Attached files
file | filename |
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EX-31.1 - CERTIFICATION - CPC OF AMERICA INC | cpc_10q-ex3101.htm |
EX-31.2 - CERTIFICATION - CPC OF AMERICA INC | cpc_10q-ex3102.htm |
EX-32.1 - CERTIFICATION - CPC OF AMERICA INC | cpc_10q-ex3201.htm |
EXCEL - IDEA: XBRL DOCUMENT - CPC OF AMERICA INC | Financial_Report.xls |
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2011
o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from _______________ to _______________
Commission File Number 0-24053
CPC of America, Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction
of incorporation or organization)
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11-3320709
(IRS Employer
Identification No.)
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5348 Vegas Drive, #89, Las Vegas, Nevada 89108
(Address of principal executive offices)
(702) 952-9650
(Registrant’s telephone number)
(Not applicable)
(Former name, former address and former fiscal year, if changed since last report)
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 (“Exchange Act”) during the past 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. Yes x No o
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). Yes x No o
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 definition 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).
Yes o No x
As of November 14, 2011, the registrant had 10,149,838 shares of its $.0005 par value common stock issued and outstanding.
CPC OF AMERICA, INC.
Quarterly Report on Form 10-Q
For the Period Ended September 30, 2011
PART I - FINANCIAL INFORMATION
Page No.
|
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Item 1. Financial Statements.
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Unaudited Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010 (audited)
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F-1
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Unaudited Condensed Consolidated Statements of Operations for the three month and nine month periods ended September 30, 2011 and 2010 and for the period from inception (April 11, 1996) to September 30, 2011
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F-2
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Unaudited Condensed Consolidated Statements of Shareholders’ Equity (Deficit) from inception (April 11, 1996) to September 30, 2011
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F-3
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Unaudited Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2011 and 2010 and for the period from inception (April 11, 1996) to September 30, 2011
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F-7
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Notes to Unaudited Condensed Consolidated Financial Statements
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F-9
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2
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Balance Sheets(Unaudited)
December 31,
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||||||||
September 30,
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2010
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|||||||
2011
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(Audited)
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|||||||
ASSETS
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||||||||
Current assets
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||||||||
Cash and equivalents
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$ | 156 | $ | 57,755 | ||||
Prepaid expenses
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58,298 | 51,703 | ||||||
Total current assets
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58,454 | 109,458 | ||||||
Patents, net of accumulated amortization
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150,987 | 185,127 | ||||||
Trademarks, net of accumulated amortization
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- | 273 | ||||||
TOTAL ASSETS
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$ | 209,441 | $ | 294,858 | ||||
LIABILITIES & SHAREHOLDERS' DEFICIT
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||||||||
Current liabilities
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||||||||
Current portion of convertible notes, net of discount and premium
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$ | 591,378 | $ | - | ||||
Accounts payable
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308,098 | 276,352 | ||||||
Accrued payroll and related taxes
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807,056 | 582,569 | ||||||
Accrued directors' compensation
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25,000 | 25,000 | ||||||
Accrued interest
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253,082 | 103,296 | ||||||
Accrued dividends payable
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4,262,138 | 3,789,350 | ||||||
Total current liabilities
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6,246,752 | 4,776,567 | ||||||
Long term debt - convertible notes, net of discount and premium
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230,121 | 677,447 | ||||||
Total liabilities
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6,476,873 | 5,454,014 | ||||||
Shareholders' deficit
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||||||||
Convertible preferred stock, 5,000,000 shares authorized, $.001 par value,
Series C - 271,721 shares issued and outstanding at September 30, 2011 and December 31, 2010
(Aggregate liquidation preference of $2,418,317 at September 30, 2011 and December 31, 2010)
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272 | 272 | ||||||
Series D - 594,342 shares issued and outstanding at September 30, 2011 and December 31, 2010
(Aggregate liquidation preference of $5,438,229 at September 30, 2011 and December 31, 2010)
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594 | 594 | ||||||
Series E - 399,037 shares issued and outstanding at September 30, 2011 and December 31, 2010
(Aggregate liquidation preference of $2,394,222 at September 30, 2011 and December 31, 2010)
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399 | 399 | ||||||
Common stock, 20,000,000 shares authorized, $.0005 par value, 10,149,838 shares issued and outstanding at September 30, 2011 and December 31, 2010
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5,076 | 5,076 | ||||||
Additional paid in capital - preferred
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14,335,796 | 14,808,584 | ||||||
Additional paid in capital - common
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32,151,666 | 32,077,877 | ||||||
Deficit accumulated during the development stage
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(52,761,235 | ) | (52,051,958 | ) | ||||
Total shareholders' deficit
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(6,267,432 | ) | (5,159,156 | ) | ||||
TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT
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$ | 209,441 | $ | 294,858 |
The accompanying notes are an integral part of these condensed financial statements.
F-1
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Operations(Unaudited)
Cumulative
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||||||||||||||||||||
from inception
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||||||||||||||||||||
Three Months Ended
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Nine Months Ended
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(April 11, 1996)
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September 30,
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September 30,
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to September 30,
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||||||||||||||||||
2011
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2010
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2011
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2010
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2011
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Costs and expenses
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||||||||||||||||||||
Research and development - related party
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$ | - | $ | - | $ | - | $ | - | $ | 10,016,111 | ||||||||||
Research and development - other
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46,863 | 46,888 | 115,128 | 106,319 | 13,602,797 | |||||||||||||||
46,863 | 46,888 | 115,128 | 106,319 | 23,618,908 | ||||||||||||||||
General and administrative - related party
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- | - | - | - | 1,781,577 | |||||||||||||||
General and administrative - other
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101,326 | 85,573 | 420,881 | 490,390 | 18,775,723 | |||||||||||||||
101,326 | 85,573 | 420,881 | 490,390 | 20,557,300 | ||||||||||||||||
Operating Loss
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(148,189 | ) | (132,461 | ) | (536,009 | ) | (596,709 | ) | (44,176,208 | ) | ||||||||||
Other income (expense)
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||||||||||||||||||||
Interest expense
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(52,534 | ) | (28,041 | ) | (173,268 | ) | (64,743 | ) | (296,292 | ) | ||||||||||
Interest income
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- | - | - | - | 332,588 | |||||||||||||||
Loss on extinguishment of debt
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- | (157,413 | ) | - | (157,413 | ) | (157,413 | ) | ||||||||||||
Increase in cash surrender value of insurance
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- | - | - | - | 790,910 | |||||||||||||||
(52,534 | ) | (185,454 | ) | (173,268 | ) | (222,156 | ) | 669,793 | ||||||||||||
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Net Loss
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$ | (200,723 | ) | $ | (317,915 | ) | $ | (709,277 | ) | $ | (818,865 | ) | $ | (43,506,415 | ) | |||||
Loss Per share calculation:
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||||||||||||||||||||
Net Loss
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$ | (200,723 | ) | $ | (317,915 | ) | $ | (709,277 | ) | $ | (818,865 | ) | ||||||||
Beneficial conversion feature
|
- | (31,959 | ) | - | (31,959 | ) | ||||||||||||||
Preferred dividend
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(157,596 | ) | (157,587 | ) | (472,788 | ) | (507,373 | ) | ||||||||||||
Net loss applicable to common shares - Numerator
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$ | (358,319 | ) | $ | (507,461 | ) | $ | (1,182,065 | ) | $ | (1,358,197 | ) | ||||||||
Basic and diluted net loss per share
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$ | (0.04 | ) | $ | (0.05 | ) | $ | (0.12 | ) | $ | (0.14 | ) | ||||||||
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||||||||||||||||||||
Basic and diluted weighted average number
of common shares outstanding - denominator |
10,149,838 | 10,028,216 | 10,149,838 | 9,814,617 | ||||||||||||||||
Maximum number of common shares (not included in denominator of diluted loss per share calculation due to their
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||||||||||||||||||||
anti-dilutive nature) attributable to exercise/conversion of:
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||||||||||||||||||||
Outstanding options
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1,853,907 | 1,853,907 | ||||||||||||||||||
Preferred stock
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2,340,771 | 2,340,771 | ||||||||||||||||||
Convertible notes
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2,111,377 | 1,477,108 |
The accompanying notes are an integral part of these condensed financial statements.
