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EX-32 - EXHIBIT 32 - APOGEE TECHNOLOGY INCexh32.htm
EX-31.2 - EXHIBIT 31.2 - APOGEE TECHNOLOGY INCexh31_2.htm
EX-31.1 - EXHIBIT 31.1 - APOGEE TECHNOLOGY INCexh31_1.htm
 



 
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
 
FORM 10-Q
 
(Mark One)
 
 
x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended June 30, 2011
 
 
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 001-10456
 
 
APOGEE TECHNOLOGY, INC.
(Exact name of Small Business Issuer in its charter)
 
 

DELAWARE
 
04-3005815
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation)
 
Identification No.)
     
129 MORGAN DRIVE, NORWOOD, MASSACHUSETTS 02062
(Address of principal executive offices)
     
(781) 551-9450
(Registrant’s telephone number, including area code)
     
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
 
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)

 
Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.  x   Yes   o   No  
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) of this chapter) during the proceeding 12 months (or such shorter periods that the registrant was required to submit and post such files).  x   Yes   o   No  

 
Indicate by check mark whether the registrant is a large accelerated filer, an 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 filer  o
 
Accelerated filer  o
 
Non-accelerated filer  o
( Do not check if a smaller
reporting 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). o   Yes   x   No
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:  13,178,454 shares of common stock as of August 1, 2011 were outstanding.

 
 
 

 
 
APOGEE TECHNOLOGY, INC.
 (A Development Stage Company)
Table of Contents
 
 

PART I - FINANCIAL INFORMATION
 
   
Item 1 - Financial Statements
 
Consolidated Balance Sheets at June 30, 2011 (unaudited) and December 31, 2010 (audited)
   
Unaudited Consolidated Statements of Operations and Accumulated Deficit for the Three and  Six Months Ended June 30, 2011 and June 30, 2010 and for the period from October 1, 2008 (date re-entering development stage)  through June 30, 2011 (unaudited)
   
Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and June 30, 2010 and for the period from October 1, 2008 (date re-entering development stage) through June 30, 2011 (unaudited)
   
Notes to Consolidated Financial Statements (unaudited)
   
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
Item 3 - Quantitive and Qualitative Disclosures about Market Risk
   
Item 4T - Controls and Procedures
   
   
PART II - OTHER INFORMATION
 
   
Item 1 - Legal Proceedings
   
Item 1A - Risk Factors
   
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
   
Item 3 - Defaults Upon Senior Securities
   
Item 4 – (Removed and Reserved)
   
Item 5 - Other Information
   
Item 6 - Exhibits
   
Signatures

 
 
2

 


 
 PART I                                                        FINANCIAL INFORMATION
 
 Item 1.                                                            Financial Statements
 
(A Development Stage Company)
 CONSOLIDATED BALANCE SHEETS
 
   
JUNE 30,
   
DECEMBER 31,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Audited)
 
ASSETS
           
             
Current assets
           
Cash
  $ 1,147     $ 19,719  
Accounts Receivable
          25,000  
Prepaid expenses and other current assets
    1,000       2,213  
                 
Total current assets
    2,147       46,932  
                 
Property and equipment, net
    17,343       25,440  
                 
Other assets
               
Patents, net
    161,224       170,988  
                 
    $ 180,714     $ 243,360  
                 
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
               
                 
Current liabilities
               
Accounts payable and accrued expenses
  $ 4,321,614     $ 3,773,620  
Officer loans and notes payable
    1,665,000       1,470,134  
Shareholder loans and notes payable
    1,371,665       1,346,443  
Other loans and notes payable
    435,496       438,573  
                 
Total current liabilities
    7,793,775       7,028,770  
                 
Stockholders’ deficiency
               
Preferred stock, par value $0.0001 per share; 5,000,000 shares authorized, none issued and outstanding
           
Common stock, $0.01 par value; 40,000,000 shares authorized, 13,178,454 issued and outstanding at June 30, 2011 and at December 31, 2010
    131,785       131,785  
Additional paid-in capital
    19,828,868       19,776,466  
Accumulated deficit
    (21,891,704     (21,891,704 )
Accumulated deficit during development stage
    (5,682,010     (4,801,957 )
                 
Total stockholders’ deficiency
    (7,613,061     (6,785,410 )
    $ 180,714     $ 243,360  

The accompanying notes are an integral part of these consolidated financial statements.

 
3

 

(A Development Stage Company)
 CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
 (Unaudited)

   
Three Months Ended June 30,
   
Six Months Ended June 30,
   
Cumulative from
Re-entering Development Stage
on October 1, 2008
to June 30, 2011
 
   
2011
   
2010
   
2011
   
2010
       
                               
Revenues
                             
Product sales
  $     $     $     $     $  
Consulting
    45,000       15,000       65,000       15,000       130,000  
                                         
      45,000       15,000       65,000       15,000       130,000  
                                         
Costs and expenses
                                       
Research and development
    115,576       75,534       219,964       198,105       1,828,313  
Selling, general and administrative
    223,460       280,198       489,277       486,456       3,074,980  
                                         
      339,036       355,732       709,241       684,561       4,903,293  
                                         
Operating loss
    (294,036 )     (340,732 )     (644,241 )     (669,561 )     (4,773,293 )
                                         
Other income (expense)
                                       
                                         
Gain on extinguishment of debt
          325,310             325,310       341,810  
Warrant Expense
          (56,754 )           (56,754 )     (62,044 )
Interest and other expense
    (115,023 )     (124,784 )     (236,858 )     (252,595 )     (1,194,354 )
Interest and other income
    1,000       325       1,046       824       5,871  
                                         
      (114,023 )     144,097       (235,812 )     16,785       (908,717 )
                                         
Net loss
  $ (408,059 )   $ (196,635 )   $ (880,053 )   $ (652,776 )   $ (5,682,010 )
                                         
Accumulated deficit - beginning
  $ (27,165,655 )   $ (25,536,571 )   $ (26,693,661 )   $ (25,080,430 )   $  
                                         
Accumulated deficit - ending
  $ (27,573,714 )   $ (25,733,206 )   $ (27,573,714 )   $ (25,733,206 )   $ (5,682,010 )
                                         
Basic and diluted loss per common share
  $ (0.03 )   $ (0.02 )   $ (0.07 )   $ (0.05 )        
                                         
Weighted average common shares outstanding - basic and diluted
    13,178,454       12,336,460       13,178,454       12,234,960          


The accompanying notes are an integral part of these consolidated financial statements.



