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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

Commission File Number: 000-52818

COMPUTER VISION SYSTEMS LABORATORIES CORP.
(Exact name of Registrant as specified in its charter)

Florida
 
454561241.
(State of incorporation)
 
(IRS Employer ID Number)
 
 (888)-406-5743
(Registrant’s telephone number)

(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 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. 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
(Do not check if a smaller reporting company)
     

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 the date of this report on Form 10-Q, we had 49,126,292 shares of common stock, par value $0.0001 per share outstanding.



 
 

 
 
TABLE OF CONTENTS
 
     
Page
 
PART I       F-1  
           
Item 1.
Financial Statements (Unaudited) March 31, 2012 and (Audited) December 31, 2011
   
F-1
 
           
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
   
4
 
           
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
   
 
 
           
Item 4.
Controls and Procedures
   
 
 
           
PART II       9  
           
Item 1.
Legal Proceedings
   
9
 
           
Item 1A.
Risk Factors
   
9
 
           
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
   
21
 
           
Item 3.
Defaults Upon Senior Securities
   
22
 
           
Item 4.
Mine Safety Disclosures
   
22
 
           
Item 5.
Other Information
   
22
 
           
Item 6.
Exhibits
   
23
 
           
 
Signatures
   
24
 

 
2

 
 
PART I

FINANCIAL INFORMATION
Item 1.Financial Statements.
 
COMPUTER VISION SYSTEMS LABORATORIES CORP. 
formerly
CARDIO VASCULAR MEDICAL DEVICE CORP.
 
(A DEVELOPMENT STAGE COMPANY)
 
INDEX TO FINANCIAL STATEMENTS
 
March 31, 2012
 
Financial Statements
     
       
Balance Sheets as of March 31, 2012 and December 31, 2011
    F-2  
         
Statements of Operations for the Three Months Ended March 31, 2012 and 2011  and Cumulative from Inception
    F-3  
         
Statement of Stockholders’ Deficit for the Period from Inception Through March 31, 2012
    F-4  
         
Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 and Cumulative from Inception
    F-5  
         
Notes to Financial Statements
    F-6  
 
On July 29, 2011 our majority shareholder approved a one (1) share for ten (10) share reverse stock split of our common shares, which became effective on August 30, 2011.  Shares presented in the financial statements reflect the reverse stock split.
 
 
3

 
 
Computer Vision Systems Laboratories Corp.
(formerly Cardio Vascular Medical Device Corp.)
(A Development Stage Company)
Balance Sheets
 
 
As of
 
As of
 
 
March 31,
 
December 31,
 
 
2012
 
2011
 
 
(Unaudited)
 
(Audited)
 
ASSETS
Current Assets:
       
Cash and cash equivalents
  $ 161,329       110  
Prepaid expenses
    2,270,760       199,110  
      2,432,089       199,220  
                 
Non-current Assets:
               
License
    250,000       250,000  
Less accumulated amortization
    (9,375 )     (6,250 )
Prototype
    2,000       2,000  
                 
Total Assets
  $ 2,674,714     $ 444,970  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                 
Current Liabilities:
               
Accounts payable - trade
  $ 92,597     $ 74,999  
Accounts payable - related party
    11,505       39,291  
Accrued liabilities
    27,229       182,376  
Convertible notes payable
    475,000       260,000  
Total current liabilities
    606,331       556,666  
                 
Stockholders' Equity (Deficit):
               
Preferred stock, par value $.0001 per share, 10,000,000 shares
               
authorized; -0- issued and outstanding
    -       -  
Common stock, par value $0.0001 per share, 490,000,000 shares authorized;
               
44,029,618 and 26,005,818 shares issued and outstanding, respectively
    4,403       2,601  
Additional paid-in capital
    4,149,838       1,530,703  
(Deficit) accumulated during the development stage
    (2,085,858 )     (1,645,000 )
Total stockholders' equity (deficit)
    2,068,383       (111,696 )
                 
Total Liabilities and Stockholders' Equity (Deficit)
  $ 2,674,714     $ 444,970  
 
The accompanying notes to financial statements are an integral part of these statements.
 
 * On July 29, 2011 our majority shareholder approved a one (1) share for ten (10) share reverse stock split of our common shares, which became effective on August 30, 2011.  Shares presented in the financial statements reflect the reverse stock split.  Prior year share and common stock values have been retroactively restated for comparative presentation.
 
 
F-1

 

Computer Vision Systems Laboratories Corp.
(formerly Cardio Vascular Medical Device Corp.)
(A Development Stage Company)
Statements of Operations
(Unaudited)
 
               
From Inception
 
               
(April 26, 2007)
 
   
Three Months Ended
   
Through
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
                   
Revenues
  $ -     $ -     $ -  
                         
OPERATING EXPENSES:
                       
Consulting
    127,792       -       927,330  
Consulting - related parties
    64,924       28,400       629,244  
Audit and accounting fees
    1,500       3,000       90,880  
Legal and professional fees
    39,644       7,000       159,664  
SEC and other public expense
    2,343       3,970       42,133  
Other administrative
    15,465       -       38,975  
Amortization
    3,125       -       10,100  
Total operating expenses
    254,793       42,370       1,898,326  
                         
Loss from Operations
    (254,793 )     (42,370 )     (1,898,326 )
                         
Other Income (Expense):
                       
Interest income
    -       -       45  
Interest expense
    (186,065 )     -       (223,743 )
Miscellaneous income
    -       -       825  
Gain on foreign currency exchange
    -       -       1,110  
Settlement of Debt
    -       -       34,231  
Net Loss
  $ (440,858 )   $ (42,370 )   $ (2,085,858 )
(Loss) Per Common Share:
                       
Basic and Diluted
  $ (0.01 )   $ (0.00 )        
                         
Weighted average number of shares
    31,050,739       19,738,889          
Basic and diluted net loss per share
  $ (0.01 )   $ (0.00 )        
 
The accompanying notes to financial statements are an integral part of these statements.
 
* On July 29, 2011 our majority shareholder approved a one (1) share for ten (10) share reverse stock split of our common shares, which became effective on August 30, 2011.  Shares presented in the financial statements reflect the reverse stock split.  Prior year share and common stock values have been retroactively restated for comparative presentation
 
 
F-2

 

Computer Vision Systems Laboratories Corp.
(formerly Cardio Vascular Medical Device Corp.)
(A Development Stage Company)
Statements of Changes in Stockholders' Equity (Deficit)
(Unaudited)
 
    Common Stock    
Additional
Paid-In
   
Deficit
Accumulated
During the
Development
       
   
Shares *
   
Amount
   
Capital
   
Stage
   
Total
 
BALANCE, April 26, 2007 (Date of inception)
    -       -       -       -       -  
Issuance of common stock for :
                                       
Cash
    40,000,000     $ 4,000     $ (3,000 )   $ -     $ 1,000  
Cash
    14,000,000       1,400       108,490       -       109,890  
Deferred Offering Costs
    -       -       (20,000 )     -       (20,000 )
Services
    100,000       10       515       -       525  
Net loss for the period
    -       -       -       (98,121 )     (98,121 )
                                         
BALANCE, December 31, 2007
    54,100,000       5,410       86,005       (98,121 )     (6,706 )
                                         
Net loss for the period
    -       -       -       (41,386 )     (41,386 )
                                         
BALANCE, December 31, 2008
    54,100,000       5,410       86,005       (139,507 )     (48,092 )
                                         
Common stock issued for cash
    13,600,000       1,360       26,140       -       27,500  
Net loss for the period
    -       -       -       (69,866 )     (69,866 )
                                         
BALANCE, December 31, 2009
    67,700,000       6,770       112,145       (209,373 )     (90,458 )
                                         
Common stock issued for services
    1,200,000       120       23,880       -       24,000  
Common stock issued for services
    2,000,000       200       59,800       -       60,000  
Common stock issued for services
    1,000,000       100       29,900       -       30,000  
Common stock issued for cash
    125,000,000       12,500       82,500       -       95,000  
Contributed capital
    -       -       1,804       -       1,804  
Net loss for the period
    -       -       -       (142,520 )     (142,520 )
                                         
BALANCE, December 31, 2010
    196,900,000       19,690       310,029       (351,893 )     (22,174 )
                                         
Common stock issued for services
    2,000,000       200       8,200       -       8,400  
Contributed to capital
    -       -       10,000       -       10,000  
Common stock issued for services
    37,840,000       3,784       937,436       -       941,220  
Reverse split 1:10
    (213,066,000 )     (21,302 )     21,307       -       5  
Conversion of note payable
    2,256,818       226       238,788       -       239,014  
Common stock issued for services
    75,000       3       4,943       -       4,946  
Net loss for the period
    -       -       -       (1,293,107 )     (1,293,107 )
                                         
BALANCE, December 31, 2011
    26,005,818       2,601       1,530,703       (1,645,000 )     (111,697 )
                                         
Common stock issued for services
    17,626,000       1,763       2,431,675       -       2,433,438  
Conversion of note payable
    397,800       40       9,960       -       10,000  
Discount on convertible notes
    -       -       177,500       -       177,500  
Net loss for the period
    -       -       -       (440,858 )     (440,858 )
                                         
BALANCE, March 31, 2012
    44,029,618     $ 4,403     $ 4,149,838     $ (2,085,858 )   $ 2,068,383  

The accompanying notes to financial statements are an integral part of these statements.
 
