333,333 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $224,685.
Also on March 2, 2009, we issued 1,428,572 common shares to an accredited investor who subscribed to our common stock during 2008. We credited capital in the amount of $14,286 and retired the liability at December 31, 2008 which was included in “Common Stock Payable”. This investor was issued an additional 1,428,572 shares on that date which we recorded at the fair market value on the grant date, crediting capital in the amount of $25,714 and charging “Loss on Settlement of Debt”.
Also on March 2, 2009, we issued 46,910,896 common shares to our President, Chief Scientific Officer and Interim Board Chairman to retire a portion of his convertible note in the amount of $1,097,940 and accrued interest. Per the terms of the conversion feature of the note, the principal balance was convertible into 36,598,000 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $725,628 which was recorded as a reduction of Additional Paid In Capital.
Also on March 2, 2009, we issued 9,571,429 common shares to retire a convertible note to our Interim Chief Executive Officer in the amount of $150,000 and accrued interest of $5,819. Per the terms of the conversion feature of the note, the principal balance was convertible into 5,000,000 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $168,127 which was recorded as a reduction of Additional Paid In Capital.
On March 13, 2009, we issued 2,761,878 common shares to a vendor to settle outstanding invoices of $59,047. We recorded these shares at the fair value on the grant date, $0.019 per share, or $52,476 and included the resulting $6,571 gain as a reduction of “Gain on Settlement of Debt”.
On March 17, 2009, the board granted a holder of 3,333,333 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.10 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.018; Exercise price of options: $0.10 (old) and $0.01 (new); option term: 1 year, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $17,191. We received cash of $33,333 upon exercise.
On March 17, 2009, the board granted a holder of 416,666 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.08 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.022; Exercise price of options: $0.08 (old) and $0.01 (new); option term: 0.66 years, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $2,702. The exercise entitles the Company to receive $4,166 in cash. As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.
On March 20, 2009, we issued 900,000 shares to a consultant pursuant to a consulting agreement. We valued the shares on the grant date and included $18,000 of professional fees in “Other selling, general and administrative expenses”.
On March 16, 2009, we issued 10,000,000 common shares to retire a convertible note in the amount of $100,000 and accrued interest of $14,345. Per the terms of the conversion feature of the note, the principal balance was convertible into 1,111,111 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $178,643.
On March 16, 2009, the board granted a holder of 833,333 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.09 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.02; Exercise price of options: $0.09 (old) and $0.01 (new); option term: 1 year, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $4,053. We received cash of $8,333 upon exercise.
On March 17, 2009, the board granted a holder of 2,000,000 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.10 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock
price on measurement date: $0.02; Exercise price of options: $0.10 (old) and $0.01 (new); option term: 1 year, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $10,315. The exercise entitles the Company to receive $20,000 in cash. As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.
Options and Warrants
Potentially dilutive securities outstanding at December 31, 2008, first quarter 2009 activity, and balances at March 31, 2009 is as follows:
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| Activity During 2009 |
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Weighted Avg. Years Remaining Until Expiry |
| Weighted Average Exercise Price |
| Options and Warrants Outstanding 12/31/08 |
| New Grants |
| Exercised |
| Expired |
| Options and Warrants Outstanding 3/31/09 |
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<1 |
| $ | 0.20 |
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| 2,195,832 |
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| — |
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| 300,000 |
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| — |
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| 1,895,832 |
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1 |
| $ | 0.11 |
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| 12,883,330 |
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| — |
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| 6,583,332 |
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| — |
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| 6,299,998 |
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2 |
| $ | 0.10 |
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| 11,510,766 |
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| — |
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| — |
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| — |
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| 11,510,766 |
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3 |
| $ | 0.05 |
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| 49,978,482 |
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| 1,200,000 |
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| — |
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| — |
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| 51,178,482 |
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4 |
| $ | 0.25 |
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| 1,000,000 |
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| — |
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| — |
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| — |
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| 1,000,000 |
| |||||
5 |
| $ | 0.14 |
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| 1,000,000 |
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| — |
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| — |
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| — |
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| 1,000,000 |
| |||||
6 |
| $ | 0.06 |
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| 8,000,000 |
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| — |
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| — |
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| — |
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| 8,000,000 |
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N/A (1) |
| $ | 1.00 |
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| 100,000 |
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| — |
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| — |
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| — |
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| 100,000 |
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Totals |
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|
| 86,668,410 |
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| 1,200,000 |
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| 6,883,332 |
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| — |
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| 80,985,078 |
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(1) 100,000 warrants were issued in June, 2004 which remain exercisable at $1 so long as the individuals remain on the Company’s Scientific Advisory Board. As of the date of this report, the individuals remain on this board.
