UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 June 30, 2009
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ___________ to____________
Commission File Number: 000-28629
| REVOLUTIONS MEDICAL CORPORATION |
| (Name of Registrant as specified in its charter) |
| | | |
| | | |
| NEVADA | | 73-1526138 |
| (State or other jurisdiction of incorporation) | | (IRS Employer Identification No.) |
| | | |
| | | |
2073 SHELL RING CIRCLE MT. PLEASANT, SC 29466 |
| (Address of principal executive offices and Zip Code) |
| |
| |
| (843) 971-4848 |
| (Registrant's telephone number, including area code) |
Copies to:
Joseph M. Lucosky, Esq.
Anslow & Jaclin, LLP
195 Rt. 9 South, 2nd Floor
Manalapan, NJ, 07726
Tel No.: (732) 409-1212
Fax No.: (732) 577-1188
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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 filer o | Accelerated filer o | Non-accelerated filer o | 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).
As of August 14, 2009, there were 30,431,813 shares outstanding of the Issuer's common stock.
TABLE OF CONTENTS
| PART I. | FINANCIAL INFORMATION | |
| | | | |
| | ITEM 1. | FINANCIAL STATEMENTS | |
| | | | |
| | | Consolidated Balance Sheets | 3 |
| | | | |
| | | Consolidated Statements of Operations | 4 |
| | | | |
| | | Consolidated Statements of Cash Flows | 5 |
| | | | |
| | | Notes to Consolidated Financial Statements | 7 |
| | | | |
| | ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 14 |
| | | | |
| | ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 16 |
| | | | |
| | ITEM 4. | CONTROLS AND PROCEDURES | 16 |
| | | | |
| PART II. | OTHER INFORMATION | |
| | | | |
| | ITEM 1. | LEGAL PROCEEDINGS | 17 |
| | | | |
| | ITEM 1A. | RISK FACTORS | 17 |
| | | | |
| | ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 17 |
| | | | |
| | ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 17 |
| | | | |
| | ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 17 |
| | | | |
| | ITEM 5. | OTHER INFORMATION | 17 |
| | | | |
| | ITEM 6. | EXHIBITS | 17 |
REVOLUTIONS MEDICAL CORPORATION
(A Development Stage Company)
BALANCE SHEET
June 30, 2009
(Unaudited)
ASSETS
| | | 6/30/09 | | | 12/31/08 | |
| | | | | | | |
| CURRENT ASSETS | | | | | | |
| Cash | | $ | 1,205 | | | $ | 4,796 | |
| Other assets | | | 4,395 | | | | -- | |
| Goodwill | | | 23,276 | | | | 23,276 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 28,876 | | | $ | 28,072 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 224,389 | | | $ | 466,683 | |
| Accrued Salaries | | | 711,449 | | | | 1,158,103 | |
| Notes Payable and Accrued Interest | | | -- | | | | 143,429 | |
| Total current liabilities | | | 935,838 | | | | 1,768,215 | |
| | | | | | | | | |
| Total liabilities | | | 935,838 | | | | 1,768,215 | |
| | | | | | | | | |
| SHAREHOLDERS' DEFICIENCY | | | | | | | | |
| Preferred stock, $0.001 par value, | | | | | | | | |
| 5,000,000 shares authorized; 1,000,000 shares issued and outstanding | | | 1,000 | | | | 1,000 | |
| Common stock, $0.001 par value, | | | | | | | | |
| 250,000,000 shares authorized; 31,378,641 and 26,883,195 | | | | | | | | |
| shares issued and outstanding at 6/30/09 and 12/31/08, respectively | | | 31,379 | | | | 26,883 | |
| Paid in capital | | | 21,298,602 | | | | 18,769,691 | |
| Deficit accumulated during the development stage | | | (22,237,943 | ) | | | (20,537,717 | ) |
| Total shareholders' deficiency | | | (906,962 | ) | | | (1,740,143 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY | | $ | 28,876 | | | $ | 28,072 | |
The accompanying notes are an integral part of the interim financial statements
REVOLUTIONS MEDICAL CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From Inception (August 16, 1996) Through June 30, 2009 and
For The Six Months Ended June 30, 2009 and 2008
(Unaudited)
| | | FROM INCEPTION | | | | | | | |
| | | (AUGUST 16, 1996) | | | SIX MONTHS | | | SIX MONTHS | |
| | | THROUGH | | | ENDED | | | ENDED | |
| | | JUNE 30, 2009 | | | JUNE 30, 2009 | | | JUNE 30, 2008 | |
| | | | | | | | | | |
| Investment Income | | $ | 170,753 | | | $ | -- | | | $ | -- | |
| Other Income | | | 3,857 | | | | -- | | | | -- | |
| | | | 174,610 | | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| EXPENSES | | | | | | | | | | | | |
| Research and development | | | 2,438,056 | | | | 155,000 | | | | 8,000 | |
| Purchased R&D | | | 3,309,515 | | | | -- | | | | -- | |
| General and administrative | | | 14,497,447 | | | | (70,317 | ) | | | 132,856 | |
| Total operating expenses | | | 20,245,018 | | | | 84,683 | | | | 355,147 | |
| | | | | | | | | | | | | |
| Operating income (loss) | | | (20,070,408 | ) | | | (84,683 | ) | | | (355,147 | ) |
| | | | | | | | | | | | | |