* On July 29, 2011 our majority shareholder approved a one (1) share for ten (10) share reverse stock split of our common shares, which became effective on August 30, 2011.  Shares presented in the financial statements reflect the reverse stock split.
 
 
F-3

 

Computer Vision Systems Laboratories Corp.
(formerly Cardio Vascular Medical Device Corp.)
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
 
               
From Inception
 
               
(April 26, 2007)
 
   
Three Months Ended
   
Through
 
   
March 31,
   
March 31,
 
   
2012
   
2011
   
2012
 
Cash Flows From Operating Activities
                 
Net Loss
  $ (440,858 )   $ (42,370 )   $ (2,085,858 )
Adjustments to reconcile net loss to net cash
                       
used in operating activities:
                       
Common stock issued for services and interest
    2,433,438       8,400       3,521,548  
Amortization of discount
    177,500       -       177,500  
Amortization
    3,125       -       10,100  
Gain on extinguishment of liabilities
    -       -       (725 )
Changes in assets and liabilities:
                       
Prepaid expenses
    (2,071,650 )     -       (2,270,760 )
Accounts payable and accrued expenses
    (165,336 )     30,970       131,330  
Total Cash Used For Operating Activities
    (63,781 )     (3,000 )     (516,865 )
                         
Cash Flows From Financing Activities
                       
Proceeds from related party loans
    -       3,000       172,054  
Payments on related party loans
    -       -       (170,250 )
Proceeds from loans
    225,000       -       485,000  
Payment of deferred offering costs
    -       -       (20,000 )
Proceeds from sale of common stock
    -       -       453,390  
Contribution by shareholder
    -       -       10,000  
Total Cash Provided by Financing Activities
    225,000       3,000       930,194  
                         
Cash Flows From Investing Activities
                       
Purchase of license
    -       -       (250,000 )
Purchase of prototype
    -       -       (2,000 )
Total Cash Used For Investing Activities
    -       -       (252,000 )
                         
Net Increase (Decrease) in Cash
    161,219       -       161,329  
                         
Cash at Beginning of Period
    110       -       -  
                         
Cash at End of Period
  $ 161,329     $ -     $ 161,329  
                         
Supplemental Disclosure of Cash Flow Information
                       
Interest paid
  $ -     $ -     $ 19,014  
Income taxes paid
  $ -     $ -     $ -  
                         
Non-cash Disclosure:
                       
Contribution of shareholder debt
  $ -     $ -     $ 10,000  
Conversion of note payable
  $ 10,000     $ -     $ 10,000  
 
The accompanying notes to financial statements are an integral part of these statements.

* On July 29, 2011 our majority shareholder approved a one (1) share for ten (10) share reverse stock split of our common shares, which became effective on August 30, 2011.  Shares presented in the financial statements reflect the reverse stock split.
 
On May 28, 2007, the Company acquired by assignment a United States patent named Maneuverable Coiled Guidewire from a Director and stockholder.  Under Staff Accounting Bulletin Topic 5G, "Transfer of Nonmonetary Assets by Promoters and Shareholders," the Company recorded the transaction as a royalty obligation payable at the Director and stockholder's historical cost basis, in the amount of $5,000 as determined under accounting principles generally accepted in United States of America. As of June 30, 2010, the Company determined that future cash flows to be generated by the patented technology were less than the net capitalized value of the patent.  Consequently, the patent and related accumulated amortization of $4,275 and $725, respectively, were written-off. The Company was also relieved of the royalty obligation of $5,000 payable to the transferring stockholder. As a result of this transaction, the Company recognized a gain of $725.  See Note 3 for additional details of this transaction.
 
On June 30, 2010, the Company was forgiven of an outstanding accrued liability of $1,804 payable to the Company's Chief Executive Officer. This transaction was treated as a capital contribution for financial reporting purposes.  On May 15, 2011 the Company was forgiven an outstanding loan from a shareholder in the amount of $10,000.  This transaction was treated as a capital contribution for financial reporting purposes. 
 
 
F-4

 

Computer Vision Systems Laboratories Corp.
(formerly Cardio Vascular Medical Device Corp.)
(A Development Stage Company)

 (1) Summary of Significant Accounting Policies
 
Nature of Operations
 
Computer Vision Systems Laboratories Corp., (the “Company” or” Computer Vision”) was incorporated in the state of Florida on June 27, 2011.  The Company formerly was Cardio Vascular Medical Device Corp. (the “Company” or “Cardio Vascular”) a Delaware corporation in the development stage.  The Company was organized on April 12, 2007, and incorporated under the laws of the State of Delaware on April 26, 2007.  The business plan of the Company is to commercialize its Sentinel BreastScan System and develop a medical device application utilizing its patent pertaining to a maneuverable coiled guide wire.  

Basis of Presentation

The Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States.  

Certain reclassifications have been made to prior periods presented to conform to information provided for the current period, for the purposes of comparability.

Unaudited Interim Financial Statements

The interim financial statements of the Company as of March 31, 2012, and for the periods then ended, and cumulative from inception, are unaudited. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company’s financial position as of March 31, 2012, and the results of its operations and its cash flows for the periods ended March 31, 2012, and cumulative from inception. These results are not necessarily indicative of the results expected for the calendar year ending December 31, 2012. The accompanying financial statements and notes thereto do not reflect all disclosures required under accounting principles generally accepted in the United States. Refer to the Company’s audited financial statements as of December 31, 2011, filed with the SEC, for additional information, including significant accounting policies.
 
Use of Estimates
 
The financial statements are prepared on the basis of accounting principles generally accepted in the United States of America.  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses.  Actual results could differ from those estimates made by management.

Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
 
 
F-5

 

Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 820 “Fair Value Measurements and Disclosures” (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) a reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
 
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2012 and 2010. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.

The Company applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on the Company’s financial statements.

As of March 31, 2012 and 2011 the fair values of the Company’s financial instruments approximate their historical carrying amount.

Cash and Cash Equivalents
 
For purposes of reporting within the statements of cash flows, the Company considers all cash on hand, cash accounts not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash and cash equivalents.  
 
Other Assets

The Company applied ASC 350-30, General Intangibles Other than Goodwill for its other assets.
 
The useful life of an intangible asset to an entity is the period over which the asset is expected to contribute directly or indirectly to the future cash flows.  Intangible assets with a finite useful life are amortized  over that finite useful life and intangible assets with an indefinite useful life shall are not amortized.

At March 31, 2012 other assets consisted of rights to a license of $250,000 and a prototype of $2,000.  Amortization expense for the years ended March 31, 2012 and 2011 was $9,375 and $6,250, respectively.

Long-lived assets such as intangibles assets are reviewed for impairment whenever facts and circumstances indicate that the carrying value may not be recoverable.  When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset.  The fair value is determined based on estimates of future cash flows, market value of similar assets, if available, or independent appraisals, if required.  If the carrying amount of the long-lived asset is not recoverable from its undiscounted cash flows, an impairment loss is recognized for the difference between the carrying amount and fair value of the asset.  When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risk associated with the recovery of the assets.  We did not recognize any impairment losses for any periods presented.
 
 
F-6

 

Revenue Recognition
 
The Company is in the development stage and has yet to realize revenues from planned operations.  It plans to realize revenues from licensing, manufacturing, selling, research and development, and royalty activities.  The Company follows FASB Accounting Standards Codification  ASC 605 “Revenue Recognition” and recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met:
 
(i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
 
Major revenue activities are expected to be licensing; manufacturing and selling;  research and development; and  royalty
 
Earnings (Loss) Per  Share

The Company follows FASB Accounting Standards Codification ASC 260, “Earnings Per Share”.  Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.  Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.  There were no potentially dilutive shares outstanding as of March 31, 2012 and 2011.
 
Income Taxes
 
The Company accounts for income taxes pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC 740”).  Under ASC 740, deferred tax assets and liabilities are determined based on temporary differences between the basis of certain assets and liabilities for income tax and financial reporting purposes.  The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.
 
The Company maintains a valuation allowance with respect to deferred tax assets.  The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.  Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws.
 
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset.  Any change in the valuation allowance will be included in income in the year of the change in estimate.
 
(2) Development Stage Activities and Going Concern
 
The Company is currently in the development stage, and its business plan includes raising capital essential to commencing its operating plan to commercialize its Sentinel Breast Scan System and develop a medical device application utilizing a patent pertaining to a maneuverable coiled guidewire.  
 
The accompanying 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 incurred an operating loss since inception and the cash resources of the Company are insufficient to meet its planned business objectives.  These and other factors raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
 
 
F-7

 
 
(3) Convertible Notes Payable and Loans Payable
 
During November 2011, the Company issued $ 470,000 worth of convertible notes to three investors. The notes are convertible at the price per share which is 20% less than the daily average of the Company's bid and ask price for the thirty days prior to the date that the Holder delivers a notice of conversion to the Company.

On December 1, 2011, the Company issued 2,256,818 shares of restricted common stock to an investor in satisfaction of $220,000 principal and $19,014 interest due pursuant to a convertible note.

In February 2012, the Company entered into convertible note agreements with two investors pursuant to which the Company received $225,000. The notes are due on demand and they bear interest at 10% per annum. The notes may be converted at the election of the holder, into common stock of the Company at the per share price of $0.10 per common share. For each one share converted, holder shall be entitled to receive one warrant exercisable into one share of Common Stock at the price of $.50 per share. The Warrants shall be exercisable for a term of one year after the grant date.