F-2
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Shareholders' Equity (Deficit) (continued)
From inception (April 11, 1996) to September 30, 2011
Preferred Stock
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Common Stock
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Deficit
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|||||||||||||||||||||||||||||||||||||||||||||||||
Series A
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Series B
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Series C
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Series D
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Series E
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Additional
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Additional
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Accumulated
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|||||||||||||||||||||||||||||||||||||||||||
Number | Number | Number |
Number
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Number
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Number
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Stock
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Paid-in
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Paid-in
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During the
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Total
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||||||||||||||||||||||||||||||||||||||||||
of
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of
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of
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of
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of
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of
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Option
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Capital-
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Capital-
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Development
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Shareholders'
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||||||||||||||||||||||||||||||||||||||||||
Shares
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Total
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Shares
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Total
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Shares
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Total
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Shares
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Total
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Shares
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Total
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Shares
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Total
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Costs
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Common
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Preferred
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Stage
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Equity(Deficit)
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||||||||||||||||||||||||||||||||||||
Initial capitalization
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- | $ | - | - | $ | - | - | $ | - | - | $ | - | - | $ | - | 2,400,000 | $ | 1,200 | $ | - | $ | - | $ | - | $ | - | $ | 1,200 | ||||||||||||||||||||||||
Issuance of common stock for a note
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- | - | - | - | - | - | - | - | - | - | 300,000 | 150 | - | - | - | - | 150 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
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- | - | - | - | - | - | - | - | - | - | 100,000 | 50 | - | 4,950 | - | - | 5,000 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for services
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- | - | - | - | - | - | - | - | - | - | 764,000 | 382 | - | 37,818 | - | - | 38,200 | |||||||||||||||||||||||||||||||||||
Net loss for 1996
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- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (59,079 | ) | (59,079 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 1996
|
- | - | - | - | - | - | - | - | - | - | 3,564,000 | 1,782 | - | 42,768 | - | (59,079 | ) | (14,529 | ) | |||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 26,666 | 13 | - | 29,987 | - | - | 30,000 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for cash and conversion of note payable ($77,000)
|
- | - | - | - | - | - | - | - | - | - | 640,000 | 320 | - | 927,680 | - | - | 928,000 | |||||||||||||||||||||||||||||||||||
Net loss for 1997
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (457,829 | ) | (457,829 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 1997
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- | - | - | - | - | - | - | - | - | - | 4,230,666 | 2,115 | - | 1,000,435 | - | (516,908 | ) | 485,642 | ||||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 57,000 | 29 | - | 114,971 | - | - | 115,000 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for cash
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- | - | - | - | - | - | - | - | - | - | 40,000 | 20 | - | 57,980 | - | - | 58,000 | |||||||||||||||||||||||||||||||||||
Issuance of preferred stock for cash
|
8,824 | 9 | - | - | - | - | - | - | - | - | - | - | - | - | 74,991 | - | 75,000 | |||||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series A Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 25,000 | (25,000 | ) | 0 | ||||||||||||||||||||||||||||||||||
Contribution of officer's salary
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 80,000 | - | - | 80,000 | |||||||||||||||||||||||||||||||||||
Net loss for 1998
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- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (640,580 | ) | (640,580 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 1998
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8,824 | 9 | - | - | - | - | - | - | - | - | 4,327,666 | 2,164 | - | 1,253,386 | 99,991 | (1,182,488 | ) | 173,062 | ||||||||||||||||||||||||||||||||||
Exercise of warrants
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- | - | - | - | - | - | - | - | - | - | 209,490 | 105 | - | 366,503 | - | - | 366,608 | |||||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 146,904 | 73 | - | 177,289 | - | - | 177,362 | |||||||||||||||||||||||||||||||||||
Issuance of preferred stock for cash
|
70,469 | 70 | - | - | - | - | - | - | - | - | - | - | - | - | 598,930 | - | 599,000 | |||||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (25,725 | ) | - | (25,725 | ) | |||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series A Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 199,486 | (199,486 | ) | 0 | ||||||||||||||||||||||||||||||||||
Repurchase of common shares
|
- | - | - | - | - | - | - | - | - | - | (560,000 | ) | (280 | ) | - | - | - | (280 | ) | |||||||||||||||||||||||||||||||||
Net loss for 1999
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,329,328 | ) | (1,329,328 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 1999
|
79,293 | $ | 79 | - | $ | - | - | $ | - | - | $ | - | - | - | 4,124,060 | $ | 2,062 | $ | - | $ | 1,797,178 | $ | 872,682 | $ | (2,711,302 | ) | $ | (39,301 | ) |
F-3
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Shareholders' Equity (Deficit) (continued)
From inception (April 11, 1996) to September 30, 2011
Preferred Stock
|
Common Stock
|
|
|
Deficit
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
Series A
|
Series B
|
Series C
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Series D
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Series E
|
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Additional
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Additional
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Accumulated
|
Total
|
|||||||||||||||||||||||||||||||||||||||||||
Number
|
Number
|
Number
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Number
|
Number
|
Number
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Stock
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Paid-in
|
Paid-in
|
During the
|
Shareholders'
|
||||||||||||||||||||||||||||||||||||||||||
of | of | of | of | of | of |
Option
|
Capital-
|
Capital- |
Development
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Equity
|
||||||||||||||||||||||||||||||||||||||||||
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
shares
|
Total
|
Shares
|
Total
|
Costs
|
Common
|
Preferred
|
Stage
|
(Deficit)
|
||||||||||||||||||||||||||||||||||||
Balance, December 31, 1999
|
79,293 | $ | 79 | - | $ | 0 | - | $ | 0 | - | $ | 0 | - | $ | 0 | 4,124,060 | $ | 2,062 | $ | 0 | $ | 1,797,178 | $ | 872,682 | $ | (2,711,302 | ) | $ | (39,301 | ) | ||||||||||||||||||||||
Exercise of warrants
|
- | - | - | - | - | - | - | - | 365,500 | 183 | - | 639,442 | - | - | 639,625 | |||||||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | 223,832 | 113 | - | 258,528 | - | - | 258,641 | |||||||||||||||||||||||||||||||||||||
Issuance of preferred stock for cash
|