| Interest income | | | 17,276 | | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| Interest expense | | | 122,297 | | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| Gain on disposal of assets | | | 794 | | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| Gain on extinguishment of debt | | | (152,914 | ) | | | (163,312 | ) | | | 1,434 | |
| | | | | | | | | | | | | |
| Depreciation and amortization | | | 75,536 | | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| Compensation cost for options | | | 2,018,280 | | | | 1,452,231 | | | | -- | |
| | | | | | | | | | | | | |
| Net loss before minority interest | | | (22,421,365 | ) | | | (1,700,226 | ) | | | (353,713 | ) |
| | | | | | | | | | | | | |
| Minority Interest in Subsidiary Loss | | | (183,422 | ) | | | -- | | | | (34,243 | ) |
| | | | | | | | | | | | | |
| Net loss from operations | | $ | (22,237,943 | ) | | $ | (1,700,226 | ) | | $ | (319,470 | ) |
| | | | | | | | | | | | | |
| Weighted average shares outstanding | | | 36,885,305 | | | | 29,571,163 | | | | 19,422,405 | |
| | | | | | | | | | | | | |
| Net loss per share (Note 1) | | $ | (0.60 | ) | | $ | (0.06 | ) | | $ | (0.02 | ) |
The accompanying notes are an integral part of the interim financial statements
REVOLUTIONS MEDICAL CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From Inception (August 16, 1996) Through June 30, 2009 and
For The Six Months Ended June 30, 2009 and 2008
(Unaudited)
| | | FROM INCEPTION | | | | | | | |
| | | (AUGUST 16, 1996) | | | SIX MONTHS | | | SIX MONTHS | |
| | | THROUGH | | | ENDED | | | ENDED | |
| | | JUNE 30, 2009 | | | JUNE 30, 2009 | | | JUNE 30, 2008 | |
| | | | | | | | | | |
| OPERATING ACTIVITIES | | | | | | | | | |
| Loss from operations before minority interest | | $ | (22,237,943 | ) | | $ | (1,700,226 | ) | | $ | (353,713 | ) |
| Plus non-cash charges to earnings | | | | | | | | | | | | |
| Stock compensation expense | | | 2,018,280 | | | | 1,452,231 | | | | -- | |
| Depreciation and amortization | | | 75,525 | | | | -- | | | | -- | |
| Purchase R&D - Clear Image | | | 3,309,515 | | | | -- | | | | -- | |
| Common stock issued for services | | | 4,240,369 | | | | 623,041 | | | | -- | |
| Preferred stock issued for services | | | 20,000 | | | | -- | | | | -- | |
| Expenses paid by third parties | | | 57,134 | | | | -- | | | | -- | |
| Contribution of services by officer and employees | | | 799,154 | | | | -- | | | | -- | |
| Services by officer and employees paid for with non-cash consideration | | | 167,500 | | | | -- | | | | -- | |
| Compensation cost for option price reduction | | | 50,000 | | | | -- | | | | -- | |
| Amortization of compensation cost for options granted | | | | | | | | | | | | |
| to non-employees and common stock issued for services | | | 1,775,577 | | | | -- | | | | -- | |
| Allowance for doubtful accounts | | | 50,900 | | | | -- | | | | -- | |
| Gain on extinguishment of debt | | | (10,398 | ) | | | -- | | | | (1,434 | ) |
| Write-off of Notes Receivable | | | 14,636 | | | | -- | | | | -- | |
| Write-off of Notes Payable | | | (8,239 | ) | | | -- | | | | (8,239 | ) |
| Write-off of organizational costs | | | 3,196 | | | | -- | | | | -- | |
| Write-off of zero value investments | | | 785,418 | | | | -- | | | | -- | |
| Write-off of leasehold improvements and computer equipment | | | 2,006 | | | | -- | | | | -- | |
| Compensation costs for stock options and warrants granted to non-employees | | | 1,205,015 | | | | -- | | | | -- | |
| Change in working capital accounts: | | | | | | | | | | | | |
| (Increase) decrease in receivables from related parties | | | (68,900 | ) | | | -- | | | | -- | |
| Increase in other assets | | | (4,395 | ) | | | (4,395 | ) | | | -- | |
| (Increase) decrease in goodwill | | | (23,276 | ) | | | -- | | | | -- | |
| (Increase) decrease in other receivables | | | (176,577 | ) | | | -- | | | | -- | |
| Increase (decrease) in accrued salaries and consulting | | | 486,398 | | | | (446,653 | ) | | | 90,161 | |
| Increase (decrease) in accrued interest | | | 91,177 | | | | -- | | | | -- | |
| Increase (decrease) in accounts payable and accrued liabilities | | | 1,315,935 | | | | (242,294 | ) | | | (26,060 | ) |
| Total operating activities | | | (6,061,993 | ) | | | (318,296 | ) | | | (299,285 | ) |
| | | | | | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | | | | | |
| Purchase of equipment | | | (67,042 | ) | | | -- | | | | -- | |
| Investment in syringe patent development | | | (10,000 | ) | | | -- | | | | -- | |
| Investment in Ives Health Company | | | (251,997 | ) | | | -- | | | | -- | |
| Investment in The Health Club | | | (10,000 | ) | | | -- | | | | -- | |
| Total investing activities | | | (339,039 | ) | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | | | | | |
| Loans from shareholders | | | 13,907 | | | | -- | | | | -- | |
| Repayment of loans from shareholders | | | (8,005 | ) | | | -- | | | | -- | |