(4) Common Stock
 
On January 12, 2010, the Company issued 1,200,000 (pre-reverse split) shares of its common stock, par value $0.0001 per share, to a Director and officer as compensation for consulting services rendered amounting to $24,000 for services rendered, and to be rendered during the year ending December 31, 2010.
 
On May 15, 2010, the Company issued 2,000,000 (pre-reverse split) shares of common stock to Mr. Asher Zwebner, a former officer and Director or the company in exchange for the release of liabilities owed to him by the Company. The transaction was valued at $60,000.
 
 On May 15, 2010, the Company issued 1,000,000 (pre-reverse split) shares of common stock to Mr. Joseph Raz in exchange for the release of liabilities owed to him by the Company. The transaction was valued at $30,000.
 
On June 8, 2010, the Company sold an aggregate of 125,000,000 (pre-reverse split) shares of Common Stock to two separate entities (Rada Advisors, Inc. and Olympus Capital Group, LLC) for a total of $95,000 pursuant to an Agreement for the purchase of common stock. The share transaction represented approximately 63.5 percent of the total outstanding securities of the Company, and resulted in a change in control of the Company.
 
On March 10, 2011, David Hostelley, was named the Chief Executive Officer, President, Chief Financial Officer and Director of the Company. For agreeing to serve in such capacity Mr. Hostelley was issued 2,000,000 (pre-reverse split) shares of Common Stock of the Company. The stock was valued at $8,400 based the current fair market price.
 
On May 15, 2011 a shareholder, who was owed $10,000 from loans to the Company agreed to contribute that amount to the Company as contributed capital.
 
On July 28, 2011, the Company issued restricted common stock for services rendered to: Michael DiCicco (14,440,000 pre-reverse split shares, valued at $358,560), our Vice President and Director and Related Party; Joseph Safina (11,700,000 pre-reverse split shares, valued at $291,330); and Joseph Babiak (11,700,000 pre-reverse split shares, valued at $291,330).
 
On July 29, 2011 the Company’s majority shareholder approved a one (1) share for ten (10) share reverse stock split of its common shares which resulted in its shareholders receiving one (1) common share for every ten (10) shares held. The reverse split became effective on August 30, 2011. Shares presented in the financial statements reflect the  reverse stock split.

On November 9, 2011, the Company's board of directors approved an undetermined number of its common shares for future issuance for services rendered which can be issued at the discretion of its board of directors.

On December 1, 2011, the Company issued 2,256,818 shares of restricted common stock to an investor in satisfaction of $220,000 principal and $19,014 interest due pursuant to a convertible note.
 
 
F-8

 

On December 22, 2011, the Company issued 75,000 shares of restricted common stock for services valued at $4,946.

On February 13, 2012, the Company issued an aggregate of 175,000 shares to six persons for service on the Company’s scientific advisory board.

In February 2012 the Company issued 397,800 shares of restricted common stock to two investors in satisfaction of $10,000 principal pursuant to convertible notes.

On March 7, 2012, the Company issued 6,556,000 restricted to the Company’s vice president and director, Michael DiCicco for services rendered to from January 1, 2012 to December 31, 2016.
 
On March 7, 2012, the Company issued 1,000,000 restricted shares to the Company’s director, Douglas Miscoll for services from March 8, 2012 to March 8, 2016.
 
On March 7, 2012, the Company issued 6,830,000 restricted shares to a consultant for services rendered from June 1, 2011 to February 28, 2016.
 
On March 7, 2012, the Company issued 2, 830,000 restricted shares to a consultant for services rendered from June 1, 2011 to February 28, 2016.

On March 7, 2012, we issued 235,000 shares of our restricted common stock for services rendered to the Company.

(5) Related Party Transactions
 
On July 11, 2011, the Company entered into a License and Option to Purchase Agreement (the “Agreement”) with Infrared Sciences Corp., a Delaware corporation (“Infrared”) controlled by Thomas DiCicco,  our Chief Executive Officer and Director wherein the Company obtained the exclusive worldwide rights to use, develop, modify and commercialize certain non-patented technology, equipment and other property known as the Sentinel BreastScan, which develops high resolution digital infrared imaging for breast cancer detection (the “Intellectual Property”).  The Company agreed to pay $250,000 (the “Licensing Fee”) as consideration for the rights granted under the Agreement. Of this amount, a non-refundable payment of $175,000 has been paid to Infrared. The Company is required to pay the $75,000 balance upon the earlier of (i) its receipt of funding of at least $500,000; or (ii) two years after the execution date of the Agreement. If the Company fails to tender the final payment of $75,000 on or before July 11, 2013: (i) the license shall terminate and Infrared shall hold all interests in the Intellectual Property; (ii) the Company will hold no interest or license to the Intellectual Property; and (iii) the Company will have no interest or claim for the non-refundable payment of $175,000 made to Infrared.

The Agreement terminates on July 11, 2021. Under the terms of the Agreement, the Company may purchase the Intellectual Property any time prior to July 11, 2013 upon payment of an additional $250,000 (“the Acquisition Fee”) and the remaining $75,000 balance of the Licensing Fee if not previously paid.

On March 10, 2011 David Hostelley, was named Chief Executive Officer, President, Chief Financial Officer and Director of the Company.  For agreeing to serve in such capacity Mr. Hostelley was issued 2,000,000 shares of Common Stock of the Company. The stock was valued at $8,400 based on the current market price discounted for restricted trading.
 
On April 18, 2011 the Company issued 125,000,000 restricted common shares to Tom DiCicco for services to be rendered through October 2015. The shares were valued at $200,000.

On May 15, 2011, the Company owed $10,000 to stockholders of the Company who agreed to contribute that loan to capital.
 
On July 28, 2011, the Company issued restricted common stock for services rendered to: Michael DiCicco (14,440,000 shares, valued at $358,560), our Vice President and Director and Related Party.
 
 
F-9

 

On March 7, 2012, the Company issued 6,556,000 restricted to the Company’s vice president and director, Michael DiCicco for services rendered to from January 1, 2012 to December 31, 2016.
 
On March 7, 2012, the Company issued 1,000,000 restricted shares to the Company’s director, Douglas Miscoll for services from March 8, 2012 to March 8, 2016.

The Company is dependent on funding from the majority shareholder to meet operating cash requirements; however there is no written agreement to continue such funding.

During the periods presented, the Company has minimal needs for office space. The current shareholders have provided, as necessary, any minimal use of office and office equipment at no charge.

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

(6) Income Taxes

The provision (benefit) for income taxes for the period ended March 31, 2012, and 2011 was as follows (assuming a 34% effective tax rate):

   
2012
   
2011
 
Current Tax Provision:
           
Federal-
           
Taxable income
  $ -     $ -  
                 
Total current tax provision
  $ -     $ -  
                 
Deferred Tax Provision:
               
Federal-
               
Expected tax benefit
  $ 149,892     $ 14,406  
Non deductible amortization
    (60,350 )     -  
Change in valuation allowance
    (89,542 )     (14,406 )
                 
Total deferred tax provision
  $ -     $ -  
 
The Company had deferred income tax assets as of March 31, 2012and December 31, 2011, as follows:

   
2012
   
2011
 
             
Loss carryforwards
  $ 648,842     $ 559,300  
Less - Valuation allowance
    (648,842 )     (559,300 )
                 
Total net deferred tax assets
  $ -     $ -  
 
The Company provided a valuation allowance equal to the deferred income tax assets for the periods ended March 31, 2012 and December 31, 2011, because it is not presently known whether future taxable income will be sufficient to utilize the loss carryforwards.

As of March 31, 2012 the Company had approximately $1,908,000 in tax loss carryforwards that can be utilized in future periods to reduce taxable income, and expire by the year 2032.
 
 
F-10

 

The Company did not identify any material uncertain tax positions.  The Company did not recognize any interest or penalties for unrecognized tax benefits.

The Company has filed income tax returns in the United States. All tax years are closed by expiration of the statute of limitations.
 
(7) Change in Management
 
On March 10, 2011 David Hostelley, was named Chief Executive Officer, President, Chief Financial Officer and Director of the Company.
 
Our former sole director, David Hostelley, resigned as our director and appointed Thomas DiCicco and Michael DiCicco as our two directors effective May 17, 2011, and Thomas DiCicco was appointed as our Chief Executive Officer.
 
(8) Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact our financial position or results of operation
 
(8) Subsequent Events
 
On April 11, 2012, we issued 50,000 shares of our restricted common stock for services related to the advancement of our guidewire technology.

 On May 15, 2012, the holder of two convertible promissory notes dated April 5, 2011 and February 15, 2012 converted the principal amount of $250,000 and accrued interest into 2,666,666 shares of our common stock in full satisfaction of all principal and interest due thereunder.  In connection with the February 15, 2012 note, we granted the holder one (1) warrant for each (1) shares converted under the February 15, 2012 note. Each warrant is exercisable into one (1) share of our Common Stock at the price of $.50 per share. The Warrants are exercisable for a term of two (2) years after the date of execution hereof.

On May 16, 2012, the holder of two convertible promissory notes dated April 1, 2011 and February 24, 2012 converted the principal amount of $225,000 and accrued interest into 2,380,000 shares of our common stock in full satisfaction of all principal and interest due thereunder.  In connection with the February 24, 2012 note, we granted the holder one (1) warrant for each (1) shares converted under the February 24, 2012 note. Each warrant is exercisable into one (1) share of our Common Stock at the price of $.50 per share. The Warrants are exercisable for a term of two (2) years after the date of execution hereof.
 