- | - | 71,429 | 71 | - | - | - | - | - | - | - | - | 624,929 | - | 625,000 | |||||||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series B Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | 208,125 | (208,125 | ) | - | ||||||||||||||||||||||||||||||||||||
Conversion of Series A Preferred into common shares
|
(70,469 | ) | (70 | ) | - | - | - | - | - | - | 131,996 | 66 | - | 624,659 | (598,930 | ) | - | 25,725 | ||||||||||||||||||||||||||||||||||
Beneficial conversion feature on Series A Preferred shares
|
- | - | - | - | - | - | - | - | - | - | - | 199,486 | (199,486 | ) | - | - | ||||||||||||||||||||||||||||||||||||
Settlement of lawsuit
|
- | - | - | - | - | - | - | - | - | - | 33,333 | 17 | - | 199,983 | - | - | 200,000 | |||||||||||||||||||||||||||||||||||
Purchase of patent
|
- | - | - | - | - | - | - | - | - | - | 47,042 | 24 | - | 235,184 | - | - | 235,208 | |||||||||||||||||||||||||||||||||||
Stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | (280,000 | ) | 280,000 | - | - | - | ||||||||||||||||||||||||||||||||||
Amortization of stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | 105,000 | - | - | - | 105,000 | |||||||||||||||||||||||||||||||||||
Cancellation of common shares
|
- | - | - | - | - | - | - | - | - | - | (89,000 | ) | (45 | ) | - | - | - | - | (45 | ) | ||||||||||||||||||||||||||||||||
Net loss for 2000
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,749,444 | ) | (1,749,444 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2000
|
8,824 | $ | 9 | 71,429 | $ | 71 | - | $ | 0 | - | $ | 0 | - | $ | 0 | 4,836,763 | $ | 2,420 | $ | (175,000 | ) | $ | 4,234,460 | $ | 907,320 | $ | (4,668,871 | ) | $ | 300,409 | ||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 360,394 | 180 | - | 413,483 | - | - | 413,663 | |||||||||||||||||||||||||||||||||||
Issuance of common stock for services
|
- | - | - | - | - | - | - | - | - | - | 100,000 | 50 | - | 255,450 | - | - | 255,500 | |||||||||||||||||||||||||||||||||||
Issuance of preferred stock for cash
|
- | - | 113,715 | 114 | 95,123 | $ | 95 | - | - | - | - | - | - | - | - | 1,841,392 | - | 1,841,601 | ||||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series B Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 331,636 | (331,636 | ) | - | ||||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series C Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 282,233 | (282,233 | ) | - | ||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
(8,824 | ) | (9 | ) | (113,715 | ) | (114 | ) | - | - | - | - | - | - | 330,327 | 165 | - | 1,081,316 | (1,069,887 | ) | - | 11,471 | ||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (63,397 | ) | - | (63,397 | ) | |||||||||||||||||||||||||||||||||
Issuance of common stock options for services
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 20,000 | - | - | 20,000 | |||||||||||||||||||||||||||||||||||
Amortization of stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | 140,000 | - | - | - | 140,000 | |||||||||||||||||||||||||||||||||||
Net loss for 2001
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,968,471 | ) | (1,968,471 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2001
|
- | - | 71,429 | 71 | 95,123 | 95 | - | - | - | - | 5,627,484 | 2,815 | (35,000 | ) | 6,004,709 | 2,229,297 | (7,251,211 | ) | 950,776 | |||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 282,480 | 140 | - | 317,650 | - | - | 317,790 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | (71,429 | ) | (71 | ) | (18,576 | ) | (19 | ) | - | - | - | - | 241,627 | 120 | - | 790,205 | (783,495 | ) | - | 6,740 | ||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series C & D Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 1,122,521 | (1,122,521 | ) | - | ||||||||||||||||||||||||||||||||||
Cancellations of shares
|
- | - | - | - | - | - | - | - | (535,933 | ) | (268 | ) | - | (199,732 | ) | - | - | (200,000 | ) | |||||||||||||||||||||||||||||||||
Issuance of preferred stock for cash
|
- | - | - | - | 264,657 | 265 | 110,627 | 111 | - | - | - | - | - | 3,367,233 | - | 3,367,609 | ||||||||||||||||||||||||||||||||||||
Amortization of stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | 35,000 | - | - | - | 35,000 | |||||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (122,861 | ) | - | (122,861 | ) | |||||||||||||||||||||||||||||||||
Purchase of Med Enclosure Stock
|
- | - | - | - | - | - | - | - | - | - | 10,000 | 5 | - | 53,495 | - | - | 53,500 | |||||||||||||||||||||||||||||||||||
Net loss for 2002
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (3,460,574 | ) | (3,460,574 | ) | |||||||||||||||||||||||||||||||||
Balance December 31, 2002
|
- | $ | 0 | - | $ | 0 | 341,204 | $ | 341 | 110,627 | $ | 111 | - | $ | 0 | 5,625,658 | $ | 2,812 | $ | 0 | $ | 6,966,327 | $ | 5,812,695 | $ | (11,834,306 | ) | $ | 947,980 |
F-4
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Shareholders' Equity (Deficit) (continued)
From inception (April 11, 1996) to September 30, 2011
Preferred Stock
|
Common Stock
|
|
|
Deficit
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
Series A
|
Series B
|
Series C
|
Series D
|
Series E
|
|
Additional
|
Additional
|
Accumulated
|
Total
|
|||||||||||||||||||||||||||||||||||||||||||
Number
|
Number | Number |
Number
|
Number
|
Number
|
Stock
|
Paid-in
|
Paid-in
|
During the
|
Shareholders'
|
||||||||||||||||||||||||||||||||||||||||||
of
|
of |
of
|
of
|
of
|
of
|
Option
|
Capital-
|
Capital-
|
Development
|
Equity
|
||||||||||||||||||||||||||||||||||||||||||
Shares
|
Total
|
Shares
|
Total
|
of Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Costs
|
Common
|
Preferred
|
Stage
|
(Deficit)
|
||||||||||||||||||||||||||||||||||||
Balance, December 31, 2002
|
- | $ | 0 | - | $ | 0 | 341,204 | $ | 341 | 110,627 | $ | 111 | - | $ | 0 | 5,625,658 | $ | 2,812 | $ | 0 | $ | 6,966,327 | $ | 5,812,695 | $ | (11,834,306 | ) | $ | 947,980 | |||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 775,117 | 388 | - | 1,351,807 | - | - | 1,352,195 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | (26,786 | ) | (27 | ) | - | - | - | - | 73,800 | 37 | - | 263,034 | (244,973 | ) | - | 18,071 | ||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series D Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 2,161,694 | (2,161,694 | ) | - | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock for cash
|
- | - | - | - | - | - | 708,824 | 709 | - | - | - | - | - | - | 6,484,373 | - | 6,485,082 | |||||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (390,289 | ) | (390,289 | ) | ||||||||||||||||||||||||||||||||||
Net loss for 2003
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (2,759,466 | ) | (2,759,466 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2003
|
- | - | - | - | 314,418 | 314 | 819,451 | 820 | - | - | 6,474,575 | 3,237 | - | 8,581,168 | 13,823,500 | (16,755,466 | ) | 5,653,573 | ||||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 460,775 | 230 | - | 1,082,034 | - | - | 1,082,264 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | (11,236 | ) | (11 | ) | (27,873 | ) | (28 | ) | - | - | 70,918 | 36 | - | 383,428 | (354,961 | ) | - | 28,464 | ||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (478,594 | ) | (478,594 | ) | ||||||||||||||||||||||||||||||||||
Stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 4,527,784 | - | - | 4,527,784 | |||||||||||||||||||||||||||||||||||
Net loss for 2004
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (8,314,255 | ) | (8,314,255 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2004
|
- | - | - | - | 303,182 | 303 | 791,578 | 792 | - | - | 7,006,268 | 3,503 | - | 14,574,414 | 12,989,945 | (25,069,721 | ) | 2,499,236 | ||||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 470,393 | 235 | - | 777,724 | - | - | 777,959 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | (6,180 | ) | (6 | ) | (106,922 | ) | (107 | ) | - | - | 176,405 | 88 | - | 1,150,457 | (1,033,109 | ) | - | 117,323 | ||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (501,921 | ) | (501,921 | ) | ||||||||||||||||||||||||||||||||||
Issuance of common stock for patent
|
- | - | - | - | - | - | - | - | - | - | 4,000 | 2 | - | 153,998 | - | - | 154,000 | |||||||||||||||||||||||||||||||||||
Net loss for 2005
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,625,516 | ) | (1,625,516 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2005
|
- | - | - | - | 297,002 | 297 | 684,656 | 685 | - | - | 7,657,066 | 3,828 | - | 16,656,593 | 11,454,915 | (26,695,237 | ) | 1,421,081 | ||||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 732,699 | 367 | - | 1,187,471 | - | - | 1,187,838 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | (5,618 | ) | (6 | ) | (28,418 | ) | (28 | ) | - | - | 60,219 | 30 | - | 358,881 | (309,966 | ) | - | 48,911 | ||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (430,176 | ) | - | (430,176 | ) | |||||||||||||||||||||||||||||||||
Stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 264,297 | - | - | 264,297 | |||||||||||||||||||||||||||||||||||
Expenses paid by officer/shareholder
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 61,252 | - | - | 61,252 | |||||||||||||||||||||||||||||||||||
Net loss for 2006