NOTE 8 – FINANCING ARRANGEMENTS AND DERIVATIVE LIABILITIES
New Borrowings
During the three months ended March 31, 2009, we received $20,000 in cash from two existing creditors. These amounts were appended to their already-existing 12% notes due September 8, 2009.
Derivative Liabilities
Our derivative liabilities increased from $1,352,247 at December 31, 2008 to $2,098,591 at March 31, 2009.
Many of our warrants contain a reset provision which was triggered when we reduced the strike price during March 2009. The amount of increase in liabilities due to these reset features was $116,147.
The following tabular presentation reflects the components of derivative financial instruments on the Company’s balance sheet at March 31, 2009 and December 31, 2008:
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| March 31, 2009 |
| December 31, 2008 |
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Common stock warrants |
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| 1,476,495 |
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| 554,637 |
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Embedded conversion features |
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| 622,076 |
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| 778,178 |
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Other derivative instruments |
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| — |
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| 19,432 |
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Total |
| $ | 2,098,571 |
| $ | 1,352,247 |
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NOTE 9 – TRANSGENOMIC DEFINITIVE AGREEMENT
On January 23, 2009, the Company executed a definitive Collaboration and Exclusive License agreement with Transgenomic, Inc. The License Agreement grants Transgenomic exclusive rights in the United States and certain other countries to the Company’s proprietary test kits or systems for performing Neurodegenerative Diagnostic Tests, for which the Company will receive an up-front license execution fee, certain milestone fees, including fees payable in cash, fees payable in shares of Transgenomic common stock, and royalties based upon net sales of the Company’s tests, test kits or systems by Transgenomic.
The License Agreement also provides for Transgenomic to fund the Company’s activities relating to the clinical validation of its Neurodegenerative Diagnostic Tests. Funds for such activities will be provided by Transgenomic through a separate bank account pursuant to a Disbursement Control Agreement. The Company is obligated to cooperate with Transgenomic during the period of continued development and to provide Transgenomic with plans, budgets and reports regarding the progress of the Company’s development activities. Transgenomic has the right to assume the clinical validation activities, with notice and a cure period, under certain circumstances.
The License Agreement has an infinite life and provides for each party to maintain the confidentiality of the other party’s confidential information, and to not make any public announcement concerning the transactions contemplated by the License Agreement without the consent of the other party. The License Agreement also contains other covenants and indemnification provisions that are typical for license agreements entered into by companies in connection with similar licensing transactions.
During the three months ended March 31, 2009, we recorded revenues of $132,766 relating to this agreement which includes the $100,000 up-front license execution fee.
NOTE 10 – SUBSEQUENT EVENTS
Subsequent to March 31, 2009, we issued 19,800,728 unrestricted shares to contractors for services and 7,333,333 of restricted shares for liabilities owed at March 31, 2009. The shares were valued based on our closing stock price on the date of grant.
ITEM 2- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including: any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. “Forward-looking statements” may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect,” “plan” or “anticipate” and other similar words.
Although we believe that the expectations reflected in our “forward-looking statements” are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any “forward-looking statements”, are subject to change and to inherent risks and uncertainties, such as those disclosed in this report. In light of the significant uncertainties inherent in the “forward-looking statements” included in this report, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Except for its ongoing obligation to disclose material information as required by the federal securities laws, we do not intend, and undertake no obligation, to update any “forward-looking statement”. Accordingly, the reader should not rely on “forward-looking statements”, because they are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by the “forward-looking statements”.