| Repayments of Promissory Notes | | | 47,325 | | | | (143,429 | ) | | | -- | |
| Common stock subscribed | | | 34,000 | | | | -- | | | | -- | |
| Sale of preferred stock for cash: | | | (1,000 | ) | | | -- | | | | -- | |
| Sale of common stock for cash: | | | | | | | | | | | | |
| To third-party investors (prior to merger) | | | 574,477 | | | | -- | | | | -- | |
| To third-party investors | | | 4,016,001 | | | | 10,134 | | | | 117,205 | |
| From exercise of stock options | | | 1,770,418 | | | | 448,001 | | | | 230,166 | |
| Less: Issue Costs | | | (102,318 | ) | | | -- | | | | -- | |
| Convertible debentures issued for cash | | | 355,000 | | | | -- | | | | -- | |
| Payment of exclusive license note payable | | | (100,000 | ) | | | -- | | | | -- | |
| Total financing activities | | | 6,599,805 | | | | 314,706 | | | | 347,371 | |
| | | | | | | | | | | | | |
| Minority interest | | | (197,567 | ) | | | -- | | | | (34,243 | ) |
| | | | | | | | | | | | | |
| Change in cash | | | 1,206 | | | | (3,590 | ) | | | 13,843 | |
| Cash at beginning of period | | | -- | | | | 4,796 | | | | 2,398 | |
| | | | | | | | | | | | | |
| Cash at end of period | | $ | 1,206 | | | $ | 1,206 | | | $ | 16,241 | |
Continued
REVOLUTIONS MEDICAL CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS, Continued
From Inception (August 16, 1996) Through June 30, 2009 and
For The Six Months Ended June 30, 2009 and 2008
(Unaudited)
| | | FROM INCEPTION | | | | | | | |
| | | (AUGUST 16, 1996) | | | SIX MONTHS | | | SIX MONTHS | |
| | | THROUGH | | | ENDED | | | ENDED | |
| | | JUNE 30, 2009 | | | JUNE 30, 2009 | | | JUNE 30, 2008 | |
| | | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | | |
| Cash paid for interest and taxes during the period | | | 57,571 | | | | -- | | | | -- | |
| | | | | | | | | | | | | |
| Non-cash financing and investing activities: | | | | | | | | | | | | |
| Acquisition of Color MRI Technology | | | 3,309,515 | | | | -- | | | | -- | |
| Investment in Globe Joint Venture | | | (637,566 | ) | | | -- | | | | -- | |
| Common stock issued to founders | | | 7,000 | | | | -- | | | | -- | |
| Common stock issued in connection with merger with Cerro Mining Corporation | | | 300 | | | | -- | | | | -- | |
| 20 to 1 reverse stock split | | | 138,188 | | | | -- | | | | -- | |
| Common stock issued in Ives merger | | | 346,262 | | | | -- | | | | -- | |
| Common stock subscriptions | | | 69,800 | | | | -- | | | | -- | |
| Capitalized compensation cost for options granted | | | 1,487,700 | | | | -- | | | | -- | |
| Common stock issued in exchange for promissory note | | | 676,500 | | | | -- | | | | -- | |
| Common stock issued for payment of debt | | | 152,553 | | | | -- | | | | -- | |
| Common stock issued for convertible debentures | | | 190,660 | | | | -- | | | | -- | |
| Common stock issued for services | | | 706,663 | | | | -- | | | | -- | |
| Common stock issued to pay Ives debt | | | 27,000 | | | | -- | | | | -- | |
| Common stock issued to Clear Image shareholders under short form merger | | | 12,208 | | | | -- | | | | -- | |
The accompanying notes are an integral part of the interim financial statements
REVOLUTIONS MEDICAL CORPORATION AND SUBSIDIARY
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2009
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying interim consolidated financial statements of Revolutions Medical Corporation ("RevMed") and its partially-owned subsidiary Clear Image, Inc. ("Clear Image"), together referred to as the "Company" are unaudited; however, in the opinion of management, the interim consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the year ending December 31, 2009. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes for the year ended December 31, 2008 appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission.
Organization and Nature of Operations
Revolutions Medical Corporation, a Nevada corporation, ("RevMed" or "the Company") is principally engaged in the design and development of retractable safety needle devices intended to reduce the risk of accidental needle stick injuries among health care workers. During 2008, RevMed acquired 100% of the common stock of Clear Image, Inc., which was developing a color MRI technology. The Company now owns this technology as well. The Company has no products for sale at this time.
Development Stage Company
Since its inception in 1996, the Company has been considered a development stage enterprise for financial reporting purposes as significant efforts have been devoted to raising capital and to research and development of various safety needle devices.
Cash and Cash Equivalents
The Company considers highly liquid investments (those readily convertible to cash) purchased with original maturity dates of three months or less to be cash equivalents.