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (2,811,855 | ) | (2,811,855 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2006
|
- | - | - | - | 291,384 | 291 | 656,238 | 657 | - | - | 8,449,984 | 4,225 | - | 18,528,494 | 10,714,773 | (29,507,092 | ) | (258,652 | ) | |||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 621,551 | 311 | - | 1,553,566 | - | - | 1,553,877 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | (2,809 | ) | (3 | ) | (27,014 | ) | (28 | ) | - | - | 52,964 | 26 | - | 333,659 | (272,117 | ) | - | 61,537 | ||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (434,044 | ) | - | (434,044 | ) | |||||||||||||||||||||||||||||||||
Stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 23,063 | - | - | 23,063 | |||||||||||||||||||||||||||||||||||
Net loss for 2007
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (2,435,774 | ) | (2,435,774 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2007
|
- | $ | - | - | $ | - | 288,575 | $ | 288 | 629,224 | $ | 629 | - | $ | - | 9,124,499 | $ | 4,562 | $ | - | $ | 20,438,782 | $ | 10,008,612 | $ | (31,942,866 | ) | $ | (1,489,993 | ) |
F-5
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Shareholders' Equity (Deficit) (continued)
From inception (April 11, 1996) to September 30, 2011
Preferred Stock
|
Common Stock
|
|
|
Deficit
|
|
|||||||||||||||||||||||||||||||||||||||||||||||
Series A
|
Series B
|
Series C
|
Series D
|
Series E
|
|
Additional
|
Additional
|
Accumulated
|
Total
|
|||||||||||||||||||||||||||||||||||||||||||
Number
|
Number
|
Number
|
Number
|
Number
|
Number |
Stock
|
Paid-in
|
Paid-in
|
During the
|
Shareholders'
|
||||||||||||||||||||||||||||||||||||||||||
of
|
of
|
of
|
of
|
of
|
of
|
Option
|
Capital-
|
Capital-
|
Development
|
Equity
|
||||||||||||||||||||||||||||||||||||||||||
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Shares
|
Total
|
Costs
|
Common
|
Preferred
|
Stage
|
(Deficit)
|
||||||||||||||||||||||||||||||||||||
Balance, December 31, 2007
|
- | $ | 0 | - | $ | 0 | 288,575 | $ | 288 | 629,224 | $ | 629 | - | $ | 0 | 9,124,499 | $ | 4,562 | $ | 0 | $ | 20,438,782 | $ | 10,008,612 | $ | (31,942,866 | ) | $ | (1,489,993 | ) | ||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 154,150 | 77 | - | 592,502 | - | - | 592,579 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | - | - | (4,826 | ) | (5 | ) | - | - | 8,045 | 4 | - | 55,159 | (44,145 | ) | - | 11,013 | ||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series E Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 2,459,959 | (2,459,959 | ) | - | ||||||||||||||||||||||||||||||||||
Issuance of preferred stock
|
- | - | - | - | - | - | - | - | 551,703 | 552 | - | - | - | - | 3,309,668 | - | 3,310,220 | |||||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (637,465 | ) | (637,465 | ) | ||||||||||||||||||||||||||||||||||
Stock option costs
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 7,712,616 | - | - | 7,712,616 | |||||||||||||||||||||||||||||||||||
Contribution of officer's salary
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 344,966 | - | - | 344,966 | |||||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (11,131,691 | ) | (11,131,691 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2008
|
- | - | - | - | 288,575 | 288 | 624,398 | 624 | 551,703 | 552 | 9,286,694 | 4,643 | - | 29,144,025 | 15,096,629 | (45,534,516 | ) | (1,287,755 | ) | |||||||||||||||||||||||||||||||||
Exercise of options
|
- | - | - | - | - | - | - | - | - | - | 29,404 | 15 | - | 232,276 | - | - | 232,291 | |||||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | (16,854 | ) | (16 | ) | (30,056 | ) | (30 | ) | - | - | 109,048 | 55 | - | 560,900 | (424,954 | ) | - | 135,955 | ||||||||||||||||||||||||||||||
Issuance of preferred stock
|
- | - | - | - | - | - | - | - | 38,834 | 38 | - | - | - | - | 232,961 | - | 232,999 | |||||||||||||||||||||||||||||||||||
Issuance of common stock
|
- | - | - | - | - | - | - | - | - | - | 111,905 | 56 | - | 288,944 | - | - | 289,000 | |||||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on Series E Preferred
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | 2,464,166 | (2,464,166 | ) | - | ||||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (746,449 | ) | - | (746,449 | ) | |||||||||||||||||||||||||||||||||
Contribution of officer's salary
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 352,462 | - | - | 352,462 | |||||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (2,887,231 | ) | (2,887,231 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2009
|
- | - | - | - | 271,721 | 272 | 594,342 | 594 | 590,537 | 590 | 9,537,051 | 4,769 | - | 30,578,607 | 16,622,353 | (50,885,913 | ) | (3,678,728 | ) | |||||||||||||||||||||||||||||||||
Conversion of preferred stock and accrued dividends into common shares
|
- | - | - | - | - | - | - | - | (191,500 | ) | (191 | ) | 491,165 | 246 | - | 1,350,443 | (1,148,809 | ) | - | 201,689 | ||||||||||||||||||||||||||||||||
Valuation of beneficial conversion feature on convertible debt
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 57,378 | - | - | 57,378 | |||||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (664,960 | ) | - | (664,960 | ) | |||||||||||||||||||||||||||||||||
Shares issued for commitment fee
|
- | - | - | - | - | - | - | - | - | - | 121,622 | 61 | - | 47,372 | - | - | 47,433 | |||||||||||||||||||||||||||||||||||
Amortization of convertible note premium
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 44,077 | - | - | 44,077 | |||||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (1,166,045 | ) | (1,166,045 | ) | |||||||||||||||||||||||||||||||||
Balance, December 31, 2010
|
- | - | - | - | 271,721 | 272 | 594,342 | 594 | 399,037 | 399 | 10,149,838 | 5,076 | - | 32,077,877 | 14,808,584 | (52,051,958 | ) | (5,159,156 | ) | |||||||||||||||||||||||||||||||||
Preferred stock dividend
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | (472,788 | ) | - | (472,788 | ) | |||||||||||||||||||||||||||||||||
Amortization of convertible note premium
|
- | - | - | - | - | - | - | - | - | - | - | - | - | 73,789 | - | - | 73,789 | |||||||||||||||||||||||||||||||||||
Net loss nine months ended September 30, 2011
|
- | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (709,277 | ) | (709,277 | ) | |||||||||||||||||||||||||||||||||
Balance, September 30, 2011 (unaudited)
|
- | $ | - | - | $ | - | 271,721 | $ | 272 | 594,342 | $ | 594 | 399,037 | $ | 399 | 10,149,838 | $ | 5,076 | - | $ | 32,151,666 | $ | 14,335,796 | $ | (52,761,235 | ) | $ | (6,267,432 | ) |
F-6
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
(Unaudited)
|
Cumulative
|
|||||||||||
from inception
|
||||||||||||
Nine Months Ended
|
(April 11, 1996)
|
|||||||||||
September 30,
|
to September 30,
|
|||||||||||
2011
|
2010
|
2011
|
||||||||||
Cash flows from operating activities
|
||||||||||||
Net loss
|
$ | (709,277 | ) | $ | (818,865 | ) | $ | (43,506,415 | ) | |||
Adjustments to reconcile net income to net cash used by operating activities:
|
||||||||||||
Depreciation and amortization
|
34,413 | 34,452 | 445,398 | |||||||||
Amortization of loan discount
|
23,418 | 4,594 | 34,192 | |||||||||
Loss on extinguishment of debt
|
- | 157,413 | 157,413 | |||||||||
Contribution of officer's salary/expenses paid by officer
|
- | - | 838,680 | |||||||||
Issuance of common stock and options for services
|
- | - | 17,396,008 | |||||||||
Issuance of preferred stock for services
|
- | - | 145,999 | |||||||||
Issuance of debt for services
|
94,422 | 137,500 | 247,422 | |||||||||
Changes in operating assets and liabilities
|
||||||||||||
(Increase) decrease in other assets
|
(6,594 | ) | 37,887 | (4,524 | ) | |||||||
Increase (decrease) in accounts and other payable
|
31,746 | (95,097 | ) | 309,274 | ||||||||
Increase (decrease) in accrued expenses
|
374,273 | 299,859 | 1,272,863 | |||||||||
Net cash used in operating activities
|
(157,599 | ) | (242,257 | ) | (22,663,690 | ) | ||||||
Cash flows from investing activities
|
||||||||||||
Purchase of patent
|
- | - | (114,795 | ) | ||||||||
Capital expenditures
|
- | - | (148,016 | ) | ||||||||
Redemption of cash surrender value of life insurance
|
- | - | 790,910 | |||||||||
Increase in cash surrender value of life insurance
|
- | - | (790,910 | ) | ||||||||
Net cash used in investing activities
|
- | - | (262,811 | ) | ||||||||
Cash flows from financing activities
|
||||||||||||
Proceeds from shareholder notes
|
- | - | 564,917 | |||||||||
Proceeds from convertible debt
|
100,000 | 265,000 | 510,000 | |||||||||
Payments on note payable to shareholder
|
- | - | (102,017 | ) | ||||||||
Exercise of options and warrants
|
- | - | 4,853,421 | |||||||||
Issuance of preferred stock
|
- | - | 16,390,512 | |||||||||
Issuance of common stock
|
- | - | 915,200 | |||||||||
Dividends
|
- | - | (5,051 | ) | ||||||||
Cancellation of common stock
|
- | - | (200,325 | ) | ||||||||
Net cash provided by financing activities
|
100,000 | 265,000 | 22,926,657 | |||||||||
|
||||||||||||
Net increase in cash
|
(57,599 | ) | 22,743 | 156 | ||||||||
Cash, beginning of period
|
57,755 | 5,583 | - | |||||||||
Cash, end of period
|
$ | 156 | $ | 28,326 | $ | 156 |
(Continued)
The accompanying notes are an integral part of these condensed financial statements.