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited financial statements, including the notes to those financial statements, included elsewhere in this report.
The information contained below is subject to the “Risk Factors” and other risks detailed in Our Annual Report on Form 10-K for our fiscal year ended December 31, 2008 and our other reports filed with the Securities and Exchange Commission. We urge you to review carefully the section “Risk Factors” included in our Annual Report on Form 10-K for our fiscal year ended December 31, 2008 for a more complete discussion of the risks associated with an investment in our securities.
Overview
Power3 Medical Products, Inc. has been a development stage company since May 2004, with our primary business activities focused on the development of our intellectual property assets in the area of diagnoses for breast cancer, ALS, Alzheimer’s disease and Parkinson’s disease. In September 2008, Steven B. Rash, our then Chief Executive Officer and Chairman of the Board, resigned from all of his positions with us. Ira L. Goldknopf, our sole remaining director and Chief Scientific Officer, was appointed as President and Interim Chairman of the Board. Helen R. Park was appointed Interim Chief Executive Officer. Under the direction of our restructured management team, we implemented a new strategy focusing on commercialization of our intellectual property assets, with less emphasis on research and development. In connection with our new focus, and in an effort to preserve cash and reduce operating costs, we reduced the amount of space we occupied and implemented a reduction in force.
Prior to May 2004, we were engaged in product development, sales, distribution and services for the healthcare industry. We transitioned to being a development stage company on May 18, 2004, when we completed the acquisition of certain intellectual property assets from Advanced Bio/Chem, Inc. and began focusing on research and development relating to those assets. On September 12, 2003, we completed a one-for-fifty reverse stock split and changed our name from Surgical Safety Products, Inc. to Power3 Medical Products, Inc.
Results of Operations
Revenues
We had our first substantial influx of revenues resulting from our January 2009 license agreement with Transgenomic, Inc. Total revenues were $132,766. We had no revenues in the same period in 2008.
Operating Expenses
Employee compensation was reduced from $283,921 for the three months ended March 31, 2008 to $17,557 for the same period in 2009 as we replaced our employees with contractors and significantly reduced headcount. Professional and consulting fees, mostly resulting from costs associated with our statutory filings, were substantially unchanged from 2008; $85,698 for the three months ended March 31, 2008 versus $80,817 for the same period in 2009. Occupancy and equipment is also substantially reduced due to our scaling back of our office space in 2009. Travel and entertainment was reduced from $56,456 to just $729 for the three months ended March 31, 2008 and 2009, respectively, reflecting a more scaled back operation from that in 2008. Similarly, general and administrative expenses were reduced from $107,173 to $88,004 from 2008 to 2009.
Other Income and Expense
The upward change in the derivative liabilities resulted mostly from an increase in our stock price from December 31, 2008 to March 31, 2009. Our change in derivative liabilities caused a corresponding expense of $746,344 for the three months ended March 31, 2009 versus a gain of $2,168,616 for the same period in 2008. Additionally, we had $883,734 in losses on conversion of certain debt instruments to equity as a result of our attempt to reduce the Company’s debt load. For the same period in 2008, we had no such gain or loss. Interest expense was significantly reduced from $388,616 for the three months ended March 31, 2008 to $177,096 for the same period in 2009, owing to the above-mentioned reduction in debt and elimination of debt discounts on their conversion.
Deemed Dividends
Certain of our warrants were re-priced during the three months ended March 31, 2009, resulting in a deemed dividend charged to common stockholders of $34,103. For the same period in 2008, we had $12,071 of such deemed dividends.
Net Income/ (Loss)
Our net loss attributable to common shareholders for the three months ended March 31, 2009 was $1,910,317 versus net income of $1,209,111 available to common shareholders for the same period in 2008 due to the factors listed above, most notably, the change in value of derivative liabilities resulting from the change in our stock price.