 
F-11

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Forward-Looking Statements
The following discussion of the financial condition and results of operations of Computer Vision System Laboratories, Corp. should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Plan of Operations; the Condensed Financial Statements; the Notes to the Financial Statements; the Risk Factors included in herein, and all our other filings, including Current Reports on Form 8-K and 10Q filed with the SEC through the date of this 10Q report. This 10Q contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements using terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “projects”, “potential,” or “continue,” or the negative or other comparable terminology regarding beliefs, plans, expectations, or intentions regarding the future. These forward-looking statements involve substantial risks and uncertainties, and actual results could differ materially from those discussed and anticipated in such statements. Factors that could cause actual results to materially differ include, without limitation, the timely and successful completion of our U.S. Food and Drug Administration (“FDA”) pre-market approval (“PMA”) clinical trials; the timely and successful submission of our applications to the FDA; manufacturing risks relating to our products, technical and regulatory risks, our ability to accurately predict the demand for our products as well as future products and to develop strategies to address our markets successfully; the early stage of market development for medical imaging products and our ability to gain market acceptance of our products by the medical community;  our dependence on senior management and key personnel and our ability to attract and retain additional qualified personnel; risks relating to financing including future working capital financing arrangements; technical innovations that could render our products obsolete; competition; risks and uncertainties relating to intellectual property, including claims of infringement and patent litigation; risks relating to future acquisitions and strategic investments and alliances; and reimbursement policies for the use of products and any products we may introduce in the future. These risks and uncertainties include, but are not limited to, those described above or elsewhere in this report on Form 10Q. All forward-looking statements and risk factors included in this document are made as of the date of this report based on information available to us as of the date of this report, and we assume no obligation to update any forward-looking statements or risk factors. You are cautioned not to place undue reliance on these forward-looking statements.

As used in this Annual Report on Form 10-K (this “Report”), references to,” “we,” “our,” “us,” or “Computer Vision” refer to Computer Vision System Laboratories Corp., unless the context otherwise indicates.

Corporate Overview.
We are a Florida corporation originally formed in the state of Delaware on April 26, 2007, to engage in the licensing of manufacturing and distribution of a maneuverable-coiled guidewire which is our core product. We also plan to engage in the distribution and operation of the Sentinel BreastScan.

On June 27, 2011, we: (i) amended our Articles of Incorporation to increase our authorized common stock, par value $0.0001 per share, from 200,000,000 to 500,000,000 and designated 490,000,000 of these shares as common stock and 10,000,000 as “blank check” preferred stock; (ii) changed our name to Computer Vision Systems Laboratories Corp.; and (iii) changed our domicile from the state of Delaware to the state of Florida. On July 29, 2011, our majority shareholder approved a one (1) share for ten (10) share reverse stock split of our common shares which resulted in our shareholders on the effective date of August 30, 2011, holding one (1) common share for every ten (10) shares held.

 
4

 

Our Operations
We hold a patent from the United States Patent and Trademark Office which was granted on November 28, 2006, entitled the “Maneuverable-Coiled Guidewire,” (United States Patent No. 7,141,024). The invention is characterized by a maneuverable-coiled guidewire. A guidewire is a slender flexible metal wire with a very soft tip (usually made of a coil) that can be bent prior to the insertion into the arteries. The surgeon, by twirling and manipulating it back and forth, tries to insert the tip into the desired branch when in a bifurcation. The invention is based on the “Buckling” theory in which the tip is bent according to the force applied to it.

The guidewire was successfully fabricated and we created a demonstrative video of the guidewire in January of 2012.
 
In January and April of 2012, we filed two additional patents with improvements related to guidewire. In January of 2012,  a new lot of first generation guidewires was fabricated and we continue to refine the manufacturing process for higher volume yield. We also began fabrication of a second generation guidewire (work in process) and we worked on development of new fabrication techniques and conducted several evaluations of the various methods (work in process).

After fabrication of the guidewire, we identified potential products for the guidewire technology, selected trademark names and applied for trademark protection with the US Patent and Trademark Office. In January of 2012, we consulted with a neurosurgeon on the design /utility of the guidewire which resulted in the filing two additional patents for the design.

In January of 2012, we hired a marketing representative to solicit interest in the guidewire from various manufacturers.  Since February 2012,  he  met with representatives of 6 companies to demonstrate the sample guidewires. Since fabrication of the guidewire, we have sent samples of the guidewire device and/or showed sample guidewires to 8 additional companies who expressed an interest in seeing samples of the guidewire.
 
We located manufacturers and entered 10 non-disclosure agreements necessary to receive and review samples of our guidewire device. In February of 2012, Mr. DiCicco provided the first live demonstration of our working guidewire product to a neurosurgeon experienced with the use of guidewires in neurosurgery, as well as the CEO of a major manufacturer of guidewire products.
 
The Sentinel BreastScan System.
On July 11, 2011, we entered into an agreement (the “Agreement”) with Infrared Sciences Corp., a Delaware corporation (“Infrared””) controlled by our Chief Executive Officer and Director, Thomas DiCicco. Pursuant to the agreement we:
 
i. obtained an exclusive ten year worldwide license to use, develop, modify and commercialize certain non-patented technology, equipment and other property known as the Sentinel BreastScan; and
ii. acquired rights to use, license and commercialize the Infrared Sciences, Sentinel BreastScan and BreastScan IR Trademark and/or Service marks.
 
 
5

 

We are required to pay $250,000 (the “Licensing Fee”) in exchange for the rights granted under the Agreement. Of this amount, a non-refundable payment of $175,000 was made. We are required to pay the $75,000 balance upon the earlier of July 11, 2013, or our receipt of funding of at least $500,000. If we fail to tender the final payment of $75,000 when due: (i) the license shall terminate and Infrared shall hold all interests in the Intellectual Property; (ii) we will hold no interest or license to the Intellectual Property; and (iii) we forfeit the non-refundable payment of $175,000. Under the terms of the Agreement, we were also granted an option purchase all rights to the Sentinel BreastScan, upon payment of an additional $250,000. The option to purchase terminates on July 11, 2013. The Agreement terminates on July 11, 2021.

There are presently three physicians in South Florida using our Sentinel BreastScan System.  From May of 2011, to present we have provided customer service support to doctors that are using existing Sentinel BreastScan systems.
 
We have maintained good standing for the Sentinel BreastScan under the U.S. Food and Drug Administration’s  510k registration.
 
Results of Operations
As of March 31, 2012, and December 31, 2011, we  had $161,329 and $ 110 in cash, respectively. We believe that such funds will not be sufficient to effectuate our plans with respect to our business operations over the next twelve months. We will need to seek additional capital for the purpose of financing our marketing efforts.

Revenues
We are in our development stage and  have not generates any revenue since our inception.

Total operating expenses
During the three months ended March 31, 2012, and 2011, total operating expenses were $254,793 and  $42,370, respectively. The general and administrative expenses were primarily the result of fees for consulting and legal and professional fees associated with fulfilling our SEC reporting requirements. We had a cumulative operating loss of $1,898,327 from April 26, 2007 (inception) to March 31, 2012.

Net loss
During the three months ended March 31, 2012, and 2011, the net loss was $440,858 and $42,370, respectively. We had a cumulative net loss of $2,085,858 from April 26, 2007 (inception) to March 31, 2012.
 
 
6

 

Liquidity and Capital Resources
As of March 31, 2012, we had $161,329 in cash resources. We do not believe that such funds will be sufficient to fund its expenses over the next 12 months.

There can be no assurance that additional capital will be available to us. We have no agreements, arrangements, or understandings with any person to obtain funds through bank loans, lines of credit, or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds for the above purposes will have a severe negative impact our ability to remain a viable company.
 
Lack of Insurance
We presently do not have insurance which provides coverage for our  office facilities and operations and we cannot be certain that we can cover the risks associated with such lack of insurance or that we will be able to obtain and/or maintain insurance to cover these risks at economically feasible premiums.
 
Going Concern Consideration
While our management believes we will be successful in its planned operating activities, there can be no assurance that we will be successful in the commercialization of our guidewire prototype, sale of our planned product, technology, or services that will generate sufficient revenues to earn a profit and sustain our operations. We  also intend to seek additional capital for our operations through the issuance of our common stock to fund our operations.
 
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation  as a going concern. We have incurred an operating loss since inception and our cash resources are insufficient to meet our  planned business objectives. These and other factors raise substantial doubt about our  ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of us to continue as a going concern.

Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
 
 
7

 
 
Recently issued accounting pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption. In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statement of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on its financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact our financial position or results of operations.

 
8

 
 
PART II
OTHER INFORMATION

Item 1.  Legal Proceedings.

There are no pending legal proceedings in which we are a party or in which any of our directors, officers or affiliates, any owner of record or beneficiary of more than 5% of any class of our voting securities is a party adverse to us or has a material interest adverse to us. Our property is not the subject of any pending legal proceedings.

