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Document and Entity Information
9 Months Ended
Sep. 30, 2012
Nov. 13, 2012
Entity Registrant Name Revolutions Medical CORP
Entity Central Index Key 0001041009
Current Fiscal Year End Date --12-31
Entity Filer Category Smaller Reporting Company
Trading Symbol rmcp
Entity Common Stock Shares Outstanding 68,878,763
Document Type 10-Q
Amendment Flag false
Document Period End Date Sep 30, 2012
Document Fiscal Period Focus Q3
Document Fiscal Year Focus 2012
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BALANCE SHEET (USD $)
Sep. 30, 2012
Dec. 31, 2011
ASSETS
Cash and cash equivalents $ 1,073 $ 4,844
Accounts receivable 560 0
Inventory 320,837 0
Due from shareholder 71,300 25,000
Due from litigation 311,000 311,000
Prepaid expenses 35,601 312,501
Total current assets 740,371 653,345
Property and equipment, net 1,138,273 1,185,664
Goodwill 23,276 23,276
Licensing agreement 15,000 15,000
Patent development 123,418 101,426
TOTAL ASSETS 2,040,338 1,978,711
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable and accrued liabilities 1,283,738 719,901
Credit cards 0 59,217
Accrued salaries 149,140 120,000
Accrued interest payable 118,836 64,670
Convertible promissory notes, net of discounts of $200,278 and 307,126, respectively 544,385 80,535
Embedded conversion option liabilities 314,928 442,311
Note payable Gifford Mabie 708,188 807,640
Total current liabilities 3,119,215 2,294,274
Total liabilities 3,119,215 2,294,274
STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value, 5,000,000 shares authorized; 1,000,000 shares issued and outstanding 1,000 1,000
Common stock, $0.001 par value, 250,000,000 shares authorized; 65,628,176 and 54,729,606 shares issued and outstanding at 9/30/12 and 12/31/11, respectively 65,628 54,730
Treasury Stock 0 0
Additional paid-in capital 32,893,316 29,463,498
Accumulated deficit (34,038,821) (29,834,791)
Total stockholders' deficit (1,078,877) (315,563)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,040,338 $ 1,978,711
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BALANCE SHEET (Parenthetical) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Convertible promissory notes, discounts $ 200,278 $ 307,126
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 1,000,000 1,000,000
Preferred stock, shares outstanding 1,000,000 1,000,000
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized 250,000,000 250,000,000
Common stock, shares issued 65,628,176 54,729,606
Common stock, shares outstanding 65,628,176 54,729,606
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STATEMENTS OF OPERATIONS (USD $)
3 Months Ended 9 Months Ended 193 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Revenue $ 349 $ 0 $ 1,189 $ 0 $ 1,189
Cost of sales 219 0 9,200 0 9,200
Gross profit 130 0 (8,011) 0 (8,011)
Research and development 9,900 0 99,588 111,832 3,054,826
Depreciation and amortization 28,341 1,625 67,136 4,778 169,277
General and administrative expenses 826,489 564,910 3,017,340 2,260,713 29,277,363
Loss from operations (864,600) (566,535) (3,192,075) (2,377,323) (32,509,477)
OTHER INCOME (EXPENSE)
Interest income 0 0 0 10 17,286
Interest expense (411,659) (130,295) (1,198,603) (321,123) (2,100,796)
Gain on disposal of assets 0 0 0 0 794
Loss on extinguishment of debt 0 0 0 0 (152,914)
Adjustments to fair value of derivatives (30,930) 1,439 189,046 (79,092) 9,914
Foreign currency adjustment (4,475) 0 (3,497) 0 (3,377)
Gain from litigation 0 0 0 0 311,000
Other income (expenses) 1,098 0 205,327
Total Other Income (Expenses), net (447,064) (128,856) (1,011,956) (400,205) (1,712,766)
Net loss before minority interest (1,311,664) (695,391) (4,204,031) (2,777,528) (34,222,243)
Minority interest in subsidiary loss (183,422)
Net loss $ (1,311,664) $ (695,391) $ (4,204,031) $ (2,777,528) $ (34,038,821)