Liquidity and Capital Resources
Our liquidity and capital needs relate primarily to working capital, development and other general corporate requirements. Although we have recorded our first significant revenues from our January 2009 contract with Transgenomic. Inc., we have not yet generated any net positive cash from operations. We have an immediate need for capital to continue our current operations, and in addition, are seeking additional capital from research grants, collaboration agreements, and other strategic alliances.
Net cash used in operating activities amounted to $57,101 for the three months ended March 31, 2009, compared to $599,066 for the three months ended March 31, 2008. The change in net cash used in operating activities during 2009 was primarily due to changes in the fair value of derivative liabilities, and net income for the three months ended March 31, 2009 compared to the same period in 2008.
Net cash provided by financing activities was $69,922 for the three months ended March 31, 2009, as compared to $489,910 for the three months ended March 31, 2008. The decrease in cash provided by financing activities during 2009 is due to a reduction in the sale of our common stock.
As of March 31, 2009, our principal source of liquidity was $21,152 in cash.
Plan of Operation and Cash Requirements
We currently have few operating revenues from product sales or the performance of services and it continues to experience net operating losses. We are actively pursuing third party licensing agreements, collaboration agreements, distribution agreements and similar business arrangements in order to establish an adequate revenue base utilizing its capabilities in disease diagnosis based on protein and biomarker identification, and drug resistance in the areas of cancers, neurodegenerative and neuromuscular diseases. We have undertaken clinical validation studies to demonstrate the diagnostic capabilities of its technologies. However, there can be no assurances when revenue-generating agreements will result in continuous revenue streams.
Our goal over the next several months is to complete Phase II of our testing of our Alzheimer’s and Parkinson’s Disease clinical trials with Transgenomic, Inc. We hope to commercialize these tests in the third or fourth quarter of 2009.
We are currently seeking grants and financing to fund our operation through the point of commercialization. We expect to incur costs of approximately $900,000 to that point. There is no guarantee that we can raise the required capital to fund our operation, or that our products, once commercialized, will generate adequate revenues to sustain our operation.
Off Balance Sheet Arrangements
At March 31, 2009, our only off balance sheet agreements in place for were a lease in effect for its office space, leases in effect for phone equipment, leases in effect for lab equipment and employment agreements entered with two principal officers.
Item 3. Quantitative and Qualitative Disclosures About Market RiskITEM 3 - QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and Chief Accounting Officer have evaluatedwith the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the Company’sour disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) under the Exchange Act)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered byin this report, on Form 10-Q. Based upon such evaluation, the Chief Executive Officer and Chief Accounting Officer have concluded that, as of the end of such period, the Company’sour disclosure controls and procedures were not effective asto ensure that information required under Rules 13a-15(e) and 15d-15(e)to be disclosed in reports filed under the Securities Exchange Act. This conclusionAct of 1934 is based uponrecorded, processed, summarized and reported within the numberrequired time periods and magnitudeis accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the year end and quarterly adjusting entriescontrol system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the continued existencebenefits of controls must be considered relative to their costs. Due to the deficiencies noted below.
Because of these material weaknesses, management has concluded that we did not maintain effective internal control over financial reporting atas of December 31, 2007. Based2008, based on this evaluation, management concluded that the Company’scriteria established in “Internal Control-Integrated Framework” issued by the COSO.
Change In Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting was not effective as of December 31, 2007. For the ninethat occurred during three months ended September 30, 2008 management concludedMarch 31, 2009 that the following three deficiencies previously identified inhave materially affected, or are reasonably likely to materially affect, our control process still exist:
PART II
Item 1. Legal ProceedingsITEM 1 – LEGAL PROCEEDINGS
Except for the Company by KForce regarding an employment fee adjudicatednew lawsuit in December 2003which we were recently named described in the statenext paragraph, a summary of Florida againstthese proceedings can be found in Note 8 to the Company,financial statements filed on Form 10-K/A as of December 31, 2008. There have been no material changes in these proceedings since that report was filed.