 
4

 


(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)

   
SIX MONTHS ENDED
JUNE 30,
   
Cumulative from
Re-entering Development Stage on
OCTOBER 1, 2008
through
 
   
2011
   
2010
   
JUNE 30, 2011
 
                   
Cash flows from operations
                 
Net loss
  $ (880,053 )   $ (652,776 )   $ (5,682,010 )
Adjustments to reconcile net loss to net cash used in operating activities:
                       
Depreciation and amortization
    39,861       34,897       274,635  
Stock compensation expense for employees and directors
    48,819       (46,302 )     106,408  
Original issue discount
    992       65,219       216,260  
Warrant Expenses
          56,754       62,044  
Patent impairment
                205,674  
Disposal of sensor equipment
                3,731  
Gain on extinguishment of debt
          (325,310 )     (341,810 )
Changes in operating assets and liabilities:
                       
Accounts receivable
    25,000              
Prepaid expenses and other current assets
    1,213       495       34,113  
Accounts payable and accrued expenses
    547,996       475,885       2,735,502  
                         
Net cash (used) in operating activities
    (216,172 )     (391,138 )     (2,385,453 )
                         
Cash flows from investing activities
                       
Patent costs
    (22,000 )     (83,128 )     (178,824 )
                         
Net cash (used) by investing activities
    (22,000 )     (83,128 )     (178,824 )
                         
Cash flows from financing activities
                       
Proceeds for shareholder loans and notes payable
    25,000       30,000       601,665  
Proceeds from officer loans and notes payable
    194,600       320,500       905,000  
Proceeds from other loans and notes payable
          75,000       906,563  
Proceeds and adjustment from sale of equity securities
          50,000       156,480  
                         
Net cash provided by financing activities
    219,600       475,500       2,569,708  
                         
Increase (decrease) in cash
    (18,572 )     1,234       5,431  
                         
Cash — beginning
    19,719       4,704       (4,284 )
                         
Cash— ending
  $ 1,147     $ 5,938     $ 1,147  
                         
Supplemental Cash Flow Information:
                       
Non-cash financing activities
                       
Warrants issued in connection with notes payable and stock sales
  $ 3,582     $ 103,060     $ 270,304  
Converted promissory notes to common stock
  $  —     $ 585,000     $ 615,000  
Converted interest to common stock
  $  —     $ 286,122     $ 286,122  


The accompanying notes are an integral part of these consolidated financial statements
 
 
5

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
 
1.                             The Company and Basis of Presentation

The Company

The accompanying unaudited interim financial statements of Apogee Technology, inc., a Delaware corporation, have been prepared in accordance with accounting principles generally accepted in the United States of American and the rules of the Securities and Exchange Commission and should be read in conjunction with the audited financial statements and notes thereto contained in our last Annual Report filed with the SEC on Form 10-K.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected therein.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Apogee Technology, Inc., (“Apogee”, “we”, “us” or “our”) is developing PyraDerm™, a proprietary intradermal drug delivery system for vaccines and other pharmaceuticals that we intend to market to pharmaceutical and medical device companies.  Until March 31, 2009, we were also engaged in the development of IntellaPAL™, a proprietary sensor-based health monitoring systems for the elderly care and other markets that we intended to manufacture and market to individuals and health organizations.

Our Life Science Group is developing PyraDerm, an advanced intradermal drug delivery system, to meet the needs of patients, health insurers, companies developing pharmaceuticals, as well as, governments and international health organizations. PyraDerm is designed to be a low-cost, effective, painless delivery system that can be self administered and easily stored while potentially providing pharmaceutical companies an extended patent position for their current drug formulations. We had previously demonstrated that PyraDerm system containing adjuvanted vaccine formulations is capable of improving the efficiency of immunization and providing a significant dose sparing effect in a relevant animal model. Technologies that reduce the required vaccine dose would allow faster and more efficient production of vaccines, which is especially important in case of vaccine shortages during epidemic emergencies, such as pandemic influenza. The results of these studies were published in 2009 in the Proceedings of the National Academy of Sciences of the USA serving as an important validation of our approach to intradermal vaccination.  In 2009 we had to scale down research and development efforts due to financial constraints and focused on the proof-of-concept stability studies of PyraDerm system and relevant formulation and process development activities. In 2010 and continuing in 2011, Apogee, while still operating under the same conditions, has continued these efforts concentrating on the development of analytical and quality control systems, as well as further advancement of our microneedle with improved stability. We believe that these development efforts are critically important for the successful commercialization of our microneedle platform.  Apogee also continued to pursue patent applications related to our technology. Upon completion of our studies, if successful, we intend to pursue licensing and partnership agreements for multiple product applications with pharmaceutical, and medical device companies, and government and world health organizations  interested in drug delivery systems and technologies.

We have operated as a technology research and development stage company since October 1, 2008.  We have not yet generated revenue from our principal operations. During the fiscal year ended December 31, 2010 and continuing in 2011, we invested our limited resources in the development of our Life Science Group.

Basis of Presentation

Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  Apogee has recurring operating losses, negative cash flows from operations, negative working capital of approximately $7.8 million and stockholder’s deficiency of approximately $7.6 million.  We are in arrears with substantially all of our vendors, and in default on a majority of our Promissory Notes and occasionally have been in arrears with payroll and related expenses.  Net losses were approximately $880,000 and negative cash flows from operations were approximately $216,000 for the six months ended June 30, 2011.  This raises substantial doubt about our ability to continue as a going concern.    Given our current cash position, net losses and negative cash flows from operations and our outstanding current obligations, we will not be able to continue as a going concern without obtaining additional funding which is not assured.

As of June 30, 2011, we had cash of approximately $1,000.
 