Item 1A. Risk Factors
.
We have no revenues from operations and require financing, which we may not be able to receive, to continue our operations.
We currently have no significant operations from which to generate cash flows. Our operations to date have consumed substantial capital resources and we expect to require additional financing to fund our continued operations and implement our business plan. Our future capital requirements will depend on many factors, including technological and market developments, our ability to sell the Sentinel BreastScan System or the underlying software, and cash flows from operating activities. If we raise additional funds through equity or debt financings to finance our future operations, any equity financings could result in dilution to our stockholders and debt financing would result in increased interest expense. Any financing, if available, may be on terms unfavorable or not acceptable to us. If adequate funds are not obtained, we may be required to reduce or curtail our proposed operations.

Disruptions in the capital and credit markets, as have been experienced since 2008, could adversely affect our ability to obtain financing. If we do obtain debt financing in the future, those banks may not be able to meet their funding commitments to us if they experience shortages of capital and liquidity or if they experience excessive volumes of borrowing requests from us and other borrowers within a short period of time.

We expect to incur substantial losses so long as we continue our planned manufacturing, regulatory, and research and development activities. If we ultimately receive regulatory approval for the Sentinel BreastScan System, our manufacturing, marketing and sales activities are likely to substantially increase our expenses and our need for additional working capital. It is possible that we will not have adequate resources in the future to support continuation of our business activities.
 
Because our auditors have issued a going concern opinion and we may be unable to achieve our objectives, we may have to suspend our business operations should sufficient financial resources be unavailable.
Our auditors’ report in our December 31, 2011 financial statements for our fiscal year ending December 31, 2011 expressed an opinion that our capital resources as of December 31, 2011 are insufficient to sustain operations. These conditions raise substantial doubt about our ability to continue as a going concern.
 
 
9

 

We have minimal operations, no revenues and no current prospects for future revenues, and we expect losses to continue into the future.
Our operations to date have consisted primarily of developing our operating plan. We have no operating history upon which an evaluation of our potential success or failure can be made.  As of March 31, 2012 and December 31, 2011, we had an accumulated deficit of  $1,964,072 and $1,293,107, respectively.  Our ability to generate revenues and become profitable is dependent upon our ability to commercialize our two products. We expect to incur additional operating losses in the future due to commercialization of our intellectual property.

We require a significant amount of capital for our operations; should we fail to raise sufficient capital we will have to cease our operations and you will lose your entire investment.
The development of our Sentinel BreastScan and maneuverable-coiled guidewire will require significant outlays of capital and generally offers limited success probability. Our cash as of March 31, 2012, was $161,329 and is insufficient to meet our current operating cash requirements. We need to raise a significant amount of capital to pay for our planned business and development activities. If we cannot raise the capital to fund our required expenditures, we will be unable to commercialize our intellectual properties and our business will likely fail. Even assuming that we obtain the required financing, if our products are not accepted by our market, you will lose your entire investment.

We are subject to government regulation and failure to obtain and maintain required regulatory approvals would severely limit our ability to sell our products.
Our Sentinel BreastScan is subject to regulation by the FDA and other federal and state regulatory agencies. Pursuant to FDA regulations, we have  510(k) clearance and premarket authorization (“PMA”) . We must maintain 501(k) clearance and premarket authorization prior to marketing our products in the United States. If we fail to maintain our clearance or our PMA, we will not be able to implement our current business plan and may be unable to generate any revenues. The FDA clearance and approval process can be costly and time consuming, as well as, uncertain. There can be no assurance that we will maintain these clearances. Delays in obtaining such clearances and PMAs or changes in existing requirements could have a material and adverse effect on our business and operations. Even if we do obtain regulatory approval of a product, that approval may be subject to limitations on the indicated uses for which it may be marketed. Even after granting regulatory approval, the FDA and regulatory agencies in other countries continue to review and inspect marketed products, manufacturers and manufacturing facilities, which may create additional regulatory burdens. Later discovery of previously unknown problems with a product, manufacturer or facility, may result in restrictions on the product or manufacturer, including a withdrawal of the product from the market.

Our inability to complete our clinical testing and product development activities would severely limit our ability to operate or finance operations.
In order to commercialize our products, we must complete substantial clinical trials, and obtain sufficient safety and efficacy results to support required registration approval and market acceptance. We may not be able to successfully complete the development of our products, or successfully market our technologies or products. We may encounter problems and delays relating to research and development, regulatory approval and intellectual property rights of our technologies and products. Our research and development programs may not be successful, and our technologies and products may not identify tumor or lesions and may not facilitate the identification of breast cancer with the expected result. Our technologies and products may not prove to be safe and efficacious in clinical trials, and we may not obtain the requisite regulatory approvals for our technologies or product candidates. If any of these events occur, we may not have adequate resources to continue operations for the period required to resolve the issues, thereby delaying commercialization.  As a result, we may not be able to raise capital to finance our continued operations during the period required for resolution of the issues.
 
 
10

 

Even if we obtain regulatory approvals to sell our products, lack of commercial acceptance could impair our business.
Even if we obtain all required regulatory approvals, we cannot be certain that our products and processes will be accepted in the marketplace at a level that would allow us to operate profitably. Our products may be unable to achieve commercial acceptance for a number of reasons, such as the availability of alternatives that are less expensive, more effective, or easier to use; the perception of a low cost-benefit ratio for the product amongst our market, including screening centers, hospitals, radiologists and physicians; or an inadequate level of product support. Our technologies or product candidates may not be employed in all potential applications being investigated, and any reduction in applications would limit the market acceptance of our technologies and product candidates, and our potential revenues.

We must comply with extensive governmental regulations and have no assurance of regulatory approvals or clearances which could cause us to cut back or cease operations.
A delay or inability to obtain any necessary United States, state or foreign regulatory clearances or approvals for our products would prevent us from selling our products the U.S. and other countries. In the United States, our products are regulated as medical devices and are subject to the FDA's pre-market clearance or approval requirements. To obtain FDA approval of an application for pre-market approval of a diagnostic tool such as the Sentinel BreastScan the pre-market approval application must demonstrate based on statistically significant results from extensive clinical studies, that the subject device is safe and has clinical utility, meaning that as a diagnostic tool it provides information that measurably contributes to a diagnosis or management of a disease or condition.

In addition, sales of medical devices outside the United States may be subject to international regulatory requirements that vary from country to country. The time required to gain approval for international sales may be longer or shorter than required for FDA approval and the requirements may differ.

Regulatory approvals, if granted, may include significant limitations on the indicated uses for which our products may be marketed. In addition, to obtain these approvals, the FDA and certain foreign regulatory authorities may impose numerous other requirements which medical device manufacturers must comply with. Product approvals could be withdrawn for failure to comply with regulatory standards or the occurrence of unforeseen problems following initial marketing.

The third-party manufacturers upon which we will depend to manufacture our products are required to adhere to applicable FDA regulations regarding quality systems regulations commonly referred to as QSRs, which include testing, control and documentation requirements. Failure to comply with applicable regulatory requirements, including marketing and promoting products for unapproved use, could result in warning letters, fines, injunctions, civil penalties, recall or seizure of products, total or partial suspension of production, refusal of the government to grant pre-market clearance or approval for devices, withdrawal of approvals and criminal prosecution. Changes in existing regulations or adoption of new government regulations or polices could prevent or delay regulatory approval of our products. Material changes to medical devices also are subject to FDA review and clearance or approval.
 
 
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There can be no assurance that we will be able to obtain or maintain the following:

 
·
FDA approval of a pre-market approval application for the SentinelBreastScan;
 
·
foreign marketing clearances for our products or regulatory approvals or clearances for other products that we may develop, on a timely basis, or at all;
 
·
timely receipt of approvals or clearances;
 
·
continued approval or clearance of previously obtained approvals and clearances, and,
 
·
compliance with existing or future regulatory requirements.

If we do not obtain or maintain any of the above-mentioned standards, there may be material adverse effects on our business, financial condition, and results of operations.

We depend on third parties who may not be in compliance with the FDA's quality system regulations which may delay the approval or decrease the sales of our products
We have used and do use third parties to manufacture and deliver the components of our products and intend to continue to use third parties to manufacture and deliver these components and other products we may develop. There can be no assurance that the third-party manufacturers we depend on for the manufacturing of our product components will be in compliance with the quality system regulations (QSR) at the time of the pre-approval inspection or will maintain compliance afterwards. This failure could significantly delay FDA approval of the pre-market approval application for our products.

Any claims relating to our making improper payments to physicians for consulting services, or other potential violations of regulations governing interactions between us and healthcare providers, could be time-consuming and costly.
Our relationships with physicians, hospitals and marketers of our products will be subject to scrutiny under various state and federal anti-kickback, self-referral, false claims and similar laws, often referred to collectively as healthcare fraud and abuse laws. The federal anti-kickback laws prohibit unlawful inducements for the referral of business reimbursable under federally-funded health care programs, such as remuneration provided to physicians to induce them to use certain medical devices reimbursable by Medicare or Medicaid. Healthcare fraud and abuse laws are complex and subject to evolving interpretation, and even minor, inadvertent violations can potentially give rise to claims that the relevant law has been violated. Certain states have similar anti-kickback, anti-fee splitting and self-referral laws andmpose substantial penalties for violations. Any violations of these laws could result in a material adverse effect on the market price of our common stock, as well as our business, financial condition and results of operations. We cannot assure you that any of the healthcare fraud and abuse laws will not change or be interpreted in the future in a manner which restricts or adversely affects our business activities or relationships with physicians, screening centers, hospitals and marketers of our products. In addition, possible sanctions for violating these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare and Medicaid programs and forfeiture of amounts collected in violation of these prohibitions.
 