During the three months ended March 31, 2009, we were served with a lawsuit inWoodlands Road Utility versus Power 3 Medical Products, Inc. in Montgomery County, Precinct 3 alleging personal property taxes owed in the amount of $15,873, together with $4,735 inapproximately $4,000 plus interest. Power3 doesThe pre-trial conference was set for May 20, 2009. Management believes that, since the personal property was not agree with the Foreign Judgment and is attempting to resolve the issue prior to enforcement. No resolution has been achieved on this issue at this time; however, the Company is endeavoring to resolve the petition. This debt is not recorded in accounts payableowned by the Company because it is the Company’s position that the judgment should never have been entered against Power3, but rather against a different corporate entity, not related to Power3 in any way. The Company’s attorney in this matter feels that no loss is probable, nor will the Company be obligated to pay any sums whatsoever on this matter. The Company has pled improper party and expects to be vacated from the suit since it does not apply to the Company. Power3 has counterclaimed KForce for frivolous claims.
ITEM 1A – RISK FACTORS
Not applicable.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES
On January 13, 2009, we issued a convertible promissory note and warrants to Ira L. Goldknopf, our President, Chief Scientific Officer and sole director. We issued Dr. Goldknopf a note in the original principal amount of Equity$8,256, which is convertible into 1,200,000 shares of our common stock, and warrants to purchase an aggregate of 1,200,000 shares of our common stock for $0.04 per share. The note was issued in exchange for 1,200,000 shares of our common stock held by Dr. Goldknopf. The note, the warrant and the shares of our common stock issuable upon conversion of the note and the warrant, was offered and sold to Dr. Goldknopf without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and Usein reliance on similar exemptions under applicable state laws for exchanges of Proceeds
In January and February of 2009, we issued a total of 15,117,270 shares of our common stock to Able Income Fund, LLC, a holder of our convertible debentures, upon the nine months ended September 30, 2008,conversion of $138,256 in principal and accrued interest of those convertible debentures. The issuance of the Companycommon stock upon conversion of the convertible debentures was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 1, 2009, we granted an existing security holder warrants to purchase 300,000 shares of our common stock for $0.01 per share in exchange for warrants to purchase an equal number of shares for $0.04 per share and the holder’s agreement to exercise the new warrants for cash. The grant of the warrants in exchange for the existing warrants was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 2, 2009, we issued 7,492,875 unregistereda total of 36,671,428 shares of our common stock to three existing security holders, upon the conversion of $928,683 in principal and accrued interest of convertible promissory notes. The issuance of the common stock upon conversion of the convertible notes was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 2, 2009, we also issued a total of 46,910,896 shares of our common stock to Ira L. Goldknopf, our President, Chief Scientific Officer and sole director, upon conversion of $1,144,415 in principal and accrued interest of a convertible promissory note. The issuance of the common stock upon conversion of the convertible note was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 2, 2009, we also issued a total of 9,571,429 shares of our common stock to Bronco Technology, Inc., an affiliate of Helen R. Park, our interim Chief Executive Officer, upon conversion of $155,171 in principal and accrued interest of a convertible promissory note. The issuance of the common stock upon conversion of the convertible note was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 13, we issued 2,761,878 shares of our common stock to a vendor who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, in payment of outstanding invoices of $59,047. The offers and sales were made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws. No general solicitation or general advertising was used in connection with the offering of the shares. We disclosed to the vendor that the shares of common stock could not be sold unless they are registered under the Securities Act or unless an exemption from registration is available.