 
6

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
The long-term success of Apogee is dependent upon our ability to raise additional funds to continue our operations, pay our outstanding liabilities and to successfully develop and market our technologies and products and to attain profitable operations. Although we have modified our business strategy to improve near-term financial performance, there can be no assurance that we will be able to obtain funds, to generate sufficient revenue, if any, or become profitable or that additional funds will be available to us on acceptable terms, if at all.  Accordingly, we may be unable to implement current plans.  In addition, if sufficient capital cannot be obtained, Apogee may be forced to cease operations.  In the event that any future financing is affected, to the extent it includes equity securities; the holders of the common stock may experience additional dilution.  In the event of a cessation of operations, there may not be sufficient assets to fully satisfy all creditors, in which case, the holders of securities may be unable to recoup any of their investment.

We are attempting to secure sufficient financing to meet our current obligations and to continue development of our technology.  We have been working to obtain significant long-term financing from outside investors for more than three years, but have not yet been successful.  In the interim, short-term debt financing provided primarily by two of Apogee’s significant shareholders, including our President, Chief Executive Officer and Chairman of the Board of Directors Mr. Herbert M. Stein and Mr. David Spiegel, and other individuals, is being utilized to pay operating expenses.  There is no assurance that this short-term debt financing will continue.  Additionally, cost cutting measures, including accrual and deferral of salary for the CEO, deferral of capital expenditures, and reduced general spending were instituted during 2009 and will continue until such time as sufficient funding is secured.

Due to the early stages of development of our products, we cannot estimate at this time the amounts of cash or the length of time that will be required to bring our products under development to market.  It is expected that such costs will be funded not only by external funding, if available, but also through partnership activities.  Without additional financing, we will be unable to continue operations.

On October 28, 2009, Apogee received a “Wells Notice” from the staff of the Securities and Exchange Commission, which stated that the staff’s intent was to recommend that the Commission institute a public administrative proceeding against the Apogee, alleging that it violated Section 13(a) of the Securities Exchange Act of 1934.

On December 18, 2009 we filed our delinquent financial report on Form 10-K for the year ended December 31, 2008. This report contained a Disclaimer of Opinion by our Independent Accountants due to significant uncertainty as to our ability to be a going concern. On April 16, 2010 the SEC issued an Order for an Administrative Hearing based on a claim that the filing as well as Form 10-Q’s for the first three quarters of 2009, which had been filed on January 15, 2010, were materially deficient due to the Disclaimer of Opinion and thus the filings remained delinquent.  This Disclaimer of Opinion was removed on a subsequent filing.  We were also delinquent on our Form 10-K for the Year ended December 31, 2009 An Order of Suspension of trading in our securities was enacted at that time.  We also did not file its Form 10-Q for the quarters ended March 31, 2010 and June 30, 2010.

In June 2010 the SEC and Apogee entered into a Settlement agreement without a Hearing, under which we would file all our delinquent filings without a material deficiency by a mutually agreed date.  Failure to do so would activate an Order to revoke the ability for our securities to trade on an exchange.  On August 18, 2010 we filed Amendment No.1 to our Form 10-K for the fiscal year ended 2008, Amendment No.1 to our Form 10-Qs for the first, second and third quarters of 2009 as well as our Form 10-K and Form 10-Q for the fiscal year ended December 31, 2009 and the quarters ended March 31, 2010 and June 30, 2010, respectively.

On August 27, 2010 we received Release No. 62786, informing us that the administrative proceeding were terminated and that final judgment be entered without the imposition of a remedy pursuant to Section 12(j) of the Securities Exchange Act of 1934.

On December 8, 2010 our application to regain trading status on the OTC Bulletin Board was submitted to the Financial Industry Regulatory Authority (“FINRA”).  On January 21, 2011 we received notification from FINRA that our Common Stock was cleared to enter quotations on the OTC Bulletin Board and OTC Link.

Consolidated Financial Statements

The financial statements include the accounts of Apogee Technology, Inc. and its wholly owned inactive subsidiary, DUBLA, Inc.  All significant intercompany transactions and accounts have been eliminated.

 
7

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
 
2.                             Summary of Significant Accounting Policies
 
Accounting Standards: On July 1, 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, also known as FASB Accounting Standards Codification (“ASC”) 105-10, General Accepted Accounting Principles (“ASC 105-10”).  ASC 105-10 established the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants.  The Codification supersedes all existing non-SEC accounting and reporting standards.  All other non -grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.  Following the Codification, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts.  Instead, it will issue Accounting Standards Updates, which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification.  GAAP was not intended to be changed as a result of the FASB’s Codification project, but it will change the way the guidance is organized and presented.  As a result, these changes will have a significant impact on how companies reference GAAP in their financial statements and in their accounting policies for financial statements issued for interim and annual periods ending after September 15, 2009.  Apogee has implemented the Codification by providing references to the Codification topics, as appropriate.
 
Recent Accounting Pronouncements
 
In January 2011, the Company adopted a new U.S. GAAP accounting standard which revises the accounting guidance for milestone revenue recognition with no material effect upon our financial statements. The new guidance allows for revenue recognition contingent upon the achievement of a milestone in its entirety, in the period in which the milestone is achieved, only if the milestone meets all the criteria within the guidance to be considered substantive.  The Company adopted this guidance beginning with agreements entered into on or after January 1, 2011. This standard may impact the Company in the event it completes future transactions or collaborative relationships that include milestone payments.

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04 (ASU 2011-4), Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs to provide a uniform framework for fair value measurements and related disclosures between U.S. GAAP and International Financial Reporting Standards (IFRS). Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 requires prospective application for interim and annual periods beginning on or after December 15, 2011. The Company is currently evaluating the impact that ASU 2011-04 will have on its financial position and results of operations.

In June 2011, the FASB issued ASU No. 2011-05 (ASU 2011-05), Comprehensive Income (Topic 220): Presentation of Comprehensive Income. ASU No. 2011-05 amends existing guidance by allowing an entity the option to present the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This ASU eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. ASU No. 2011-05 requires retrospective application and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The Company believes the adoption of this guidance concerns disclosure only and will not have a material impact on its financial position or results of operations.
 