 
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Federal anti-kickback laws also restrict the kinds of relationships we may have with physicians, including clinical research investigators and consultants. We must comply with a variety of other laws, such as laws prohibiting false claims for reimbursement under Medicare and Medicaid, which also can be triggered by violations of federal anti-kickback laws; the Healthcare Insurance Portability and Accountability Act of 1996, which protects the privacy of individually identifiable healthcare information; and the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections. In certain cases, federal and state authorities pursue actions for false claims on the basis that manufacturers and distributors are promoting unapproved or off-label uses of their products.

The scope and enforcement of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent and regulations. Although we believe we comply with these laws, and intend to comply in the future, we cannot assure you that federal or state regulatory authorities will not challenge or investigate our current or future activities under these laws. Any challenge or investigation could have a material adverse effect on our business, financial condition and results of operations. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming. Additionally, we cannot predict the impact of any changes in these laws, and whether or not they will be retroactive.

We are dependent upon New Technology.
Our Sentinel BreastScan System is relatively new and has not yet achieved widespread acceptance in the health care industry. Additionally, our maneuverable-coiled guidewire is based upon a “buckling theory” in which the tip is bent according to the force applied and is not a commercially accepted application for guidewire. Our success is entirely dependent upon our ability to successfully commercialize our two products, the Sentinel BreastScan System and the buckling coiled guidewire.

Our inability to complete our product development activities would severely limit our ability to operate or finance operations.
We may not be able to successfully complete the development of our products, or successfully market our technologies or products. We may encounter problems and delays relating to research and development, regulatory approval and intellectual property rights of our technologies and products. Our research and development programs may not be successful, and our technologies and products may not identify tumor or lesions and may not facilitate the identification of breast cancer with the expected result. Our technologies and products may not prove to be safe and efficacious in clinical trials, and we may not obtain the requisite regulatory approvals for our technologies or product candidates. If any of these events occur, we may not have adequate resources to continue operations for the period required to resolve the issues, thereby delaying commercialization.  As a result we may not be able to raise capital to finance our continued operations during the period required for resolution of the issues. resolve the issues, thereby delaying commercialization.

Even if we obtain regulatory approvals to sell our products, lack of commercial acceptance could impair our business.
Even if we obtain all required regulatory approvals, we cannot be certain that our products and processes will be accepted in the marketplace at a level that would allow us to operate profitably. Our products may be unable to achieve commercial acceptance for a number of reasons, such as the availability of alternatives that are less expensive, more effective, or easier to use; the perception of a low cost-benefit ratio for the product amongst our market, including screening centers, hospitals, radiologists and physicians; or an inadequate level of product support. Our technologies or product candidates may not be employed in all potential applications being investigated, and any reduction in applications would limit the market acceptance of our technologies and product candidates, and our potential revenues.
 
 
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The market for our products will be heavily dependent on third-party reimbursement policies.
In the United States, suppliers of health care products and services are greatly affected by Medicare, Medicaid, and other government insurance programs, as well as by private insurance reimbursement programs. Third-party payors (Medicare, Medicaid, private health insurance companies and other organizations) may affect the pricing or relative attractiveness of our system by regulating the coverage or level of reimbursement provided by such payors to the physicians and clinics utilizing the Sentinel BreastScan System. If examinations utilizing the Sentinel BreastScan System are not reimbursed under these programs, or are not adequately reimbursed, our ability to sell the system may be materially adversely affected. There can be no assurance that third-party payors will provide reimbursement for use of our system. In international markets, reimbursement by third-party medical insurance providers, including governmental insurers and independent providers, varies from country to country. In certain countries, our ability to achieve significant market penetration may depend upon the availability of third-party governmental reimbursement.

We face competition in the medical technology field and if we do not keep pace with our competitors and with technological and market changes, we may not be able to successfully compete.
The medical device industry generally, and the cancer diagnostic imaging segments in particular, are characterized by rapidly evolving technology and intense competition. Other companies in the medical device industry may be developing, or could in the future attempt to develop, products that are competitive with ours. The market in which we intend to participate is highly competitive. Many of the companies in the cancer diagnostic and screening and maneuverable-coiled guidewire markets have substantially greater technological, financial, research and development, regulatory, manufacturing, human and marketing resources, and experience than we do. Our competitors may succeed in developing or marketing technologies and products that are more effective or less costly than ours, or that would render our technology and products obsolete or noncompetitive. We may not be able to compete against such competitors and potential competitors in terms of manufacturing, marketing, and sales. If we are unable to compete successfully, it could have a negative impact on our results of operations and our stock price.

Potential product liability claims could affect our earnings and financial condition.
The nature of our business exposes us to risk for product liability claims, which are inherent in the use of our maneuverable-coiled guidewire and the testing, manufacturing and marketing of cancer detection products. Significant litigation, not involving us, has occurred in the past based on allegations of false negative diagnoses of cancer or allegations of malpractice by physicians or those using our system. Accordingly, there can be no assurance that we can avoid significant product liability exposure. We currently do not maintain product liability insurance coverage. Even if we obtain coverage, there is substantial doubt that product liability insurance will cover all liabilities should we face significant claims. A successful products liability claim brought against us could have a material adverse affect on our business, operating results and financial condition. If we are unable to maintain adequate product liability insurance, our ability to market our products will be significantly impaired. Any losses we may suffer for future claims or a voluntary or involuntary recall of our products and the damage that any product liability litigation or voluntary or involuntary recall may do to the reputation or marketability of our products would have a material adverse affect on our business, operating results, financial condition and stock price.

We are currently dependent on two products.
Our sole source of expected revenues for the foreseeable future is expected to come from the sale of our coiled guidewire and the Sentinel BreastScan System. Our operations may be adversely affected by economic, regulatory or similar problems or events that may apply only to us, only to medical devices of the type similar to the Sentinel BreastScan System or only within a particular market area in which the Sentinel BreastScan System is sold. The adverse effect of any such problems or events could be more easily absorbed in an investment in a more diversified business or one that operates in a different industry.
 
 
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Our products are new and unproven.
The science and technology of medical products, including ultrasound equipment, is rapidly evolving. The Sentinel BreastScan System may require significant further research, development, testing, and regulatory clearances and is subject to the risk of failure inherent in the development of products based on innovative technologies. These risks include the possibility that the Sentinel BreastScan System will prove to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances; that the Sentinel BreastScan System, if effective, may prove uneconomical to market; that third parties hold proprietary rights that preclude us from marketing the Sentinel BreastScan System; or that third parties market superior or equivalent products. Accordingly, we are unable to predict whether our research and development activities will result in a commercially viable product. Further, due to the extended testing and regulatory review process required before marketing clearance can be obtained for the Sentinel BreastScan System, we cannot predict with certainty when or if we will be able to sell the system. There is also no guarantee that we will be able to develop and sell other products based upon the technology behind the system.
 
Methods for the detection of cancer are subject to rapid technological innovation and there can be no assurance that future technical changes will not render the Sentinel BreastScan System obsolete. There can be no assurance that the development of new types of diagnostic medical equipment or technology will not have a material adverse effect on our business, financial condition, results of operations or stock price.
 
If our patents and proprietary rights do not provide substantial protection, then our business and competitive position will suffer.
Our ability to commercialize our products will depend, in part, on our ability both in the United States and in other countries to obtain patents, enforce those patents, preserve trade secrets and operate without infringing on proprietary rights of third parties. We currently have one patent. Also, the scope of any of our issued patents may not be sufficiently broad to offer meaningful protection.
 
The patent positions of medical device companies are uncertain and involve complex legal and factual questions. There can be no assurance that any patents that now or in the future are owned or licensed by us will prevent other companies from developing similar or medically equivalent products, or that other companies will not be issued patents that may prevent the sale of our products or that will require us to enter into licenses and pay significant fees or royalties. Patent litigation is costly and time-consuming, and there can be no assurance that we will have or will devote sufficient resources to pursue such litigation. There can be no assurance that our patent will provide us meaningful protection.
 
Any claims relating to our making improper payments to physicians for consulting services, or other potential violations of regulations governing interactions between us and healthcare providers, could be time-consuming and costly.
Our relationships with physicians, hospitals and marketers of our products will be subject to scrutiny under various state and federal anti-kickback, self-referral, false claims and similar laws, often referred to collectively as healthcare fraud and abuse laws. The federal anti-kickback laws prohibit unlawful inducements for the referral of business reimbursable under federally-funded health care programs, such as remuneration provided to physicians to induce them to use certain medical devices reimbursable by Medicare or Medicaid. Healthcare fraud and abuse laws are complex and subject to evolving interpretations, and even minor, inadvertent violations potentially can give rise to claims that the relevant law has been violated. Certain states have similar anti-kickback, anti-fee splitting and self-referral laws, imposing substantial penalties for violations. Any violations of these laws could result in a material adverse effect on the market price of our common stock, as well as our business, financial condition and results of operations. We cannot assure you that any of the healthcare fraud and abuse laws will not change or be interpreted in the future in a manner which restricts or adversely affects our business activities or relationships with physicians, screening centers, hospitals and marketers of our products. In addition, possible sanctions for violating these anti-kickback laws include monetary fines, civil and criminal penalties, exclusion from Medicare and Medicaid programs and forfeiture of amounts collected in violation of these prohibitions.
 