Stock-based Compensation
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"). SFAS 123R requires the recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. SFAS 123R also requires the stock option compensation expense to be recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period).
Income Taxes
The Company uses the liability method of accounting for income taxes as set forth in Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under the liability method, deferred taxes are determined based on the differences between the financial statement and tax basis of assets and liabilities at enacted tax rates in effect in the years in which the differences are expected to reverse.
Segment Information
Effective January 1, 1998, the Company adopted the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". The Company identifies its operating segments based on business activities, management responsibility and geographical location. During the period covered by these financial statements, the Company operated in a single business segment engaged in developing selected healthcare products.
Loss per Share
The Company computes net loss per share in accordance with SFAS No. 128, "Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provision of SFAS No. 128 and SAB 98 basic net loss per share is calculated by dividing net loss available to common stockholders for the period by the weighted average shares of common stock of the Company outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and common equivalent shares outstanding during the period. The calculation of fully diluted loss per share of common stock assumes the dilutive effect of stock options outstanding. During a loss period, the assumed exercise of outstanding stock options has an anti-dilutive effect. Therefore, the outstanding stock options were not included in the June 30, 2009 and 2008 calculations of loss per share.
Use of Estimates
The preparation of financial statements in conformity with accounting principals generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.
Reclassifications
Certain reclassifications may have been made to the prior year financial statements to conform to the current period presentation.
Long-Lived Assets
Property, plant and equipment, including significant improvements, are stated at cost. Expenditures for maintenance and repairs are charged to operating expenses as incurred. When properties are retired or otherwise disposed of, the cost of the asset and the related accumulated depreciation are removed from the accounts with the resulting gain or loss being reflected in results of operations.
Management assesses the recoverability of property and equipment, goodwill, trademarks and other intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from its future undiscounted cash flows. If it is determined impairment has occurred, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its estimated fair value.
New Accounting Standards
The Financial Accounting Standards Board ("FASB") periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. Management has reviewed the recently issued pronouncements and concluded that the following new accounting standards are potentially applicable to the Company.
In April 2009, the FASB issued Staff Position No. 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination that Arise from Contingencies.” The Staff Position amends SFAS No. 141(R), “Business Combinations” to require an acquirer to recognize at fair value at acquisition date an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition date fair value of that asset or liability can be determined during the measurement period. The Staff Position is effective for business combinations with an acquisition date on or after December 15, 2008. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations or cash flows.
In April 2009, the FASB issued Staff Position No. 157-4, “Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Indentifying Transactions that are not Orderly.” The Staff Position provides guidance for making fair value measurements more consistent with the principles presented in SFAS No. 157, “Fair Value Measurements.” The Staff Position relates to determining fair values when there is no active market or where the inputs being used represent distressed sales. The Staff Position is effective for interim and annual periods ending after June 15, 2009, but entities may early adopt the Staff Position for the interim and annual periods ending after March 15, 2009. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or its cash flows.
In April 2009, the FASB issued Staff Position No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” The purpose of this Staff Position is to enhance consistency in financial reporting by increasing the frequency of fair value disclosures. The Staff Position relates to assets and liabilities that are not currently disclosed on the statement of financial position at fair value. These financial instruments are currently disclosed at fair value in the notes to the financial statements on an annual basis only. This Staff Position provides for these fair value footnote disclosures to be made at interim periods, also. The Staff Position is effective for interim and annual periods ending after June 15, 2009, but entities may early adopt the Staff Position for the interim and annual periods ending after March 15, 2009. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or its cash flows.
In April 2009, the FASB issued Staff Position No. 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairment.” The purpose of this Staff Position is to bring greater consistency to the timing of impairment recognition and greater clarity regarding disclosures to investors regarding the cash flows, credit losses and aging of securities with unrealized losses. The Staff Position is effective for interim and annual periods ending after June 15, 2009, but entities may early adopt the Staff Position for the interim and annual periods ending after March 15, 2009. The Company does not expect the adoption of this standard to have a material impact on its financial position, results of operations or its cash flows.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company's financial position, results of operations or cash flows.
NOTE 2 - UNCERTAINTIES
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company is in the development stage and has not established sources of revenues to fund the development of business and pay operating expenses, resulting in a cumulative net loss of$(22,237,943) for the period from inception (August 16, 1996) to June 30, 2009. The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company's capital raising efforts to fund the development of its retractable safety syringe and its color MRI technology. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - MAXXON/GLOBE JOINT VENTURE AGREEMENT
On November 3, 2005, Maxxon and Globe Med Tech, Inc. entered into a definitive joint venture agreement to patent, develop, manufacture, market and distribute safety needle products throughout the world. Maxxon and Globe each own 50% of the joint venture. Maxxon contributed its safety syringe technology and patent rights related thereto and Globe contributed its safety syringe IV catheter and patent rights related thereto. In connection with the agreement, Maxxon issued restricted shares of its common stock, valued at $625,066, to Globe. Subsequent to December 31, 2006, the Company ended the joint venture and cancelled the shares of common stock and options that were issued to Globe pursuant to the agreement. On March 1, 2007, the Company filed a lawsuit in the District Court of Tulsa County, Oklahoma against Globe Med Tech, Inc. to rescind, terminate and seek monetary damages for the non-fulfillment and breach of a joint venture agreement entered into November 3, 2005 and other related agreements, in addition to an accounting of expenditures of funds under the terms and provisions of the agreements. On May 11, 2007, a partial default judgment against Globe was granted by the District Court of Harris County, Texas. The partial default judgment as to liability only was granted with respect to the Company's causes of action against Globe for breach of contract, conversion and common law fraud with respect to the Company's Original Petition and Application for Temporary and Permanent Injunctions against Globe on January 30, 2007. On August 13, 2007, the Company was granted a final default judgment for permanent injunctive relief and for damages in the amount of $14,029,000 against Globe. Globe has appealed the judgment. On November 23, 2007, the Court signed an order granting Globe's Motion for New Trial and setting aside the Final Default Judgment entered in favor of the Company on August 13, 2007.