Revenue Recognition

Consulting and licensing revenue is recognized as services are performed.
 
 
8

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
Product revenue will be recognized when the following revenue recognition criteria are met:  (1) persuasive evidence of an arrangement exists; (2) the product has been shipped and the customer takes ownership and assumes the risk of loss; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.

Royalty revenue will be recognized when earned in accordance with the underlying agreements.

Use of Estimates in Financial Statements

The preparation of financial statements in conformity with accounting principles 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 amount of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Development Stage Company

Apogee has been since October 1, 2008 and continues to be a development stage company reporting under the provisions of Accounting Standard Codification (“ASC”) 915, Development State Entity.

Property and Equipment

Major replacements and betterments of equipment are capitalized.  Cost of normal maintenance and repairs is charged to expense as incurred.  Depreciation is provided over the estimated useful lives of the assets using accelerated methods.

Leasehold Improvements

Leasehold improvements are amortized over either the term of lease or the estimated useful life of the improvement.

Patents

Costs incurred to register and obtain patents are capitalized and amortized on a straight-line basis over five years, their estimated useful lives.  Management performs analysis for impairment on a periodic basis.

Impairment of Long-Lived Asset

We assess the carrying values of long-lived assets for possible impairment in accordance with the requirements of ASC 360-10.  We conduct impairment tests when we identify events or when we believe that circumstances may have changed to indicate that the carrying amount of a long-lived asset may not be recoverable. Such events or changes in circumstances may include the discontinuation of a product or product line, a sudden or consistent decline in the forecast for a product, changes in technology or in the way an asset is being used, or an adverse change in legal factors or in the business climate. Our impairment review, to determine if a potential impairment charge is required, is based on an undiscounted cash flow analysis. This analysis requires judgment with respect to many factors, including future cash flows, changes in technology, the continued success of product lines and future volume and revenue and expense growth rates. It is possible that our estimates of these assumptions may change in the future, resulting in the need to reassess the carrying value of our long-lived assets for impairment.

Income Taxes

Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis and the tax basis of our assets and liabilities.  Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax laws.  Allowances are recorded if recovery is uncertain.  See Note 10 – Income Taxes and Tax Loss Carryforwards.

Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common stock outstanding during the period.  Diluted net loss per share is computed based on the weighted average number of common stock and dilutive potential common stock outstanding.  Potential common stock consists of incremental common stock issuable upon the exercise of stock options and common stock issuable upon the exercise of common stock warrants.  The calculation of diluted net loss per share excludes potential common stock as the effect is anti-dilutive. The weighted average number of shares of common stock outstanding used to compute basic loss per share for the three months ended June 30, 2011 and 2010 was 13,178,454 and 12,334,960, respectively.
 
 
9

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
Research and Development

Costs for research and development are expensed as incurred.

Legal Fees

We record legal costs (such as fees and expenses of external lawyers and other service providers) when incurred or when it is probable that a liability has been incurred on or before the balance sheet date and the amount can be reasonably estimated if invoices have not been received.  Legal fees incurred pursuant to filing patent applications are capitalized as part of the patent costs.

Contingencies

Apogee is involved in and/or indemnifies others in various legal proceedings.  Management assesses the probability of loss for such contingencies and recognizes a liability when a loss is probable and estimable.  See Note 9 – Legal and Related Indemnification Arrangements with our Executives and Others.

Advertising

Advertising costs are expenses when incurred and were not significant for the three and six months ended June 30, 2011 and 2010.

Related Parties

Related parties, which can be a corporation, individual, investor or another entity are considered to be related if the party has the ability, directly or indirectly, to control the other party or exercise significant influence over Apogee in making financial and operation decisions.  Companies are also considered to be related in they are subject to common control or common significant influence.  The Company has these relationships.

Stock-Based Compensation

Apogee accounts for stock-based compensation for employees in accordance with ASC Topic 718, "Compensation-Stock Compensation” using the modified prospective method.  Under the fair value recognition provision of ASC Topic 718, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense as it is earned over the requisite service period, which is the vesting period. The fair value of the options on their grant date is measured using the Black-Scholes option-pricing model, which we believe yields a reasonable estimate of the fair value of the grants made. The valuation provisions of ASC Topic 718 apply to grants issued since January 1, 2006 (the effective date) and to grants that were outstanding as of that date that are subsequently modified. Estimated compensation expense for grants that were outstanding as of the effective date will be recognized over the remaining vesting period.

Non-employee stock-based compensation is accounted for in accordance with ASC Topic 505, "Equity-based payments to Non-Employees."  In accordance with this topic, cost recognized for non-employee share-based payment transactions is determined by the fair value of whichever is more reliably measurable:  (a) the goods or services received; or (b) the equity instruments issued.

Apogee’s stock compensation activity with respect to the three months ended June 30, 2011 is summarized below:
Stock Options
 
Shares
   
Weighted-
Average
Exercise
Price
   
Weighted-
Average
Remaining
Contractual
Term
 
Outstanding at December 31, 2010
    2,786,600     $ 4.6725        
Granted
                   
Exercised
                   
Cancelled or expired
    (369,000     6.3054        
Outstanding at June 30, 2011
    2,417,600     $ 4.4233       2.9888  
                         
Vested at June 30, 2011
    2,266,400     $ 4.6568       2.7478  
                         
Exercisable at June 30, 2011
    2,266,400     $ 4.6568       2.7478  

 
10

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
The following table summarizes information about options outstanding as of June 30, 2011:

     
Options Outstanding
   
Options Exercisable
 
           
Weighted
                   
           
Average
   
Weighted
         
Weighted
 
           
Remaining
   
Average
         
Average
 
Range of Exercise
   
Number
   
Contractual
   
Exercise
   
Number
   
Exercise
 
Prices
   
Outstanding
   
Term
   
Price
   
Exercisable
   
Price
 
                                 
$ 0.45 — 1.69       906,000       5.4050     $ 0.9958       754,800     $ 1.0102  
$ 2.71 — 6.50       1,016,600       0.9185     $ 5.3026       1,016,600     $ 5.3026  
$ 8.45 — 12.15       495,000       2.8184     $ 8,8909       495,000     $ 8.8909  
                                             
Total at June 30, 2011
      2,417,600       2.9888     $ 4.4233       2,266,400     $ 4.6568  

Apogee did not grant options during the six months ended June 30, 2011 and 2010.  No options were exercised during six months ended June 30, 2011 and 2010.  During the six months ended June 30, 2011, options to purchase eleven thousand six hundred (11,600) shares of Apogee common stock vested. The weighted average fair value of these options was $0.8276. During the six months ended June 30, 2011 options to purchase three hundred sixty-nine thousand (369,000) shares of Apogee common stock expired.  As of June 30, 2011, approximately 151,200 options to purchase approximately 151,200 shares of Apogee common stock with an approximate value of $18,002 are not yet vested.