On March 16, 2009, we issued 10,000,000 shares of our common stock in exchange for cash proceeds$117,459 of $647,404. Proceedsprincipal and accrued interest of a non-convertible promissory note. The issuance of the common stock upon conversion of the convertible note was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 16 and 17 of 2009, we granted four existing security holders warrants to purchase a total 6,683,332 shares of our common stock for $0.01 per share in exchange for warrants to purchase an equal number of shares for $0.03 per share and the holders’ agreement to exercise the new warrants for cash. We then issued a total of 6,683,332 shares of our common stock to those existing security holders upon the exercise of the new warrants. The grant of the new warrants in exchange for the existing warrants, and the issuance of the shares of our common stock upon exercise of those warrants, was exempt from registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 3(9) of the Securities Act and in reliance on similar exemptions under applicable state laws for exchanges of securities with existing security holders.
On March 20, we issued 900,000 shares of our common stock to a consultant who we reasonably believe is an “accredited investor,” as such term is defined in Rule 501 under the Securities Act, in payment of $19,800 in professional fees we owed to such consultant. The offers and sales were made without registration under the Securities Act, or the securities laws of certain states, in reliance on the exemptions provided by Section 4(2) of the Securities Act and Regulation D under the Securities Act and in reliance on similar exemptions under applicable state laws. No general solicitation or general advertising was used in connection with the offering of the shares. We disclosed to fund operations.
On January 13, 2009, we received 1,200,000 shares of common stock from our President, Chief Scientific Officer and Interim Board Chairman in exchange for a one-year convertible note payable to him in the amount of $8,256 with interest payable at 12% and warrants to purchase 1,200,000 shares at $0.04 per share. The note itself is convertible into 1,200,000 shares of common stock (or $0.00688 per share).
On January 20, 2009, we issued 1,200,000 common shares to Able Income Fund, LLC (“Able”) to convert $8,256 of our obligation to them into equity. We recorded a loss of $3,744 upon conversion.
On February 20, 2009, we issued 14,117,270 common shares to Able to convert $130,000 of our obligation to them into equity. We recorded a loss of $22,345 upon conversion.
On March 2, 2009, the board granted a holder of 300,000 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.98 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.018; Exercise price of options: $0.98 (old) and $0.01 (new); option term: 0.25 years, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $3,895. The exercise entitles the Company to receive $3,000 in cash. As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.
Also on March 2, 2009, we issued 12,680,952 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301. Per the terms of the conversion feature of the note, the principal balance was convertible into 9,166,667 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $218,738.
Also on March 2, 2009 we issued 11,428,571 shares to an accredited investor for a subscription of $80,000. At March 31, 2009, the subscription remains unpaid by the investor.
Also on March 2, 2009, we issued 12,085,714 common shares to retire a convertible note in the amount of $275,000 and accrued interest of $11,301. Per the terms of the conversion feature of the note, the principal balance was convertible into 9,166,667 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $206,833.
Also on March 2, 2009 we issued 12,857,143 shares to an accredited investor for a subscription of $90,000. At March 31, 2009, the subscription remains unpaid by the investor.
Also on March 2, 2009, we issued 13,390,476 common shares to retire a convertible note in the amount of $340,000 and accrued interest of $13,973. Per the terms of the conversion feature of the note, the principal balance was convertible into 11,333,333 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $224,685.
Also on March 2, 2009, we issued 1,428,572 common shares to an accredited investor who subscribed to our common stock during 2008. We credited capital in the amount of $14,286 and retired the liability at December 31, 2008 which was included in “Common Stock Payable”. This investor was issued an additional 1,428,572 shares on that date which we recorded at the fair market value on the grant date, crediting capital in the amount of $25,714 and charging “Loss on Settlement of Debt”.
Also on March 2, 2009, we issued 46,910,896 common shares to our President, Chief Scientific Officer and Interim Board Chairman to retire a portion of his convertible note in the amount of $1,097,940 and accrued interest. Per the terms of the conversion feature of the note, the principal balance was convertible into 36,598,000 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $725,628 which was recorded as a reduction of Additional Paid In Capital.
Also on March 2, 2009, we issued 9,571,429 common shares to retire a convertible note to our Interim Chief Executive Officer in the amount of $150,000 and accrued interest of $5,819. Per the terms of the conversion feature of the note, the principal balance was convertible into 5,000,000 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $168,127 which was recorded as a reduction of Additional Paid In Capital.