On October 29, 2008, the Company filed a lawsuit in the district court of Harris county Texas, a lawsuit for fraud and contempt of court for Globe Med Tech and Andy Hu individually. In response, Globe filed a motion to stay the lawsuit based upon the forum selection clause in the joint venture agreement between RMC and Globe which provides that the exclusive forum for all disputes relating to the Joint Venture Agreement shall be Oklahoma state court/Tulsa County. Due to the Texas state district's court's backlog of cases and the withdrawal of Globe and Andy Hu's counsel, the motion to stay was not heard until May 1, 2009. The motion was granted as to Globe; however, Hu did not join in the motion and, after the May 1st hearing, filed a separate motion to stay, based upon the same grounds as Globe's motion. Hu’s motion to stay was denied at a May 8th hearing. Accordingly, the Company intends to proceed post haste with discovery with respect to its claims against Hu, including without limitation obtaining the deposition of a key witness.
NOTE 4 - OTHER COMMITMENTS AND CONTINGENCIES
Employment Agreement with Rondald Wheet, CEO
Effective March 31, 2008, the Company and Mr. Wheet, our CEO, entered into a three year employment agreement. The agreement provides for an annual salary of $225,000.As of June 30, 2009, the Company owed Mr. Wheet $57,724 pursuant to his prior employment agreement. He is responsible for the Company's substantive and financial reporting requirements of the Securities Exchange Act of 1934, as amended, and is specifically allowed to hire any and all professionals necessary to assist that process. The Company will provide him with all reasonable and customary fringe benefits, including, but not limited to, participation in pension plans, profit sharing plans, employee stock ownership plans, stock option plans (whether statutory or not), stock appreciation rights plans, hospitalization, medical dental disability and life insurance, car allowance, vacation and sick leave. The Company will reimburse all of his reasonable and necessary travel, entertainment or other related expenses incurred by him in carrying out his duties and responsibilities under the agreement. The Company will also provide him with a cell phone, suitable office space, and membership dues in professional organizations and for any seminars and conferences related to Company business.
Mr. Wheet may elect, by written notice to the Company, to terminate his employment with continued pay through the employment agreement term if (i) the Company sells all of its assets, (ii) the Company merges with another business entity with a change in control, (iii) more than 50% of the outstanding stock is acquired by a third party, (iv) the Company requires Mr. Wheet to relocate or assigns duties not commensurate with his position as CEO, (v) Mr. Wheet is removed from the Board of Directors and (vi) the Company defaults in making payments required to Mr. Wheet under this agreement. For two years following his resignation or termination, Mr. Wheet will not work for or provide any services in any capacity to any competitor and will not solicit any of the Company's customers or accounts.
Mutual Release and Settlement Agreement With Former CEO
On April 14, 2006, the Company and its former CEO entered into a mutual release and settlement agreement, pursuant to which the Company issued to the former CEO a promissory note for $203,920 (amount outstanding at December 31, 2007) and a warrant to purchase up to 12,913,239 shares of common stock at $0.001 per share on or before April 14, 2010. In addition, the mutual release and settlement provides for continued indemnification of the former CEO and mutual releases. The note, which is unsecured and is presently in default, bears interest at 18% per year as the note was due April 14, 2007. As of December 31, 2007, the Company had accrued interest payable of $91,176. The warrant is exercisable only to the extent that the number of shares of common stock exercised plus the number of shares presently owned by the warrant holder does not exceed 4.99% of the outstanding shares of Common Stock of the Company on such date. The exercise limit is revocable by the warrant holder upon 75 days prior notice to the Company. During the six months ended March 31, 2006, the former CEO exercised warrants to purchase 6,000,000 shares of common stock. The exercise price of $6,000 was paid by reducing the principal balance of the promissory note by $6,000. During 2007, the Company issued 345,662 shares of common stock upon the exercise of a warrant. The exercise price of $6,913 was paid by reducing the principal balance of the promissory note payable by the Company.
On April 8, 2008, the Company entered into a Memorandum of Understanding with its former CEO to settle this outstanding obligation through the issuance of its common stock on a quarterly basis commencing May 8, 2008 for one year. The value of the issuance of the common stock will be determined by the market value of the ten day average price following May 8, 2008 through May 18, 2008. During 2008, the Company issued 271,491 shares at a total value of $133,030 to partially repay this debt. On May 6, 2009, the Company issued 666,828 shares with a value of $306,741 to completely pay off this debt.