Fair value of financial instruments

Carrying amounts of certain of the our financial instruments, including cash, loans and accounts payable, approximate their fair values due to their relative short maturities and based upon comparable market information available at the respective balance sheet dates. We do not hold or issue financial instruments for trading purposes.

Recent Accounting Pronouncements
 
There have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2011, as compared to the recent accounting pronouncements described in our Form 10-K, that are of significance, or potential significance to Apogee.
 
 
3.                             Property and Equipment
 
Property and equipment at June 30, 2011 and December 31, 2010 are comprised of the following:
 
Property and Equipment
 
June 30,
   
December 31,
 
   
2011
   
2010
 
             
Equipment
  $ 162,790     $ 162,789  
Software
    32,943       32,943  
Furniture and fixtures
    22,047       22,047  
Leasehold improvements
    92,892       92,892  
                 
    $ 310,672     $ 310,671  
                 
Less accumulated depreciation
    (293,329 )     (285,231 )
                 
    $ 17,343     $ 25,440  
 
 
11

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
Depreciation expense was approximately $4,000 and $8,100 for the three and six months ended June 30, 2011, respectively, compared to approximately $4,600 and $9,100 for the three and six months ended June 30, 2010, respectively.
 
The estimated useful lives of the classes of physical assets were as follows:

Description
 
Depreciable Lives
 
       
Equipment
 
5 years
 
Software
 
3 years
 
Furniture and fixtures
 
7 years
 
Leasehold improvements
 
Term of lease
 

 
 
4.                              Asset Impairment
 

We did not record any patent impairment charge at June 30, 2011.  For the three and six months ended June 30, 2011 we amortized approximately $16,400 and $31,800, respectively, of patent application related expenses.  This compares to approximately $14,200 and $25,800 of patent application related expenses for the three and six months ended June 30, 2010, respectively.

Patent costs are summarized in the table below:

   
Gross Carrying Value
   
Accumulated Amortization
   
Accumulated
Impairment
   
Net Book Value
 
                         
December 31, 2010
  $ 549,227       (132,565 )     (245,674 )   $ 170,988  
June 30, 2011
  $ 571,227       (164,329 )     (245,674 )   $ 161,224  

Estimated amortization is as follows:

Year ended December 31,
 
Six months ended December 2011
    33,346  
2012
    65,110  
2013
    31,342  
2014
    27,026  
2015
    4,400  
 
 
12

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
 
5.                             Accounts Payable and Accrued Expenses
 
Accrued expenses are included in accounts payable on the balance sheet. Accounts payable and accrued expenses are as follows:

 
 
 
Accounts Payable
 
 
June 30,
   
December 31,
 
   
2011
   
2010
 
             
 
Legal and accounting
  $ 1,747,000     $ 1,761,000  
Consulting expenses
    58,000       53,000  
Interest owed to Promissory Note holders
    755,000       519,000  
Corporate insurance expenses
    1,000       1,000  
Director and Advisory Committee fees
    184,000       155,000  
Rent expenses
    132,000       106,000  
Other expenses
    681,000       570,000  
                 
    $ 3,558,000     $ 3,165,000  
 
 
 
 
Accrued Expenses
 
 
June 30,
   
December 31,
 
   
2011
   
2010
 
             
Accrued audit expenses
  $ 32,000     $ 29,000  
Accrued legal expenses
    50,000       48,000  
Accrued consulting expenses
    71,000       65,000  
Accrued payroll and payroll taxes
    592,000       447,000  
Other accrued expenses
    18,000       20,000  
                 
    $ 763,000     $ 609,000  

 
 
6.                             Promissory Notes, Loans and Warrants

During the six months ended June 30, 2011, Apogee received $194,000 in proceeds from unsecured interest-bearing promissory notes from Mr. Herbert M. Stein, President, Chief Executive Officer and Chairman of the Board of Directors and $25,000 from Mr. David Spiegel, a major shareholder.  These promissory notes are payable upon demand, not subject to premium or penalty for prepayment, bear simple interest of 8% per annum.  All are to be repaid in 180 days.  An additional 4% interest will be charged after maturity.

On June 26, 2010 the Apogee completed an offer to its Note holders whereby Note holders could convert all interest amounts accrued and unpaid as of April 15, 2010 into Apogee Common Stock at a price of $1 per share. Two Note holders accepted this offer:

   
Interest
 
Note Holder
 
Converted
 
Herbert M. Stein
 
$
204,098
 
Robert Schacter, et al
   
82,024
 
Total interest converted
 
$
286,122
 

This transaction resulted in a gain on extinguishment of debt of $32,810 as a result of the interest conversion by Mr. Schacter.  This transaction was recorded as of June 30, 2010.  The interest conversion by Mr. Stein was recorded as a capital transaction and recorded in Additional Paid-In Capital.

As a result of the above conversion, total unpaid interest of approximately $755,000 is due as of June 30, 2011, consisting of $235,000 to Mr. Stein, $436,000 to Mr. Spiegel and $84,000 to others.

Mr. Robert Schacter requested that the $545,000 in Promissory Notes issued in the name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), and $20,000 each issued in the names of Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA be converted to shares of Apogee Common Stock.  On June 4, 2010 the Board of Directors approved this transaction and authorized the issuance of 585,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on June 4, 2010 was $0.50; therefore, Apogee recorded a $292,500 gain on extinguishment of this debt at June 30, 2010.
 