On March 13, 2009, we issued 2,761,878 common shares to a vendor to settle outstanding invoices of $59,047. We recorded these shares at the fair value on the grant date, $0.019 per share, or $52,476 and included the resulting $6,571 gain as a reduction of “Gain on Settlement of Debt”.
On March 17, 2009, the board granted a holder of 3,333,333 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.10 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.018; Exercise price of options: $0.10 (old) and $0.01 (new); option term: 1 year, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $17,191. We received cash of $33,333 upon exercise.
On March 17, 2009, the board granted a holder of 416,666 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.08 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.022; Exercise price of options: $0.08 (old) and $0.01 (new); option term: 0.66 years, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $2,702. The exercise entitles the Company to receive $4,166 in cash. As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.
On March 20, 2009, we issued 900,000 shares to a consultant pursuant to a consulting agreement. We valued the shares on the grant date and included $18,000 of professional fees in “Other selling, general and administrative expenses”.
On March 16, 2009, we issued 10,000,000 common shares to retire a convertible note in the amount of $100,000 and accrued interest of $14,345. Per the terms of the conversion feature of the note, the principal balance was convertible into 1,111,111 shares. The excess of the shares issued were to retire accrued interest. We recorded a loss on conversion of $178,643.
On March 16, 2009, the board granted a holder of 833,333 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.09 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.02; Exercise price of options: $0.09 (old) and $0.01 (new); option term: 1 year, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $4,053. We received cash of $8,333 upon exercise.
On March 17, 2009, the board granted a holder of 2,000,000 warrants to purchase common stock a revision in the terms of the warrants from an exercise price of $0.10 to an exercise price of $0.01. Pursuant to FASB 123 (revised 2004),Share-Based Payments, we revalued these warrants using the old and new warrant terms and deemed the difference in value a dividend. Variables used in the calculation were: stock price on measurement date: $0.02; Exercise price of options: $0.10 (old) and $0.01 (new); option term: 1 year, discount rate: 0.28% and computed volatility: 256.59%. We deemed this revaluation as a dividend in the amount of $10,315. The exercise entitles the Company to receive $20,000 in cash. As of the date of this report, the amount is still receivable and is included in equity on the balance sheet under “Common stock subscriptions receivable”.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
In April 2009, we were declared in default underin the provisionspayment of its October 2004 Securities Purchase Agreement,principal and accompanying registration rights agreement and debentures.interest with respect to our 6% Convertible Debenture, in the aggregate principal amount of $200,000, held by NeoGenomics, Inc. The default stems from the Company’s inability to obtain effectivenessamount of the registration statement on Form SB-2,total arrearage as amended (File No. 333-122227) filed pursuant to the registration rights agreement. The registration statement was withdrawn on June 20, 2007. As of the nine months ended September 30, 2008, the Company has settled with a numberdate of its Convertible Debenture Holders as previously mentioned above.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On January 26, 2009, we held a special meeting of Mattersour shareholders to consider and vote upon a Voteproposal to approve and adopt an amendment to our Certificate of Security Holders
ITEM 5 – OTHER INFORMATION
None.
ITEM 6 – EXHIBITS
Exhibit No. | INDEX TO EXHIBITS | |||
3.7* | Certificate of | |||
31.1* | ||||
Certification of Power3 Medical Products, Inc. | ||||
31.2* | ||||
Certification of Power3 Medical Products, Inc. Chief | ||||
32.1* | ||||
Certification of Power3 Medical Products, Inc. | ||||
32.2* | ||||
Certification of Power3 Medical Products, Inc. John Ginzler, Chief |
* Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the requirements of theSecurities Exchange Act of 1934, the registrant caused this report has beento be signed on its behalf by the following persons in the capacities and on the dates indicated.
Power 3 Medical Products, Inc. | |||||
Date: May 20, 2009 | By: | /s/ Helen Park | |||
Helen | |||||
Interim Chief Executive Officer | |||||
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