Amounts Due Pursuant to Employment and Consulting Agreements
The Company has accrued $711,449 pursuant to employment and consulting agreements which are in default. Although the Company plans to settle these amounts, there is no assurance that its efforts to settle will be successful. No litigation related to these agreements has been initiated or threatened. There is no assurance, however, that such litigation will not be initiated in the future.
Patent Applications for the Company's RevVac Safety Syringe
The Company owns a patent published January 2005 and a patent application was filed by the Globe/RevMed Joint Venture in September 2005 for the RevVac safety syringe. In January 2009, this second patent for the RevVac safety syringe was issued by the U.S. patent office and published in April 2009. During the quarter ended September 30, 2008, the Company filed international patent protection rights regarding the RevVac Safety Syringe in the following countries: Australia, China, Japan, Taiwan, Mexico, Canada and Europe.
Revolutions Medical Patent Applications and License to Color MRI Technology
The Company owns four (4) separate patent applications, filed September 15, 2006. There is no assurance that any patent protections will be secured. The lack of patent protection, whether foreign or domestic, could allow competitors to copy and sell products based on our designs without paying us a royalty, which could have a material adverse effect on the Company's business.
In 1996, a former subsidiary of the Company, Clear Image, Inc., acquired an exclusive license to a color MRI technology from the University of South Florida Research Foundation ("USFRF").In 2002, USFRF notified Clear Image that the license was terminated because Clear Image had not used its "best efforts", an assertion which Clear Image disputed. Although the current stage of the Company's technology uses color MRI technology, the Company believes that it is sufficiently separate from the technology licensed to it by USFRF to permit it to proceed regardless of the status of the license from USFRF. The Company believes that its color MRI technology does not rely on the license; however, the legal implications are uncertain. There is no assurance that this 2002 dispute with USFRF will not recur.
AMOUNTS DUE TO CONSULTANTS
During the year ended December 31, 2008, the Company entered into a commitment with a third party who would obtain the breast biopsy and needle localization technology. The Company has paid $30,000 as of June 30, 2009, and expects to pay another $210,000 by the end of the second quarter.
NOTE 5 - PREFERRED STOCK AND COMMON STOCK TRANSACTIONS
SERIES 2006 PREFERRED STOCK
The Company has authorized 5,000,000 shares of its Series 2006 preferred stock, of which 1,000,000 shares are outstanding. All 1,000,000 outstanding shares of Series 2006 preferred stock are owned by Rondald L. Wheet, our Chairman, President and CEO. Because each share of Series 2006 preferred stock is entitled to 125 votes per share, Mr. Wheet has voting control of the Company with votes representing 125,000,000 common shares.
Voting Rights: A Series 2006 preferred stock holder is entitled to 125 votes for each share of common stock into which his Series 2006 Preferred Stock is then convertible (presently on a one for one basis), voting together with our common stock as a single class. Cumulative voting is not permitted. Upon conversion of each Series 2006 preferred share, each share of common stock issued will be entitled to only one (1) vote per common share.
A Series 2006 preferred stock holder is entitled to receive, ratably, dividends when, as and if declared by the board of directors out of legally available funds to pay dividends. If any dividend or other distributions are declared on our common stock, then a dividend or other distribution must also be declared on the outstanding Series 2006 preferred stock at the same time and on the same terms and conditions, so that each holder of Series 2006 preferred stock will receive the same dividend or distribution such holder would have received if the holder had converted his Series 2006 Preferred stock as of the record date for determining stockholders entitled to receive such dividend or distribution.
Liquidation Preference: In the event of the liquidation, dissolution or winding up, a Series 2006 preferred stock is entitled to receive a liquidation preference of $0.001 for each share of Series 2006 preferred stock held prior to payment being made to any junior stock.
Conversion: A Series 2006 preferred stock holder may convert one (1) share of preferred stock into one (1) share of common stock.
Preemption: A Series 2006 Preferred stock holder has no preemptive rights and is not subject to further calls or assessments.
Redemption: There are no redemption or sinking fund provisions applicable to the Series 2006 Preferred stock.
BLANK CHECK PREFERRED STOCK
The Company's Articles of Incorporation authorize its board of directors to establish one or more additional series of preferred stock and to determine, with respect to any such series of preferred stock, its terms and rights, including: the designation of each series; the voting powers, if any, associated with each such series whether dividends, if any, will be cumulative or noncumulative and the dividend rate of each series; the redemption rights and price or prices, if any, for shares of each series; and preferences and other special rights, if any, of shares of each series in the event of any liquidation, dissolution, or distribution of the Company's assets.
COMMON STOCK TRANSACTIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009
During the six months ended June 30, 2009, 3,067,500 shares of common stock were issued as option holders exercised their options to purchase common stock and 181,118 shares were issued to third party investors. The Company received proceeds of $107,500 in connection with these share issuances.
During the six months ended June 30, 2009, the Company issued an additional 580,000 shares of common stock with a total value of $316,300 in lieu of cash as payment for consulting services.