 
13

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
Effective June 4, 2010 all promissory notes issued in the name of Robert Schacter (TYJO Corp. Money Purchase Pension Plan), Mr. Robert Schacter, as Custodian for Tyler Schacter UTMA/CA and Mr. Robert Schacter, as Custodian for Joseph Schacter UTMA/CA were converted and shares of Apogee Common Stock were issued.

Mr. Friedrich Reiner requested that his $30,000 Promissory Note be converted into shares of Apogee Common Stock.   On September 22, 2010 the Board of Directors approved this transaction and authorized the issuance of 30,000 shares of Apogee Technology, Inc. Common Stock at a price of $1.00 per share.  The closing price on September 22, 2010 was $0.45; therefore, Apogee recorded a $16,500 gain on extinguishment of debt at September 30, 2010.

In addition, unpaid rent and utilities of approximately $213,000 are owed to Mr. Spiegel as of June 30, 2011.

As of June 30, 2011 promissory notes in the amount of $3.2 million are in default and accruing post-maturity interest.

       
Promissory Notes and Loans Due To
David Spiegel
           
                     
Date of
     
Maturity
 
Initial
   
Current
 
Promissory Note
 
Amount
 
Date
 
Interest Rate
   
Interest Rate
 
                     
December 11, 2007
  $ 150,000  
March 10, 2008
    8.00 %     12.00 %
February 21, 2008
    100,000  
August 19, 2008
    8.00 %     12.00 %
March 20, 2008
    100,000  
September 16, 2008
    8.00 %     12.00 %
April 1, 2008
    50,000  
September 28, 2008
    8.00 %     12.00 %
May 15, 2008
    50,000  
November 11, 2008
    8.00 %     12.00 %
June 16, 2008
    65,000  
December 13, 2008
    8.00 %     12.00 %
June 18, 2008
    50,000  
December 15, 2008
    8.00 %     12.00 %
July 15, 2008
    50,000  
January 11, 2009
    8.00 %     12.00 %
July 28, 2008
    50,000  
January 24, 2009
    8.00 %     12.00 %
August 12, 2008
    35,000  
February 8, 2009
    8.00 %     12.00 %
August 27, 2008
    35,000  
February 23, 2009
    8.00 %     12.00 %
September 5, 2008
    35,000  
March 4, 2009
    8.00 %     12.00 %
October 27, 2008
    35,000  
April 25, 2009
    8.00 %     12.00 %
January 6, 2009
    80,000  
July 5, 2009
    8.00 %     12.00 %
March 19, 2009
    64,000  
September 15, 2009
    8.00 %     12.00 %
May 19, 2009
    35,000  
November 15, 2009
    8.00 %     12.00 %
June 10, 2009
    25,000  
December 7, 2009
    8.00 %     12.00 %
July 1, 2009
    32,000  
December 28, 2009
    8.00 %     12.00 %
November 5, 2009
    103,000  
May 4, 2010
    8.00 %     12.00 %
December 21, 2009
    68,000  
June 19. 2010
    8.00 %     12.00 %
December 29, 2009
    4,665  
July 24, 2010
    8.00 %     12.00 %
April 16, 2010
    16,000  
October 13, 2010
    8.00 %     12.00 %
June 4, 2010
    14,000  
December 1, 2010
    8.00 %     12.00 %
August 11, 2010
    100,000  
February 7, 2011
    8.00 %     12.00 %
April 8, 2011
    25,000  
October 5, 2011
    8.00 %     8.00 %
    $ 1,371,665                    

 
14

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010

 
       
Promissory Notes and Loans Due To
Herbert M. Stein
           
                     
Date of
     
Maturity
 
Initial
   
Current
 
Promissory Note
 
Amount
 
Date
 
Interest Rate
   
Interest Rate
 
                     
December 11, 2007
  $ 250,000  
March 10, 2008
    8.00 %     12.00 %
February 21, 2008
    100,000  
August 19, 2008
    8.00 %     12.00 %
March 20, 2008
    50,000  
September 16, 2008
    8.00 %     12.00 %
April 1, 2008
    50,000  
September 28, 2008
    8.00 %     12.00 %
May 15, 2008
    50,000  
November 11, 2008
    8.00 %     12.00 %
June 16, 2008
    35,000  
December 13, 2008
    8.00 %     12.00 %
June 18, 2008
    40,000  
December 15, 2008
    8.00 %     12.00 %
July 15, 2008
    30,000  
January 11, 2009
    8.00 %     12.00 %
July 28, 2008
    50,000  
January 24, 2009
    8.00 %     12.00 %
August 12, 2008
    35,000  
February 8, 2009
    8.00 %     12.00 %
August 27, 2008
    35,000  
February 23, 2009
    8.00 %     12.00 %
September 5, 2008
    35,000  
March 4, 2009
    8.00 %     12.00 %
October 27, 2008
    25,000  
April 25, 2009
    8.00 %     12.00 %
February 2, 2009
    30,000  
August 1, 2009
    8.00 %     12.00 %
February 17, 2009
    10,000  
August 16, 2009
    8.00 %     12.00 %
March 19, 2009
    25,900  
September 15, 2009
    8.00 %     12.00 %
April 13, 2009
    33,000  
October 10, 2009
    8.00 %     12.00 %
May 18, 2009
    12,000  
November 14, 2009
    8.00 %     12.00 %
July 1, 2009
    20,000  
December 28, 2009
    8.00 %     12.00 %
November 5, 2009
    42,500  
May 4, 2010
    8.00 %     12.00 %
December 21, 2009
    83,500  
June 19, 2010
    8.00 %     12.00 %
January 25, 2010
    79,000  
July 24, 2010
    8.00 %     12.00 %
February 22, 2010
    66,000  
August 21, 1010
    8.00 %     12.00 %
April 16, 2010
    86,500  
October 13, 2010
    8.00 %     12.00 %
June 4, 2010
    116,000  
December 1, 2010
    8.00 %     12.00 %
August 11, 2010
    45,700  
February 7, 2011
    8.00 %     12.00 %
September 22, 2010
    6,300  
March 21, 2011
    8.00 %     12.00 %
November 18, 2010
    9,000  
May 17, 2011
    8.00 %     12.00 %
January 6, 2011
    20,000  
July 5, 2011
    8.00 %     8.00 %
April 8, 2011
    130,600  
October 5, 2011
    8.00 %     8.00 %
July 6, 2011
    43,000  
January 2, 2012
    8.00 %     8.00 %
June 28, 2011*
    21,000                    
    $ 1,665,000                    