 
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Federal anti-kickback laws also restrict the kinds of relationships we may have with physicians, including clinical research investigators and consultants. We must comply with a variety of other laws, such as laws prohibiting false claims for reimbursement under Medicare and Medicaid, which also can be triggered by violations of federal anti-kickback laws; the Healthcare Insurance Portability and Accountability Act of 1996, which protects the privacy of individually identifiable healthcare information; and the Federal Trade Commission Act and similar laws regulating advertisement and consumer protections. In certain cases, federal and state authorities pursue actions for false claims on the basis that manufacturers and distributors are promoting unapproved or off-label uses of their products.

The scope and enforcement of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent and regulations. Although we believe we comply with these laws, and intend to comply in the future, we cannot assure you that federal or state regulatory authorities will not challenge or investigate our current or future activities under these laws. Any challenge or investigation could have a material adverse effect on our business, financial condition and results of operations. Any state or federal regulatory review of us, regardless of the outcome, would be costly and time-consuming. Additionally, we cannot predict the impact of any changes in these laws, and whether or not they will be retroactive.

Changes to health care reform could adversely affect us and our business.
On March 23, 2010, Congress enacted the Patient Protection and Affordable Care Act (P.L. 111-148) and on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (the "PPACA") provides for significant expansions of coverage for many categories of patients. Effective 2014, large employers will be required to offer coverage or be liable for an additional tax. The effect of this provision is not certain, as the amount of the tax may be less than the cost of providing health insurance. Individuals will be required to have qualifying health coverage, or pay a tax penalty. In 2014, state-based health insurance exchanges will be established to facilitate the purchase of insurance by individuals and small businesses. Effective in 2014, a comprehensive set of mandated benefits is established. Until 2014, a high risk pool will be established for individuals with pre-existing conditions. Other provisions eliminate lifetime coverage limits, rescission of coverage except in cases of fraud, and expand mandatory coverage of children. The net effect of these provisions on us cannot be predicted at this time. However, the PPACA may substantially increase governmental health care expenditures. This may result in added downward pressure on reimbursement for procedures utilizing the Sentinel BreastScan System. In addition, the PPACA establishes a 2.3% excise tax on medical devices, beginning in 2014. It is not entirely clear that this tax will apply to our business model of charging for procedures. We anticipate, however, that implementing regulations may apply the tax to the Sentinel BreastScan System. Both downward pressure on reimbursement and the excise tax could have a material adverse effect on our business, financial condition and the results of operations.

We depend on third-party suppliers and manufacturers, and if they are unable to deliver, our business would suffer.
We expect to purchase all of our components and supplies from third-party suppliers and to outsource any manufacturing to contract manufacturers. Because of regulatory restrictions on manufacturers of medical devices, we may experience significant difficulty in locating suppliers and manufacturers qualified to manufacture our products or components thereof. Further, manufacturers of medical devices generally have the right to manufacture similar products that may compete with our products, and to terminate their agreements without significant penalty under certain conditions. In addition, disclosure of our proprietary technology to a third-party for manufacturing purposes increases the risk of theft or loss of trade secrets. There can be no assurance that we will be successful in locating manufacturers or suppliers on terms and conditions or with reputations and experience acceptable to us or that our trade secrets will not be stolen.
 
 
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There can be no assurance that we will be able to compete successfully or that competitive pressures faced by us will not materially and adversely affect our business operating results and financial condition.
Breast cancer screening is an intensely competitive industry. Current testing methods are well accepted in the industry and there may be resistance to moving from such practices to new technologies. We compete with companies that are attempting to do breast cancer screening using other, and similar, techniques. These techniques include infrared thermography and other forms of infrared image processing. In addition, many companies are researching and developing new breast cancer screening methods.

There are several companies in the guidewire field, including major companies such as J&J, Boston Scientific, Cook Medical, Medtronic, Inc., and Bard. Such companies offer a variety of products that are specifically related for the usage of a guidewire. The total number of guide wires in use today worldwide is estimated at more than 4,500,000 annually. We are not aware of any other company that has developed, manufactured, and/or marketed a device of a similar nature based on the “Buckling” theory in which the tip is bent according to the force applied to it, whereby the time to reach the site is diminished. There is no assurance that our guidewire product will successfully compete with other similar products.

Whether our products can be marketed successfully depends largely on whether the product meets market needs, whether it encounters substantial market competition and whether we have an adequately trained staff to market the product, among other factors. There can be no assurance that our products can be successfully delivered to meet market needs. Although we are aware of no products now being developed or marketed that would perform significant portions of the functions of the Sentinel BreastScan System, or our maneuverable-coiled guidewire it is possible that our products will encounter substantial market competition. There are other entities and institutions, both public and private, engaged in development of breast scanning productions and guidewire products. Many of these entities and institutions have substantially greater capital and research and development resources than us and may be able to respond more quickly and efficiently to new technologies or requirements and to devote greater managerial or financial resources than us to market their businesses and to develop and promote new and existing methods and technologies. There can be no assurance that our current or future competitors will not develop products or services that may be superior in one or more respects to ours or that may gain greater market acceptance.

We depend heavily on our management and we may be unable to replace them if we lose their services.
We are dependent upon our senior management, particularly Mr. Thomas DiCicco, our Chief Executive Officer and Principal Financial Officer. The loss or unavailability of Mr. DiCicco could have a material adverse effect on our business, prospects and viability. There can be no assurance that we will be successful in retaining our existing key personnel or in attracting and retaining additional personnel. The loss of the services of any key employees, or our failure to attract and retain other qualified and experienced personnel on acceptable terms, could have a material adverse effect on our business and results of operations.

Because members of our management have other business interests, they may not be able or willing to devote a sufficient amount of time to our business operations, causing our business to fail.
The personal interests of our officers and directors and those of the companies that they are affiliated with may come into conflict with our interests and those of our minority stockholders. We, as well as the other companies that our officers and directors are affiliated with, may present them with business opportunities, which are simultaneously desired. Additionally, we may compete with these other companies for investment capital, technical resources, key personnel and other things. You should carefully consider these potential conflicts of interest before deciding whether to invest in our shares of our common stock. We have not yet adopted a policy for resolving such conflicts of interests. Our directors’ and officers’ potential conflicts of interest due to their affiliation with other companies including but not limited to Thomas DiCicco’s control of Infrared Sciences, our licensor for the Sentinel BreastScan System. We may also be subject to conflicts of interests due to family relationships including our Chief Executive Officer and Director Thomas DiCicco is the father of our Vice President and Director, Michael DiCicco.
 
 
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We are dependent upon doctors and health care providers.
Our business is highly dependent upon the acceptance of our product by doctors and health centers. There can be no assurance that we will be able to attract additional doctors and centers to place systems. There is also no assurance that we will be able to establish and promote the high degree of credibility and high quality of service it must have in order to implement our business plan.

We do not intend to pay cash dividends. Any return on investment may be limited to the value of our common stock.
We have never declared or paid dividends and do not anticipate paying cash dividends in the foreseeable future.

Our current management holds significant control over our common stock, which will prevent our minority shareholders from having the ability to control any of our corporate actions.
Our management has significant control over our voting stock, which may make it difficult to complete some corporate transactions without their support and may prevent a change in our control. Our officers and directors control a majority of our outstanding common stock. As a result of this substantial control of our common stock, our management will have considerable influence over the outcome of all matters submitted to our stockholders for approval, including the election of directors. In addition, this ownership could discourage the acquisition of our common stock by potential investors and could have an anti-takeover effect, possibly depressing the trading price of our common stock.

Investors may have difficulty in reselling their shares due to the lack of market or state Blue Sky laws.
The holders of our shares of common stock and persons who desire to purchase them in any trading market that might develop in the future should be aware that there might be significant state law restrictions upon the ability of investors to resell our shares. Accordingly, even if we are successful in having the Shares available for trading on the OTC Bulletin Board, investors should consider any secondary market for our securities to be a limited one. We intend to seek coverage and publication of information about us in an accepted publication, which permits a "manual exemption." This manual exemption permits a security to be distributed in a particular state without being registered if the company issuing the security has a listing for that security in a securities manual recognized by the state. However, it is not enough for the security to be listed in a recognized manual. The listing entry must contain (1) the names of issuers, officers, and directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either the fiscal year preceding the balance sheet or for the most recent fiscal year of operations. We may not be able to secure a listing containing all of this information. Furthermore, the manual exemption is a non issuer exemption restricted to secondary trading transactions, making it unavailable for issuers selling newly issued securities. Most of the accepted manuals are those published in Standard and Poor's, Moody's Investor Service, Fitch's Investment Service, and Best's Insurance Reports, and many states expressly recognize these manuals. A smaller number of states declare that they “recognize securities manuals” but do not specify the recognized manuals. The following states do not have any provisions and therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois, Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.

Accordingly, our common shares should be considered totally illiquid, which inhibits investors’ ability to resell their shares.

We may become involved in securities class action litigation that could divert management's attention and harm our business.
The stock market in general has experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company's securities, securities class action litigation has been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then it may become involved in this type of litigation which would be expensive and divert management's attention and resources from managing the business.
 
 
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We are subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.
The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock”, and we will become subject to Rule 15g-9 under the Exchange Act, or the “Penny Stock Rule”. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers. For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

We do not anticipate that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.
 