F-7
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows (Continued)(Unaudited)
|
Cumulative
|
|||||||||||
from inception
|
||||||||||||
Nine Months Ended
|
(April 11, 1996)
|
|||||||||||
September 30,
|
to September 30,
|
|||||||||||
2011
|
2010
|
2011
|
||||||||||
Non-cash investing and financing activities:
|
||||||||||||
Issuance of common stock for note receivable
|
$ | - | $ | - | $ | 150 | ||||||
Debt to equity conversion
|
$ | - | $ | - | $ | 422,033 | ||||||
Acquisition of minority interest
|
$ | - | $ | - | $ | 33,250 | ||||||
Sale of Tercero - elimination of goodwill
|
$ | - | $ | - | $ | (40,000 | ) | |||||
Preferred dividends accrued
|
$ | 472,788 | $ | 507,373 | $ | 4,365,124 | ||||||
Preferred dividends paid through common stock issuance
|
$ | - | $ | 201,689 | $ | 1,290,759 | ||||||
Acquisition of Med Enclosures for note payable
|
$ | - | $ | - | $ | 250,000 | ||||||
Acquisition of patent through issuance of common stock
|
$ | - | $ | - | $ | 288,708 | ||||||
Settlement of lawsuit through common stock issuance
|
$ | - | $ | - | $ | 200,000 | ||||||
Valuation of beneficial conversion features
|
$ | - | $ | 31,959 | $ | 9,312,198 | ||||||
Conversion of loan to convertible debt
|
$ | - | $ | 47,717 | $ | 47,717 | ||||||
Amortization of loan premium
|
$ | 73,789 | $ | 18,717 | $ | 117,866 |
The accompanying notes are an integral part of these condensed financial statements.
F-8
CPC OF AMERICA, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements(A Development Stage Company)
September 30, 2011
1. Organization and summary of significant accounting policies
Organization
CPC of America, Inc., a Nevada corporation (“CPC” or the “Company”), was formed on April 11, 1996 to design, develop and commercialize innovative medical devices that deliver improved therapeutic options for vascular closure and enhance the quality of patient care in endovascular procedures. Current efforts focus on developing MedCloseTM, an investigational-stage vascular closure system (VCS) that is intended to rapidly seal the femoral arterial puncture site following diagnostic or interventional catheterization procedures. The Company is classified as a development stage company because its principal activities involve obtaining capital and rights to certain technology, and conducting research and development activities.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Interim periods
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2011 are not necessarily indicative of results for any future period. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2010.
Reclassifications
Certain amounts previously reported have been reclassified to conform to the current period presentation. These reclassifications have no effect on net loss.
Liquidity and management’s plans
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has not generated any revenues from operations and there is no assurance that the Company will generate revenues in the future. The Company’s ability to generate revenue primarily depends on its success in completing development and obtaining regulatory approvals for the commercialization of its MedClose vascular closure system. The Company incurred a net loss of $709,277 during the nine months ended September 30, 2011. Also, the Company had a cash balance of $156, a working capital deficit of $6,188,298 and a stockholders’ deficit of $6,267,432 at September 30, 2011.
F-9
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
1. Organization and summary of significant accounting policies (continued)
Liquidity and management’s plans (continued)
The Company will require a minimum of $3 million of additional working capital in order to fund its proposed operations over the next 12 months, assuming that Series C and D shareholders do not make requests for a substantial amount of dividend payments in cash. In the event the Company receives substantial requests for dividend payments in cash or encounters a material amount of unexpected expenses, additional working capital in excess of $3 million may be required.
Management plans to continue to seek sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. On December 17, 2010, the Company entered into an equity line of credit agreement with Ascendiant Capital Group, LLC (“Ascendiant”) in order to establish a possible source of funding for CPC. The equity line of credit agreement establishes what is sometimes also referred to as an equity drawdown facility. Ascendiant will provide up to $3,000,000 of funding over a 24 month period. No drawdowns, however, can be made until the Company files a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”) and the registration statement is declared effective. The Company filed such a registration statement on February 14, 2011 and it is still in the approval process with the SEC at this time. Management expects to monitor and control the Company’s operating costs until cash is available through financing or operating activities. There are no assurances that the Company will be successful in achieving these plans. The Company anticipates that losses will continue until such time, if ever, as the Company is able to generate sufficient revenues to support its operations.
Fair value of financial instruments
The accounting standards regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, prepaid expenses, accounts payable and accrued liabilities, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization.
The Company has also adopted ASC 820-10 (formerly SFAS 157, “Fair Value Measurements”) which defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follow:
●
|
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
●
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
|
F-10
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
1. Organization and summary of significant accounting policies (continued)
Fair value of financial instruments (continued)
●
|
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.
|
Since January 2010, the Company has issued convertible notes totaling $805,139. As of September 30, 2011, the carrying value of these convertible notes was $1,074,581, which included accrued interest of $253,082, a $39,544 premium (net of amortization) resulting from fair value calculations due to significant modification of terms, less a discount (net of amortization) of $23,186 from the beneficial conversion feature associated with the notes. The Company used level 3 inputs for its valuation methodology and the fair value was determined to be approximately $1,758,230 using cash flows discounted at relevant market interest rates in effect at the period close and Black-Scholes Pricing Model since there is no observable market price.
As of September 30, 2011, the Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 820-10.
Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new guidance results in a consistent definition of fair value and common requirements for measurement of and disclosure about fair value between U.S. GAAP and International Financial Reporting Standards. While many of the amendments to U.S. GAAP are not expected to have a significant effect on practice, the new guidance changes some fair value measurement principles and disclosure requirements. This new guidance is effective for fiscal years and interim periods beginning after December 15, 2011. The Company does not expect the adoption of the standard update to have a significant impact on its financial position or results of operations.
In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income (loss) as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income (loss) in either a single continuous statement of comprehensive income (loss) which contains two sections, net income (loss) and other comprehensive income (loss), or in two separate but consecutive statements. This guidance will be effective for the Company beginning in fiscal 2013. The Company does not expect the adoption of the standard update to impact its financial position or results of operations, as it only requires a change in the format of presentation.
2. Share-based payments
Share-based compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. There was no estimated share-based compensation expense recognized for the nine months ended September 30, 2011 and 2010.
A summary of option activity for the nine months ended September 30, 2011 is as follows:
Number of
|
Exercise Price
|
|||||||||||
Options
|
Per Share
|
Expiration
|
||||||||||
Outstanding at December 31, 2010
|
1,853,907 | $ | 4.45 - 7.90 | 2013 | ||||||||
Activity for the nine months ended Sept. 30, 2011
|
- | |||||||||||
Outstanding at September 30, 2011
|
1,853,907 | $ | 4.45 - 7.90 | 2013 | ||||||||
Exercisable at September 30, 2011
|
1,853,907 |
If all options outstanding at September 30, 2011 were exercised, the Company would receive $14,015,865 in capital.