*Date Funds Received
 
 
15

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
       
Promissory Notes and Loans Due To
Others
           
                     
Date of
     
Maturity
 
Initial
   
Current
 
Promissory Note
 
Amount
 
Date
 
Interest Rate
   
Interest Rate
 
                     
July 28, 2008
  $ 20,000  
March 4, 2009
    8.00 %     12.00 %
October 27, 2008
    6,000  
April 25, 2009
    8.00 %     12.00 %
January 6, 2009
    500  
July 5, 2009
    8.00 %     12.00 %
February 17, 2009
    37,000  
August 16, 2009
    8.00 %     12.00 %
March 19, 2009
    500  
September 15, 2009
    8.00 %     12.00 %
April 13, 2009*
    61,500  
October 10, 2009
    8.00 %     12.00 %
May 18, 2009
    32,500  
November 14, 2009
    8.00 %     12.00 %
November 5, 2009
    70,000  
May 4, 2010
    8.00 %     12.00 %
December 21, 2009
    2,563  
June 19, 2010
    8.00 %     12.00 %
June 4, 2010*
    20,000  
December 1, 2010
    12.00 %     16.00 %
November 18, 2010
    126,000  
May 17, 2011
    8.00 %     12.00 %
January 6, 2011
    75,000  
July 5, 2011
    8.00 %     8.00 %
    $ 451,563                    

The promissory notes issued to Messrs. Stein, Spiegel and Others from December 11, 2007 through May 17, 2011 for an aggregate of $3.1 million are incurring a post-maturity rate of interest of 12% compounded monthly.  The promissory notes originally were issued with simple interest of 8% per year and were to be repaid in cash after 90 days for the December 11, 2007 and 180 days for the remaining promissory notes.  The effective interest rate for 2010 was approximately 14%, which includes the cost of warrants.

*The promissory notes issued to JAZFund LLC on April 13, 2009 and June 4, 2010 in the amounts of $30,000 and $20,000, respectively, are incurring a post-maturity rate of 16% compounded monthly.  These promissory notes originally were issued with simple interest of 12% per year and were to be repaid in cash after 180 days.

The following tables represent the net payable from promissory notes and loans as of June 30, 2011.

 
Officer Loans
 Herbert M. Stein
 
Shareholder Loans
David Spiegel
 
 
 
Total
   
               
 
Total proceeds from Loans and Promissory Notes
$
1,665,000
 
$
 
1,371,665
 
 
$
3,036,665
 
 
Discount  (Fair Market Value of Warrants)
 
(13,399
)
 
(2,604
)
 
(16,003
)
 
$
1,651,601
 
$
 
 
1,369,061
 
 
 
$
 
3,020,662
 
 
 
   
Loans
Others
 
       
 
Total proceeds from Loans Promissory Notes
 
$
 
 
451,562
 
 
Discount (Fair Market Value of Warrants)
   
 
(64
 
)
 
 
$
451,498
 
 
 
16

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
In connection with the issuance of the promissory notes and the sale of Apogee Technology, Inc. common stock, we issued warrants to purchase additional shares of our common stock.  Each warrant expires three years from issue date with an exercise price of $1.00 per share.  As of June 30, 2011 warrants to purchase forty-one thousand five hundred (41,500) and thirty-two thousand five hundred (32,500) shares of common stock for Mr. Spiegel and Mr. Stein, respectively, expired.  As of June  30, 2011, these warrants represent, in the aggregate, an underlying one three thousand one hundred sixty-six (103,166) shares of common stock for Mr. Spiegel, an underlying two hundred twenty thousand one hundred forty (220,140) shares of common stock for Mr. Stein, an underlying three hundred thirty-four thousand five hundred (334,500) shares of common stock for Mr. Schacter, and an underlying one hundred eighty-four thousand eight hundred six (184,806) shares of common stock for others.  These warrants were issued as additional consideration for the notes.  These warrants include customary terms and include a cashless or net exercise provision for exercise.  Holders of these warrants are not entitled to receive dividends, vote, receive notice of any meetings of stockholders or otherwise have any right as stockholders with respect to their warrant shares.  The values of these warrants were determined by using the Black Scholes valuation model.  Warrants associated with the issuance of the promissory notes were issued at approximately 10% to 100% of the funds received.

Included below are an additional 151,750 and 15,000 in warrants to purchase Apogee common stock issued to Mr Robert Schacter et al and Mr. Friedrich Reiner, respectively.  See Note 7 – Stockholders’ Deficiency - Additional Warrants.

These warrants issued to both Mr. Robert Schacter et al and Mr. Friedrich Reiner include customary terms and include a cashless or net exercise provision for exercise.  These warrants are not entitled to receive dividends, vote, receive notice of any meetings of stockholders or otherwise have any right as stockholders with respect to their warrant shares.  The values of these warrants were determined by using the Black Scholes valuation model.
 