We expect that the price of our common stock will fluctuate substantially, potentially adversely affecting the ability of stockholders to sell their shares.
The market price of our common stock is likely to be highly volatile and subject to wide fluctuations in response to the following factors, many of which are generally beyond our control. These factors may include:
 
the introduction of new products or services by us or our competitors;
quarterly variations in our or our competitor's results of operations;
the acquisition or divestiture of businesses, products, assets or technology;
disputes, litigation or other developments with respect to intellectual property rights or other potential legal actions;
sales of large blocks of our common stock, including sales by our executive officers and directors;
changes in earnings estimates or recommendations by securities analysts; and
general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

Market price fluctuations may negatively affect the ability of investors to sell our shares at consistent prices.

Sales of our common stock under Rule 144 could reduce the price of our stock.
We presently have approximately 15,133,275 shares held by affiliates and 6,235,941 shares held by non-affiliates which are eligible for resale in reliance upon Rule 144 of the Securities Act of 1933.  In general, persons holding restricted securities of a Securities & Exchange Commission reporting company, including affiliates, must hold their shares for a period of at least six months, may not sell more than one percent of the total issued and outstanding shares in any 90-day period, and must resell the shares in an unsolicited brokerage transaction at the market price.If substantial amounts of our common stock become available for resale under Rule 144, prevailing market prices for our common stock will be reduced.
 
 
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We may, in the future, issue additional securities, which would reduce investors’ percent of ownership and may dilute our share value.
If future operations or acquisitions are financed through issuing equity securities, stockholders could experience significant dilution. In addition, securities issued in connection with future financing activities or potential acquisitions may have rights and preferences senior to the rights and preferences of our common stock. We expect to issue additional equity securities pursuant to employee benefit plans. The issuance of shares of our common stock upon the exercise of options may result in dilution to our stockholders. Our Articles of Incorporation authorize us to issue 490,000,000 shares of common stock. As of the date of this Report on Form 10-Q, we had 49,126,292 shares of common stock and warrants exercisable into 5,046,666 common shares outstanding. Accordingly, we may issue up to an additional 435,827,042 shares of common stock. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis including for services or acquisitions or other corporate actions that may have the effect of diluting the value of the shares held by our stockholders, and might have an adverse effect on any trading market for our common stock. Additionally, we are authorized to issue 10,000,000 shares of preferred stock. Our board of directors may designate the rights terms and preferences at its discretion including conversion and voting preferences without notice to our shareholders.

Our status as a public company may make it more difficult to attract and retain officers and directors.
Sarbanes-Oxley and new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As an operating public company, we expect these new rules and regulations to increase our compliance costs in 2011 and beyond and to make certain activities more time-consuming and costly than if we were not an operating public company. As an operating public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board or as executive officers.

Compliance with changing regulations concerning corporate governance and public disclosure may result in additional expenses.
There have been changing laws, regulations and standards relating to corporate governance and public disclosure, including Sarbanes-Oxley and new regulations promulgated by the SEC. These new or changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. As a result, our efforts to comply with evolving laws, regulations and standards are likely to continue to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. Members of our Board, our Chief Executive Officer and our Chief Financial Officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may have difficulty attracting and retaining qualified board members and executive officers, which could harm our business. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies, we could be subject to liability under applicable laws or our reputation may be harmed.
 
 
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Item 2. Unregistered Sales of Equity Securities
 
We relied upon Sections 4(2) of the Securities Act of 1933, as amended in offering and sale of the common shares set forth below. We believe section 4(2) was available because:

● 
We are not a blank check company;
● 
All certificates representing the common shares had restrictive legends; andSales were made to persons with a pre-existing relationship to us or our officers and directors.

On May 15, 2012, the holderof two convertible promissory notes dated April 5, 2011 and February 15, 2012 converted the principalamount of  $250,000 and accrued interest into 2,666,666 shares of our common stock in full satisfaction of all principal and interest due thereunder.  In connection with the February 152012 note, we granted the holder one (1) warrant for each (1) shares converted under the February 15, 2012 note. Each warrant isexercisable into one (1) share of our Common Stock at the price of $.50 per share. The Warrants are exercisable for a term of two (2) years after the date of execution hereof.
 
On May 16, 2012, the holder of two convertible promissory notes dated April 1, 2011 and February 24, 2012 converted the principal amount of  $225,000 and accrued interest into 2,380,000 shares of our common stock in full satisfaction of all principal and interest due thereunder.  In connection with the February 24, 2012 note, we granted the holder one (1) warrant for each (1) shares converted under the February 24, 2012 note. Each warrant is exercisable into one (1) share of our Common Stock at the price of $.50 per share. The Warrants are exercisable for a term of two (2) years after the date of execution hereof.
 
On April 11, 2012, we issued 50,000 shares of our restricted common stock for services related to our guidewire.

On March 7, 2012, we issued 50,000 shares of our restricted common stock for book keeping services rendered to us.

On March 7, 2012, we issued 50,000 restricted shares of our common stock for fabricating the prototype for our guidewire.

On March 7, 2012, we issued 50,000 restricted shares of our common stock for fabricating the prototype for our guidewire.
 
On March 7, 2012, we issued 30,000 restricted shares of our common stock for legal services.
 
On March 7, 2012, we issued 25,000 restricted shares of our common stock for assistance with marketing our products.
 
On March 7, 2012, we issued 25,000 restricted shares of our common stock for assistance with marketing our products.

On March 7, 2012, we issued 5,000 restricted shares of our common stock for strategic introductions.
 
 
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On March 7, 2012, we issued 6,556,000 restricted to our vice president and director, Michael DiCicco for services rendered to us as our vice president and director from January 1, 2012 to December 31, 2016.

On March 7, 2012, we issued 1,000,000 restricted common shares to our director, Douglas Miscoll for service as our director from March 8, 2012 to March 8, 2016.

On March 7, 2012, we issued 6,830,000 restricted common shares to a consultant for services rendered to us from June 1, 2011 to February 28, 2016.

On March 7, 2012, we issued 2, 830,000 restricted common shares to a consultant for services rendered to us from June 1, 2011 to February 28, 2016.

On February 13, 2012, we issued 298,350 shares of our restricted common stock to Olympus Capital Group, in exchange for satisfaction of a convertible note in the amount of $7,500.

On February 13, 2012, we issued 99,450 shares of our restricted common stock to RadaAdvisors,Inc. in exchange for satisfaction of a convertible note in the amount of $2,500.

On February 13, 2012, we issued an aggregate of 175,000 shares to six persons for service on our scientific advisory board.

Purchases of equity securities by the issuer and affiliated purchasers

None.

Use of Proceeds

None

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

N/A.

Item 5. Other Information.

None.
 
 
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Item 6. Exhibits

No.   Description
     
3.1   Articles of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on August 28, 2007).
3.2   By-laws of the Company (incorporated by reference to Exhibit 3.2 to Statement on Form SB-2 filed with the Securities and Exchange Commission on August 28, 2007).
3.3   Certificate of Conversion
3.4   Certificate of Amendment to the Articles of Incorporation of Computer Vision Systems Laboratories, Corp., a Florida Corporation dated July 29, 2011 **
3.5   Amended Bylaws **
10.1   Patent Sale and Assignment, dated May 28, 2007, between the Company and Benny Gaber (incorporated by reference to Exhibit 10.1 to Cardio Vascular’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on August 28, 2007).
10.2   United States Patent Assignment form #7141024 (incorporated by reference to Exhibit 10.2 to Cardio Vascular’s Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on August 28, 2007).
10.3   Purchase and Sale Agreement dated July 9, 2008, between Benny Gaber and Carrigan Investments Limited (incorporated by reference to Exhibit 10.2 to Cardio Vascular’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 2008).
10.4   Purchase and Sale Agreement dated July 9, 2008, between Arie Orenstein and Carrigan Investments Limited (incorporated by reference to Exhibit 10.3 to Cardio Vascular’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 2008).
10.5    Exclusive Marketing Agreement dated July 22, 2009 by and between Cardio Vascular Medical Device Corp. and Elgressy Engineering Services (1987) Ltd.
10.6     Consulting Agreement dated July 21, 2009, by and between Cardio Vascular Medical Device Corp. and N.D.Raz Business and Project Development Ltd. and Mr. Yossi Raz.
10.8   10.8 License and Option to Purchase ***
10.9   10.9 Common Stock purchase Agreement ****
23.1   Consent of Peter Messino, CPA, Certified Public Accountants
31.1   Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act (filed herewith).
31.2   Rule 13a-14(a)/15d14(a) Certifications of Thomas DiCicco, the President, Chief Executive Officer and Director (attached hereto)
32.1   Rule 13a-14(a)/15d14(a) Certifications of Thomas DiCicco, the CFO (attached hereto) Section 1350 Certifications of Thomas DiCicco, the President, Chief Executive Officer and Director (attached hereto)
32.2   Section 1350 Certifications of Thomas DiCicco, CFO, (attached hereto)
___________
*
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
**
Filed as an Exhibit A to the 14C filed on August 8, 2011
***
Filed as an Exhibit to the 8K filed on May 13, 2011
****
Filed as an exhibit to the Form 8K filed on May 10,2011
 
 
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
Computer Vision Systems Laboratories
 
       
Dated: May 21, 2012
By:
/s/ Thomas DiCicco
 
 
Title:
Thomas DiCicco
 
   
President, Chief Executive Officer
 
 
 
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