NOTE 6 - STOCK OPTIONS AND WARRANTS OUTSTANDING
The following tables summarize information about the stock options outstanding at June 30, 2009:
| | | OPTIONS | | | WEIGHTED AVERAGE EXERCISE PRICE | |
| | | | | | | |
| Balance at March 30, 2009 | | | 10,360,000 | | | $ | 0.146 | |
| Granted | | | 1,430,000 | | | | 0.131 | |
| Exercised | | | (430,000 | ) | | | 0.250 | |
| Expired/Forfeited | | | -- | | | | | |
| BALANCE AT JUNE 30, 2009 | | | 10,072,500 | | | | 0.139 | |
NOTE 7 - FINANCIAL ADVISORY AND INVESTMENT BANKING AGREEMENT
The Company entered into a financial advisory and investment banking agreement with Spartan Securities Group, LTD. The agreement engaged Spartan on a non-exclusive basis for two years to provide services to include, but not limited to, arranging meetings with investment banking firms, rendering advice on internal operations, rendering advice on corporate finance matters, rendering advice or assistance on merger or acquisition activities and rendering advice on capital raising activities. Spartan will be compensated with commissions based on specified percentages in the contract related to the aggregate consideration received in the underlying merger or acquisition, equity placement, third party debt placement transaction. In certain transactions Spartan may be eligible to receive warrants to purchase common stock of the Company. This contract was terminated in December 2008 and 60,000 shares at a value of $12,600 were issued for services rendered.
NOTE 8 - MANAGEMENT CONSULTING, BUSINESS ADVISORY, SHAREHOLDER AND PUBLIC RELATIONS AGREEMENT
On March 25, 2009, the Company signed a six-month agreement with a Japanese firm to serve as an institutional public relations consultant as well as an investment banking liaison to attempt to arrange financing for the purpose of working capital as an intermediary. This is a non-exclusive contract for which the consultant was paid 250,000 shares of common stock at a value of $150,000. This common stock is restricted as to resell for six months.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with our financial statements and the notes thereto included elsewhere in this Form 10-Q. This Form 10-Q contains forward-looking statements regarding the plans and objectives of management for future operations. This information may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project" or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and we cannot assure you that these projections included in these forward-looking statements will come to pass. Our actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. See "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK."
Since 1997, we have been working to design, develop and commercialize retractable safety needle devices. Our present product development effort is focused on the RevVac retractable safety syringe, which is designed specifically to reduce accidental needle stick injuries. On February 6, 2007, the Company announced an agreement with Strategic Product Development, Inc. ("SPD") to provide FDA regulatory compliance, manufacturing management capabilities and ongoing product development services. On March 5, 2007, the Company announced that SON Medical, a privately held contract regulatory and testing consulting firm located in the Boston area, was chosen to conduct lab testing for the Company's RevVac retractable safety syringe. See “STATUS OF PLANNED PRODUCTS” below.
On March 26, 2007, the Company completed the acquisition of the sole asset of Clear Image Acquisition Corporation ("Acquisition Corp") pursuant to the Plan and Agreement of Reorganization of January 26, 2007. See Note 9 "Acquisition of Clear Image Acquisition Corp" to the consolidated financial statements for the year ended December 31, 2008 appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Securities and Exchange Commission on June 30, 2009.
Because our planned products are in various stages of development, we have no revenue. Our efforts to date have been funded almost entirely through sales of our common stock. We require substantial additional capital to complete the development of, to obtain approvals for and to begin commercializing the RevVac retractable safety syringe and the Clear Image color MRI software. There is no assurance that such capital will be available to us when needed, on acceptable terms, or at all. There is no assurance that our planned products will be commercially viable. Our present and future collaborative partners may require significant amounts of time to complete product design, develop manufacturing processes and/or to obtain specialized equipment, if any is required. Our planned products will also require FDA approval before they can be sold in the United States and similar approvals from foreign countries where our products may be marketed. Obtaining government approval, whether in the U.S. or elsewhere, is a time-consuming and costly process with no guarantee of approval.
It could be months, if ever, before our planned products are sold in the United States or anywhere else in the world. Our business is subject to numerous risks and uncertainties that are more fully described in "QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK."
STATUS OF PLANNED PRODUCTS
On April 23, 2009, the Company announced that it had acquired the exclusive rights to license an FDA-approved breast biopsy localization system. The Company recently signed a worldwide exclusive license agreement with Strategic Product Development for an image-guided navigation system that incorporates high accuracy breast biopsies systems (“BSS”) to conventional mammography systems, which number more than 50,000 globally. This technology has already received 510K market clearance by the FDA. BSS facilitates accurate and fast non-palpable lesions and micro calcification localization in the treatment of breast cancer. It is a low-cost, standalone stereotactic image-based system which uses data from a pair of mammograms to enable radiologists to accurately position a localization needle or biopsy tool at the location of suspicious abnormalities. The system can also be modified to leverage existing popular biopsy tools. The technology can be used to provide a technology platform for future development, including multi-modal breast imaging for the image fusion of MRI and X-Ray images. The BSS will be modified to use Rev Med’s proprietary safety syringe technology as well. The Company believes that this technology has the potential to be deployed in the vast majority of more than 50,000 mammography machines that are currently in use worldwide, including more than 15,000 in the United States.