F-11
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
3. Accrued salary and related taxes
The Company is in breach of contract with its CEO and CFO regarding timely payment of salary. The CEO’s salary breach originally occurred in 2006, and the breach of contract with the CFO extends back to April 1, 2009. Salary currently due to the CEO and CFO are as follows:
CEO
|
CFO
|
Total
|
||||||||||
2009 Salary
|
$ | 218,206 | $ | 45,000 | $ | 263,206 | ||||||
2010 Salary
|
175,000 | 120,000 | 295,000 | |||||||||
2011 Salary (through Sept. 30, 2011)
|
131,250 | 90,000 | 221,250 | |||||||||
$ | 524,456 | $ | 255,000 | 779,456 | ||||||||
Estimated employer taxes
|
27,600 | |||||||||||
Total accrued salary and related taxes
|
$ | 807,056 |
4. Long-term debt - convertible notes
Since January 2010, the Company has issued $805,139 in convertible notes. The debt bears interest at rates from 20% to 30% per annum, compounded monthly, and is due two years from the date the cash is received. Due dates range from January 2012 to September 8, 2013. In addition, the debt and related accrued interest is convertible into the Company’s common stock at a rate equal to the closing price of the Company’s stock on the day the cash is received, which is the date of the note. Conversion rates range from $0.22 - $0.74.
Cash proceeds of $510,000 were received from existing shareholders, the Company’s CEO converted amounts owed to him totaling $79,717 into covertible notes and the Company issued notes totaling $215,422 in exchange for services.
As noted above, the debt and related accrued interest is convertible into the Company’s common stock, and originally, this conversion rate was equal to the closing price of the Company’s stock on the day the cash was received. As additional money was received from the same individuals who had loaned money in the first and second quarters of 2010, the conversion rate for all notes from these individuals was negotiated downward to reflect the Company’s common stock price at a date near the day the additional cash was received in the third quarter of 2010. ASC 470-50-40-6 requires an exchange of debt instruments with substantially different terms to be treated as a debt extinguishment. The modification of terms on these notes met the definition of significant because the change in the fair value of the embedded conversion option was more than 10 percent of the carrying amount of the original debt instrument immediately before and after the modification of terms.
F-12
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
4. Long-term debt - convertible notes (continued)
According to ASC 470-50, the difference between the net carrying value and the price paid to acquire the debt instruments is recorded as a gain or loss. In the Company’s situation, the acquisition price was calculated as the present value of the principal (using a 1% risk-free interest rate) plus the fair value of the conversion option (calculated using the Black-Scholes Method), less the embedded beneficial conversion feature. Since this acquisition price was greater than the notes’ carrying value, a loss on extinguishment of $157,413 was recorded during the quarter ended September 30, 2010.
The Company has recorded a beneficial conversion feature in accordance with FASB ASC 470-20. The Company measures the embedded beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the embedded beneficial conversion feature to additional paid-in capital. Intrinsic value is calculated as the difference between the effective conversion price and the fair value of the common stock into which the debt is convertible, multiplied by the number of shares into which the debt is convertible. A beneficial conversion feature totaling $57,378 was recorded as loan discount since January 2010. The loan discount will be amortized over the life of the convertible note. For the nine months ended September 30, 2011 and 2010, $23,418 and $4,594 of amortization of loan discount was recorded as interest expense, respectively.
A premium of $157,411 on the convertible notes was also recorded as part of the modification of terms. This premium is the present value of the principal (using a 1% risk-free interest rate) plus the fair value of the conversion option (calculated using the Black-Scholes Method) and will be amortized over the life of the loans. For the nine months ended September 30, 2011 and 2010, $73,789 and $18,717 of amortization of premium was recorded to additional paid in capital, respectively.
The following weighted average assumptions were used to calculate the options granted: term of 1.5-1.83 years, risk-free interest rate of 0.375% - 1%, volatility ranging of 110% and a weighted fair value ranging from $0.18 - $0.36.
Another feature of the convertible notes is that interest is guaranteed for the two year period contingent on early repayment or conversion of the debt. Total interest for the notes outstanding at September 30, 2011 is $588,594 of which $253,082 has been included as interest payable on the accompanying September 30, 2011 balance sheet. The difference of $335,512 represents a contingent liability at September 30, 2011. Management has determined that early repayment or conversion of the convertible notes is remote at this time, so the contingency has not been recorded.
F-13
CPC OF AMERICA, INC. AND SUBSIDIARIES
(A Development Stage Company)
4. Long-term debt - convertible notes (continued)
The following cash outlays would be required in 2012 and 2013 should repayment of the convertible debt and related interest be in cash:
Quarter ending March 31, 2012:
|
$ | 423,148 | ||
Quarter ending June 30, 2012:
|
$ | 255,030 | ||
Quarter ending September 30, 2012
|
$ | 314,843 | ||
Quarter ending December 31, 2012
|
$ | 91,341 | ||
Quarter ending March 31, 2013
|
$ | 162,087 | ||
Quarter ending June 30, 2013
|
$ | 19,828 | ||
Quarter ending September 30, 2013
|
$ | 127,457 | ||
Total potential cash outlay:
|
$ | 1,393,734 |
5. Shareholders’ equity (deficit)
There have been no preferred stock sales or conversions or common share issuances during the three months ended September 30, 2011.
If all preferred stock, related accrued dividends, options, convertible debt and related accrued interest outstanding at September 30, 2011 were converted to common stock, the total number of shares outstanding would be approximately 18,204,887.
The following is a summary of shareholders’ equity as of September 30, 2011:
The Articles of Incorporation authorize a total of 20,000,000 shares of Common Stock, of which 10,149,838 are issued and outstanding, and a total of 5,000,000 shares of Preferred Stock, of which 1,265,100 shares are outstanding. There are outstanding options to purchase 1,853,907 shares of Common Stock, all of which expire in 2013 and carry exercise prices ranging from $4.45 to $7.90 per share, well above the current market price.
6. Subsequent events
Events subsequent to September 30, 2011 have been evaluated through the date these financial statements were issued, to determine whether they should be disclosed to keep the financial statements from being misleading. As of the date of this report, no such events occurred.
F-14
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
General
To date, our activities have included the market analysis and development of our MedClose device and the raising of development and working capital. Our operations are currently focused on the business of developing a patented internal puncture closure device known as “MedClose.” We have not commenced revenue producing operations. Our operations to date have predominately consisted of the design and development of our MedClose device and our counterpulsation units, and the raising of capital.
The MedClose is a medical device that is designed to seal arterial puncture sites in patients who have undergone diagnostic or interventional catheterization procedures. It utilizes a proprietary catheter system that is designed to enhance manual compression by delivering a biologic or synthetic sealant which forms an elastic coagulum that is fully absorbed within 10 to 14 days. The MedClose is designed to significantly reduce the time to hemostasis (the stoppage of bleeding), thereby accelerating the patient's post-operative recovery and reducing the amount of time spent by post-operative professionals. The MedClose applications and usage capabilities are intended for cardiac diagnostic and interventional cardiology procedures as well as interventional radiological and proposed carotid stenting procedures. As of the date of this report, MedClose is not available for commercial distribution. We hold three patents for both the instrument and the technique used in connection with MedClose, and two additional patents pending.
We intend to analyze our options for moving forward with the commercial exploitation of the MedClose, including licensing or sale of the product and our manufacture, marketing and sale of the product directly. If we pursue the manufacture or marketing of the MedClose product, we will require significant additional capital. In that event, we will endeavor to acquire the necessary working capital from the issuance of debt instruments or the sale of our securities. However, there can be no assurance we will be able to obtain the required additional working capital on commercially reasonable terms or at all.
We expect to commence revenue producing operations subject to U.S. or foreign regulatory approval of the MedClose device. As of the date of this report, we believe that we are likely to receive foreign regulatory approval of the MedClose device sooner than U.S. approval, and we intend to focus our development efforts on the approval of the MedClose device in the European Union. We intend to submit an application for a CE mark for the MedClose product, as a delivery system consisting of the MedClose device coupled with our proprietary sealant. A CE mark is a mandatory conformance mark on products placed on the market in the European Economic Area. With the CE marking on a product, the manufacturer ensures that the product is in conformity with the essential requirements of the applicable European Conformity directives. CE mark approval is the principal requirement for commercial sale of the MedClose device in the European Union. The filing of our application for a CE mark and the regulatory approval of the MedClose in the European Union is subject to our receipt of additional capital. Until we receive additional capital, we cannot continue progress on the CE mark application.