             
David Spiegel
                         
                                             
         
Stock Price
           
Risk Free
                   
   
Number of
   
At Date of
 
Term of
 
Strike
   
Interest
         
Value Per
       
Date of Warrant
 
Shares
   
Issuance
 
Warrant
 
Price
   
Rate
   
Volatility
   
Warrant
   
Total Value
 
                                             
July 15, 2008
    5,000     $ 0.87  
3 Years
  $ 1.00       2.70       104.55357 %   $ 0.5429     $ 2,714.50  
July 28, 2008
    5,000     $ 0.75  
3 Years
  $ 1.00       2.90       104.54508 %   $ 0.4481       2,240.50  
August 12, 2008
    3,500     $ 0.75  
3 Years
  $ 1.00       2.73       104.93498 %   $ 0.4488       1,570.80  
August 27, 2008
    3,500     $ 0.85  
3 Years
  $ 1.00       2.58       106.26182 %   $ 0.5331       1,865.85  
September 5, 2008
    3,500     $ 0.86  
3 Years
  $ 1.00       2.44       106.21122 %   $ 0.5404       1,891.40  
October 27, 2008
    3,500     $ 0.60  
3 Years
  $ 1.00       1.83       108.82589 %   $ 0.3431       1,200.85  
January 6, 2009
    8,000     $ 0.75  
3 Years
  $ 1.00       1.10       108.80131 %   $ 0.4566       3,652.80  
March 19, 2009
    6,400     $ 0.68  
3 Years
  $ 1.00       1.21       109.80676 %   $ 0.4057       2,596.48  
May 19, 2009
    3,500     $ 0.70  
3 Years
  $ 1.00       1.37       111.74849 %   $ 0.4288       1,500.80  
June 10, 2009
    2,500     $ 0.60  
3 Years
  $ 1.00       2.00       126.10551 %   $ 0.3959       989.75  
July 1, 2009
    3,200     $ 0.87  
3 Years
  $ 1.00       1.57       128.93341 %   $ 0.6295       2,014.40  
November 5, 2009
    10,300     $ 1.02  
3 Years
  $ 1.00       1.44       131.45892 %   $ 0.7681       7,911.43  
December 21, 2009
    6,800     $ 1.05  
3 Years
  $ 1.00       1.42       133.83768 %   $ 0.8029       5,459.72  
January 25, 2010
    466     $ 0.96  
3 Years
  $ 1.00       1.40       134.80467 %   $ 0.7268       338.69  
April 16, 2010
    1,600     $ 0.90  
3 Years
  $ 1.00       1.56       136.43020 %   $ 0.6800       1,088.00  
June 4, 2010
    1,400     $ 0.50  
3 Years
  $ 1.00       1.17       153.12821 %   $ 0.3740       523.60  
August 11, 2010
    10,000     $ 0.30  
3 Years
  $ 1.00       0.81       157.16541 %   $ 0.2115       2,115.00  
April 8, 2011
    25,000     $ 0.25  
3 Years
  $ 1.00       1.34       177.92758 %   $ 0.1933       4,832.50  
Total
    103,166                                               $ 44,507.07  

 
17

 
 
(A Development Stage Company)
 Notes to Unaudited Consolidated Financial Statements
June 30, 2011 and June 30, 2010
 
             
Herbert M. Stein
                         
                                             
         
Stock Price
           
Risk Free
                   
   
Number of
   
At Date of
 
Term of
 
Strike
   
Interest
         
Value Per
       
Date of Warrant
 
Shares
   
Issuance
 
Warrant
 
Price
   
Rate
   
Volatility
   
Warrant
   
Total Value
 
                                             
July 15, 2008
    3,000     $ 0.87  
3 Years
  $ 1.00       2.70       104.55357 %   $ 0.5429       1,628.70  
July 28, 2008
    5,000     $ 0.75  
3 Years
  $ 1.00       2.90       104.54508 %   $ 0.4481       2,240.50  
August 12, 2008
    3,500     $ 0.75  
3 Years
  $ 1.00       2.73       104.93498 %   $ 0.4488       1,570.80  
August 27, 2008
    3,500     $ 0.85  
3 Years
  $ 1.00       2.58       106.26182 %   $ 0.5331       1,865.85  
September 5, 2008
    3,500     $ 0.86  
3 Years
  $ 1.00       2.44       106.21122 %   $ 0.5404       1,891.40  
October 27, 2008
    2,500     $ 0.60  
3 Years
  $ 1.00       1.83       108.82589 %   $ 0.3431       857.75  
February 2, 2009
    3,000     $ 0.70  
3 Years
  $ 1.00       1.27       109.04276 %   $ 0.4188       1,256.40  
February 17, 2009
    1,000     $ 0.83  
3 Years
  $ 1.00       1.22       109.04322 %   $ 0.5219       521.90  
March 19, 2009
    2,590     $ 0.68  
3 Years
  $ 1.00       1.21       109.80676 %   $ 0.4057       1,050.76  
April 13, 2009
    3,300     $ 0.60  
3 Years
  $ 1.00       1.27       110.59204 %   $ 0.3469       1,144.77  
May 18, 2009
    1,200       0.70  
3 Years
  $ 1.00       1.36       111.77410 %   $ 0.4288       514.56  
July 1, 2009
    2,000     $ 0.87  
3 Years
  $ 1.00       1.57       128.93341 %   $ 0.6295       1,259.20  
November 5, 2009
    4,250     $ 1.02  
3 Years
  $ 1.00       1.44       131.45892 %   $ 0.7681       3,264.43  
December 21, 2009
    8,350     $ 1.05  
3 Years
  $ 1.00       1.42       133.83768 %   $ 0.8029       6,704.22  
January 25, 2010
    7,900     $ 0.96  
3 Years
  $ 1.00       1.40       134.80467 %   $ 0.7268       5,741.72  
February 22, 2010
    6,600     $ 0.70  
3 Years
  $ 1.00       1.48       134.43818 %   $ 0.5011       3,307.26  
April 16, 2010
    8,650     $ 0.96  
3 Years
  $ 1.00       1.40       134.80467 %   $ 0.7268       5,882.00  
June 4, 2010
    11,600     $ 0.50  
3 Years
  $ 1.00       1.17       153.12821 %   $ 0.3740       4,338.40  
August 11, 2010
    4,570     $ 0.30  
3 Years
  $ 1.00       0.81       157.16541 %   $ 0.2115       966.56  
September 22, 2010
    630     $ 0.45  
3 Years
  $ 1.00       0.68       166.23169 %   $ 0.3527       222.20  
November 18, 2010
    900     $ 0.35  
3 Years
  $ 1.00       0.77       170.06822 %   $ 0.2709       243.81  
January 6, 2011
    2,000     $ 0.39  
3 Years
  $ 1.00       1.11       171.68808 %   $ 0.3084       616.80  
April 8, 2011
    130,600     $ 0.25  
3 Years
  $ 1.00       1.34       177.92758 %   $ 0.1933       25,244.98  
Total
    220,140