On February 22, 2009, the Company announced that it had received notification from the FDA that the 510K application for the Rev Vac Safety Syringe has been approved. Furthermore, FDA approval is not needed for educational and research use of our Rev Color and Rev 3D MRI software products. The Company plans on marketing these products for such use very soon. In December 2008, the Company filed for patent protection in Europe on its Rev Color and Rev 3D software.The Rev Vac Safety Syringe uses vacuum technology to suck the needle into the plunger after use. The syringe cannot be reused once the vacuum is activated. Rev Med believes its safety syringe has many advantages over its competition including price, ease of use, and safety. It should help reduce accidental needle stick injuries and also aid in reducing the spread of contagious diseases. You may view a video of the syringe in use on our website at www.revolutionsmedical.com. The Company also believes that with the help of government regulation initiatives, individual state laws, and the importance of world health concerns, the safety syringe market will continue to have substantial growth into the foreseeable future.
When an MRI is taken, the images are sent to a pictorial archival computer systems ("PACS"), which displays the images for a radiologist to view. RevMed has hired and announced Strategic Product Development ("SPD") to be its project design consultant for the purpose of implementing the RevColor MRI software (including 3-D and automatic segmentation) on a PACS delivery platform and has given approval for SPD to enter into a binding letter of intent with Cambridge Medical Information Corporation ("CMIC") to use their PACS delivery platform, known as zPACS, which is an advanced fully functional PACS system currently in operation at several major international hospitals. The estimated cost of this project is $400,000, which RevMed is working to raise. A video of the MRI software can be found on the Company's website.
LIQUIDITY AND CAPITAL RESOURCES AND CASH REQUIREMENTS
As of June 30, 2009, the Company did not have and continues to not have sufficient cash to pay present obligations as they become due. We are searching for additional financing to generate the liquidity necessary to continue our operations. Due to current economic conditions and the Company's risks and uncertainties, there is no assurance that we will be able to raise any additional capital on acceptable terms, if at all. Because of these uncertainties, the auditors have expressed substantial doubt about our ability to continue as a going concern. We do not presently have any investment banking or advisory agreements in place and due to the Company's risks and uncertainties, there is no assurance that we will be successful in establishing any such agreements. Even if such agreements are established, there is no assurance that they will result in any funding. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. If adequate funds are not available to us on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy. See "RISK FACTORS."
Because we do not currently generate any cash from operations and have no credit facilities available, our only means of funding is through the sale of our common stock. We presently have 250,000,000 shares of common stock authorized, of which 31,378,641 shares were issued and outstanding as of June 30, 2009. If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not hold any derivative instruments and do not engage in any hedging activities.
Pursuant to rules adopted by the SEC as directed by Section 302 of the Sarbanes-Oxley Act of 2002, the Company's management, with the participation of the CEO/CFO, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules13a-15(e)) as of June 30, 2009. Based on that evaluation, the Company's CEO/CFO concluded that, as of that date, the Company's disclosure controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15, were effective at the reasonable assurance level. However, management's assessment identified the following material weaknesses:
| | - | As of June 30, 2009, there was a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles ("GAAP") in the US and the financial reporting requirements of the Securities and Exchange Commission. |
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| | - | As of June 30, 2009, there were insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements. |
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| | - | As of June 30, 2009, there was a lack of segregation of duties, in that we only had one person performing all accounting-related duties. |
Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the consolidated financial statements included in its reports fairly present in all material respects the Company's financial condition, results of operations and cash flows for the periods presented. The reason for the amendment of the interim financial reports was due to a later decision that the technology acquired did not have viable alternative uses, although it had originally been thought that it might have, and had it been determined that there were viable alternative uses the interim financial reports would have been correct.
The Company also disclosed these weaknesses in our Form 10-K filed on March 31, 2009. We continue to evaluate the effectiveness of internal controls and procedures on an on-going basis. We plan to further address these issues once we commence operations and are able to hire additional personnel in financial reporting.
PART II - OTHER INFORMATION
On October 29, 2008, the Company filed a lawsuit in the district court of Harris county Texas, a lawsuit for fraud and contempt of court for Globe Med Tech and Andy Hu individually. In response, Globe filed a motion to stay the lawsuit based upon the forum selection clause in the joint venture agreement between RMC and Globe which provides that the exclusive forum for all disputes relating to the Joint Venture Agreement shall be Oklahoma state court/Tulsa County. Due to the Texas state district's court's backlog of cases and the withdrawal of Globe and Hu’s counsel, the motion to stay was not heard until May 1, 2009. The motion was granted as to Globe; however, Hu did not join in the motion and, after the May 1st hearing, filed a separate motion to stay, based upon the same grounds as Globe's motion. Hu’s motion to stay was denied at a May 8th hearing. Accordingly, RMC intends to proceed post haste with discovery with respect to its claims against Hu, including without limitation obtaining the deposition of a key witness.
We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission on March 31, 2009.
There were no unregistered sales of Equity Securities and Use of Proceeds during the period ended June 30, 2009.
There were no defaults upon senior securities during the period ended June 30, 2009.
There were no matters submitted for a vote of our security holders during the period ended June 30, 2009.
ITEM 5. OTHER INFORMATION
There is no other information required to be disclosed under this item which was not previously disclosed.
ITEM 6. EXHIBITS
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