We also intend to continue our development of a proprietary synthetic sealant suitable for use in connection with the MedClose device. In March 2009, we entered into a product development agreement with Dr. Olex Hnojewyj, a holder of 13 patents in the field of vascular closure and other medical devices, pursuant to which Dr. Hnojewyj was retained by us to develop a synthetic sealant on our behalf suitable for utilization with the MedClose device. We have developed a synthetic compound, and in May 2009, we filed our first patent for a synthetic sealant for specific application for the MedClose device. We conducted animal testing of the sealant during April 2009 and have successfully completed animal testing to date, subject only to the completion of Good Laboratory Practices (GLP) animal testing and animal biocompatibility testing. However, our pursuit of the GLP and biocompatibility testing is subject to our receipt of additional capital.
Upon receipt of additional capital, we expect to commence clinical trial testing of the MedClose device utilizing the synthetic sealant formula in multiple European locations. We will also commence with completing the necessary requirements to amend the investigational device exemption, or IDE, application with the FDA, by substituting our proprietary synthetic sealant for the original biologic sealant obtained from a third party vendor. With that substitution, we anticipate a transfer back to the Center for Devices and Radiological Health (“CDRH”) branch of the FDA from the Center for Biologics Evaluation and Research (“CBER”) branch since synthetic sealants are determined to be medical devices and not biological. We also intend to pursue an ISO 13485 certification of our records and procedures relating to our development and the proposed manufacturing of our MedClose device and proprietary sealant.
We do not expect to purchase or sell significant plant or equipment during 2011, nor do we expect a significant change in the number of our employees during the year.
3
Currently our focus is to acquire the necessary working capital from the issuance of debt instruments or the sale of our securities. However, there can be no assurance we will be able to obtain the required additional working capital on commercially reasonable terms or at all. On December 17, 2010, the Company entered into an equity line of credit agreement with Ascendiant Capital Group, LLC (“Ascendiant”) in order to establish a possible source of funding. The equity line of credit agreement establishes what is sometimes also referred to as an equity drawdown facility. Ascendiant will provide up to $3,000,000 of funding over a 24 month period. No drawdowns, however, can be made until the Company files a registration statement on Form S-1 with the Securities and Exchange Commission (“SEC”). The Company filed such a registration statement on February 14, 2011 and received notice of four review comments thereof. Thereafter the Company received from the SEC its annual three year review notice with the usual routine list of comments which impacted the S-1 process thereof. On September 8, 2011, the 2010 Form 10K was deemed reviewed with no other comments and an amended 2010 Form 10K was filed thereafter in September. Thus the S-1 is still in the approval process with the SEC at this time subject to operating capital to complete this approval process thereof.
Results of Operations
Revenue. We have generated no revenue to date and do not expect to generate revenue until we have received commercial regulatory approval of our MedClose device in various countries and markets.
Research and Development. Our expenses related to research and development during the nine month period ended September 30, 2011 were nearly the same as in the prior year nine month period: $115,128 and $106,319, respectively. Research and development related to the development and testing of our internal puncture closure device and technique known as “Medclose” and our proprietary sealant have virtually ceased due to capital constraints. Subject to our receipt of additional capital, we expect our research and development costs to increase as we get further into human trials and proceed towards the submission of applications for CE Mark/European commercial approval and eventually a FDA pre-market approval thereafter.
General and Administrative. During the nine month period ended September 30, 2011, general and administrative expenses decreased by $69,509 over the prior year nine month period. The decrease was primarily due to a decrease in other professional fees and a decrease in Directors’ compensation, offset by increases in insurance and legal fees resulting from the filing of a registration statement on Form S-1 with the SEC. Upon receipt of additional capital, we would expect general and administrative expenses to increase, though we do not anticipate an increase in officer salaries.
Interest expense. During the nine month period ended September 30, 2011, we incurred $173,268 in interest expense due to the issuance of the convertible notes described below. This represents an increase of $108,525 over the prior year due to an increase in the amount of notes outstanding.
Net Loss. Our net loss decreased for the nine month period of September 30, 2011 compared to the same period in 2010: $709,277 and $818,865, respectively, as the increase in interest expense was offset by the decrease in general and administrative expenses in the current period and the loss on extinguishment of debt in the prior year period. We have had inadequate capital to fund our plan of operation
Financial Condition
As of September 30, 2011, we had $156 of cash and a working capital deficit of $6,188,298, which includes accrued dividends of $4,262,138 payable on our outstanding shares of Series C, Series D and Series E preferred stock as of such date. Our Series C and Series D preferred stock both have a 5% annual dividend payable in cash or shares of our common stock, at the option of the holder. Those dividends are convertible into our common shares at the rate of $3.57 per share in the case of the Series C preferred stock and $6.86 per share in the case of the Series D preferred stock. Our Series E preferred stock has a 10% annual dividend payable in cash or shares of our common stock, at the option of our company, subject to the holder’s right to take dividends in common shares. The dividends on Series E preferred stock are convertible into our common shares at the rate of $2.75 per share. Dividends on our outstanding shares of preferred stock are only payable at the time those shares are converted into shares of our common stock. To date, all dividends to the holders of our Series C and D preferred shares have been paid in common shares. However, there can be no assurance that our Series C and D preferred shareholders will continue to elect to receive dividends in common shares instead of cash.
Commencing in July 2009, we began to curtail certain product development and testing due to limited working capital. We believe that we will require a minimum of $3 million of additional working capital in order to fund our proposed operations over the 12 months following the date of this report, assuming we do not receive requests for a substantial amount of dividend payments in cash. In the event we receive substantial requests for dividend payments in cash or we encounter a material amount of unexpected expenses, we may require in excess of $3 million additional capital over the next 12 months. We will seek to obtain additional working capital through the issuance of debt securities or the sale of our securities. However, we have no agreements or understandings with any third parties at this time for our receipt of such working capital. Consequently, there can be no assurance we will be able to access capital as and when needed or, if so, that the terms of any available financing will be subject to commercially reasonable terms.
4
Since January 2010, the Company has issued $805,139 in convertible notes. The debt bears interest at rates from 20% to 30% per annum, compounded monthly, and is due two years from the date the cash is received. In addition, the debt and related accrued interest is convertible into the Company’s common stock at a rate equal to the closing price of the Company’s stock on the day the cash is received, which is the date of the note. Cash proceeds of $510,000 were received from existing shareholders, the Company’s CEO converted amounts owed to him totaling $79,717, and the Company issued notes totaling $215,422 in exchange for consulting expenses.
As noted above, the debt and related accrued interest is convertible into the Company’s common stock, and originally, this conversion rate was equal to the closing price of the Company’s stock on the day the cash was received. As additional money was received from the same individuals who had loaned money in the first and second quarters of 2010, the conversion rate for all notes from these individuals was negotiated downward to reflect the Company’s common stock price at a date near the day the additional cash was received in the third quarter of 2010. ASC 470-50-40-6 requires an exchange of debt instruments with substantially different terms to be treated as a debt extinguishment. The modification of terms on these notes met the definition of significant because the change in the fair value of the embedded conversion option was more than 10 percent of the carrying amount of the original debt instrument immediately before and after the modification of terms.
According to ASC 470-50, the difference between the net carrying value and the price paid to acquire the debt instruments is recorded as a gain or loss. In the Company’s situation, the acquisition price was calculated as the present value of the principal (using a 1% risk-free interest rate) plus the fair value of the conversion option (calculated using the Black-Scholes Method), less the embedded beneficial conversion feature. Since this acquisition price was greater than the notes’ carrying value, a loss on extinguishment of $157,413 was recorded for the quarter ended September 30, 2010.
The Company has recorded a beneficial conversion feature in accordance with FASB ASC 470-20. The Company measures the embedded beneficial conversion feature by allocating a portion of the proceeds equal to the intrinsic value of the embedded beneficial conversion feature to additional paid-in capital. Intrinsic value is calculated as the difference between the effective conversion price and the fair value of the common stock into which the debt is convertible, multiplied by the number of shares into which the debt is convertible. A beneficial conversion feature totaling $57,378 was recorded as loan discount since January 2010. The loan discount will be amortized over the life of the convertible note. For the nine months ended September 30, 2011 and 2010, $23,418 and $4,594 of amortization of loan discount was recorded as interest expense, respectively.
A premium of $157,411 on the convertible notes was also recorded as part of the modification of terms. This premium is the present value of the principal (using a 1% risk-free interest rate) plus the fair value of the conversion option (calculated using the Black-Scholes Method) and will be amortized over the life of the loans. For the nine months ended September 30, 2011 and 2010, $73,789 and $18,717 of amortization of premium was recorded to additional paid in capital, respectively.
The following weighted average assumptions were used to calculate the options granted: term of 1.5-1.83 years, risk-free interest rate of 0.375% - 1%, volatility ranging of 110% and a weighted fair value ranging from $0.18 - $0.36.
Another feature of the convertible notes is that interest is guaranteed for the two year period contingent on early repayment or conversion of the debt. Total interest for the notes outstanding at September 30, 2011 is $588,594 of which $253,082 has been included as interest payable on the accompanying September 30, 2011 balance sheet. The difference of $335,512 represents a contingent liability at September 30, 2011. Management has determined that early repayment or conversion of the convertible notes is remote at this time, so the contingency has not been recorded.
The following cash outlays would be required in 2012 and 2013 should repayment of the convertible debt and related interest be in cash:
Quarter ending March 31, 2012:
|
$ | 423,148 | ||
Quarter ending June 30, 2012:
|
$ | 255,030 | ||
Quarter ending September 30, 2012
|
$ | 314,843 | ||
Quarter ending December 31, 2012
|
$ | 91,341 | ||
Quarter ending March 31, 2013
|
$ | 162,087 | ||
Quarter ending June 30, 2013
|
$ | 19,828 | ||
Quarter ending September 30, 2013
|
$ | 127,457 | ||
Total potential cash outlay:
|
$ | 1,393,734 |
The report of our independent registered public accounting firm for the fiscal year ended December 31, 2010 states that due to our working capital deficiency at December 31, 2010 there is a substantial doubt about our ability to continue as a going concern.
5
As noted above, we are currently analyzing our options for moving forward with the commercial exploitation of the MedClose, including licensing or sale of the product and our manufacturing, marketing and sale of the product directly. If we pursue the direct manufacturing and marketing of the MedClose product, we will require significant additional capital in order to (i) complete clinical trials and regulatory approvals in Europe, North America and other designated foreign markets; (ii) commence manufacturing of the device; and (iii) commence marketing and sales of the device, including the development of a internal infrastructure necessary to support manufacturing and marketing.
We will endeavor to raise additional funds through the sale of our Series E preferred shares, convertible notes and any other available financing sources in order to meet our general working capital requirements and to fund the commercial exploitation of the MedClose. However, there are no agreements or understandings with any third parties at this time for our receipt of additional working capital, and there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If we are unable to access additional capital on a timely basis, we will be unable to expand or continue our development of the MedClose device and our operating results will be adversely affected.
Equity Line of Credit
On December 17, 2010, we entered into an equity line of credit agreement with Ascendiant Capital Group, LLC (“Ascendiant”) in order to establish a possible source of funding. The equity line of credit agreement establishes what is sometimes also referred to as an equity drawdown facility pursuant to a Securities Purchase Agreement entered into between the Company and Ascendiant.
Pursuant to a Registration Rights Agreement entered into between the Company and Ascendiant in connection with the equity line of credit, we filed a registration statement with the Securities and Exchange Commission (the “SEC”) on February 14, 2011. The registration statement will register shares of common stock to be purchased under the equity line of credit and the shares of common stock issued to Ascendiant for their commitment to the equity line of credit. There are no penalties assessed to us in connection with the filing and effectiveness deadlines associated with the registration statement.
Under the equity line of credit agreement, Ascendiant has agreed to provide us with up to $3,000,000 of funding prior to 24 months after the seventh trading date after the effective date of the registration statement.. During this period, we may request a drawdown under the equity line of credit by selling shares of its common stock to Ascendiant and Ascendiant will be obligated to purchase the shares. We may request a drawdown once every eleven trading days, although we are under no obligation to request any drawdowns under the equity line of credit. There must be a minimum of two trading days between each drawdown request.
During the nine trading days following a drawdown request, we will calculate the amount of shares we will sell to Ascendiant and the purchase price per share. The purchase price per share of common stock will be based on the daily volume weighted average price of our common stock during each of the nine trading days immediately following the drawdown date, less a discount of 10%.
We may request a drawdown by faxing a drawdown notice to Ascendiant, stating the amount of the drawdown and the lowest price, if any, at which we are willing to sell the shares. The lowest price will be set by our Chief Executive Officer or Chief Financial Officer in their sole and absolute discretion.
No drawdowns on the line of credit will occur until the Registration Statement mentioned above is approved by the SEC, and that process is ongoing at this time. The Company filed such a registration statement on February 14, 2011 and received notice of four review comments thereof. Thereafter the Company received from the SEC its annual three year review notice with the usual routine list of comments which impacted the S-1 process thereof. On September 8, 2011, the 2010 Form 10K was deemed reviewed with no other comments and an amended 2010 Form 10K was filed thereafter in September. Thus the S-1 is still in the approval process with the SEC at this time subject to operating capital to complete this approval process thereof.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet financing arrangements.
Forward Looking Statements
This report contains forward-looking statements that are based on our beliefs as well as assumptions and information currently available to us. When used in this report, the words “believe,” “expect,” “anticipate,” “estimate” and similar expressions are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and assumptions, including, without limitation, the risks and uncertainties concerning FDA approval of our products; the risks and uncertainties concerning the acceptance of our services and products by our potential customers; our present financial condition and the risks and uncertainties concerning the availability of additional capital as and when required; the risks and uncertainties concerning technological changes and the competition for our services and products; and the risks and uncertainties concerning general economic conditions. These and other factors that may affect our results are discussed more fully in “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011. Forward-looking statements speak only as of the date they are made. Readers are warned that we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, and are urged to review and consider disclosures we make in this and other reports that discuss factors germane to our business. See particularly our reports on Forms 10-K, 10-Q and 8-K filed from time to time with the Securities and Exchange Commission.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. Market risk is attributed to all market sensitive financial instruments, including long-term debt.
We do not utilize derivative financial instruments or investments in available-for-sale securities. All cash is held in both interest and non-interest bearing accounts. However, we do not believe that our cash accounts would have significant impact as a result of changes in interest rate since we do not rely on earnings from our cash accounts for cash flow.
Item 4. Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls and procedures” refers to the controls and procedures of our company that are designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Management, including our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
There were no changes in our internal control over financial reporting during the nine months ended September 30, 2011 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments during the quarter ended September 30, 2011 in any material pending legal proceedings to which the Company is a party or of which any of our property is the subject.
Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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None
Item 3.
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Defaults Upon Senior Securities
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None
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Item 5.
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Other Information
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(a)
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None
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(b)
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There were no changes to the procedures by which security holders may recommend nominees to our board of directors.
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Item 6.
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Exhibits.
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Exhibit No.
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Description
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Method of Filing
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31.1
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Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Filed electronically herewith
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31.2
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Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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Filed electronically herewith
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32.1
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Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).
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Filed electronically herewith
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101.INS | XBRL Instance Document |
Filed electronically herewith
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101.SCH | XBRL Schema Document | Filed electronically herewith |
101.CAL | XBRL Calculation Linkbase Document | Filed electronically herewith |
101.DEF | XBRL Definition Linkbase Document | Filed electronically herewith |
101.LAB | XBRL Label Linkbase Document | Filed electronically herewith |
101.PRE | XBRL Presentation Linkbase Document | Filed electronically herewith |
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SIGNATURES
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.
CPC of America, Inc.
(Registrant)
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Date: November 16, 2011
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By:
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/s/ Rod A. Shipman | |
Rod A. Shipman, | |||
President and Chief Executive Officer | |||
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By:
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/s/ Rod A. Shipman | |
Rod A. Shipman, | |||
Chief Financial Officer | |||
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