Weighted average number of common shares outstanding, basic and diluted (in shares) 59,880,928 47,739,213 59,880,928 47,739,213 39,056,508
Basic and diluted net loss per share attributable to common stockholders (in dollars per share) $ (0.02) $ (0.01) $ (0.07) $ (0.06) $ (0.87)
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STATEMENTS OF CASH FLOWS (USD $)
9 Months Ended 193 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
OPERATING ACTIVITIES
Loss from operations before minority interest $ (4,204,031) $ (2,777,528) $ (34,038,821)
Plus non-cash charges to earnings
Stock compensation expense 0 0 2,018,280
Depreciation and amortization 40,791 4,778 132,633
Purchase R&D - Clear Image 0 0 3,309,514
Expenses paid by third parties 0 0 57,134
Contribution of services by officer and employees 0 0 799,154
Services by officer and employees paid for with non-cash consideration 0 0 694,661
Compensation cost for option price reduction 0 0 50,000
Amortization of debt discounts 106,849 0 (233,459)
Amortization of compensation cost for options granted to non-employees and common stock issued for services 0 0 1,775,577
Allowance for doubtful accounts 0 0 50,900
Gain on extinguishment of debt 0 0 (10,398)
Write-off of Notes Receivable 0 0 14,636
Write-off of Notes Payable 0 0 (8,239)
Write-off of organizational costs 0 0 3,196
Write-off of zero value investments 0 0 785,418
Write-off of leasehold improvements and computer equipment 0 0 2,006
Compensation costs for stock options and warrants granted to non-employees 0 0 1,573,913
Adjustment to fair value of derivatives 0 (10,239)
SEC settlement Gifford Mabie (99,453) (32,381)
Change in working capital accounts:
Accounts recievable (560) 0 (560)
Prepaid expenses 276,900 0 243,156
Inventory (320,837) 0 (320,837)
(Increase) decrease in receivables from related parties (46,300) 0 (142,006)
(Increase) decrease in goodwill 0 0 (23,276)
(Increase) decrease in other receivables 0 86,896 (761,938)
Increase (decrease) in accrued salaries and consulting 29,140 0 (118,257)
Increase (decrease) in accrued interest 54,166 43,334 260,013
Increase (decrease) in accounts payable and accrued liabilities 504,620 (139,332) 3,299,356
Total operating activities (3,248,040) (2,426,002) (14,366,827)
INVESTING ACTIVITIES
Purchase of equipment and furnishings 0 (157,621) (1,229,423)
Leasehold improvements 6,600 (33,000)
Investment in patent development (21,992) (19,000) (148,418)
Investment in Ives Health Company 0 0 (251,997)
Investment in The Health Club 0 0 (10,000)
Total investing activities (15,392) (176,621) (1,672,838)
FINANCING ACTIVITIES
Loans from shareholders 0 0 15,707
Repayment of loans from shareholders 0 0 (8,005)
Repayments of Promissory Notes 0 0 57,325
Issuance of unexercised options for cash 635,707 0 635,707
Issuance of unexercised warrants for cash 394,136 0 394,136
Common stock subscribed 0 546,500
Sale of preferred stock for cash: 0 0 (1,000)
From exercise of stock options and warrants 291,915 1,465,820 4,289,503
Common stock issued for payment of debt 1,271,700 427,921 2,532,919
Less: Issue Costs 0 0 (102,318)
Beneficial conversion feature 436,184 0 530,808
Derivative Liability (127,383) 0 154,269
Debt Discount 0
Convertible debentures issued for cash 357,002 439,598 974,663
Payment of exclusive license note payable 0 0 (100,000)
Treasury stock 0 0 0
Total financing activities 3,259,661 2,535,910 16,238,305
Minority interest 0 (197,567)
Change in cash (3,771) (66,713) 1,073
Cash at beginning of period 4,844 69,517 0
Cash at end of period 1,073 2,804 1,073
Common Stock
Plus non-cash charges to earnings
Stock issued for services 410,675 355,850 5,994,037
Preferred Stock
Plus non-cash charges to earnings
Stock issued for services 0 0 270,000
Prior to Merger
FINANCING ACTIVITIES
To third-party investors 0 0 574,477
After Merger
FINANCING ACTIVITIES
To third-party investors $ 400 $ 0 $ 5,743,614
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
9 Months Ended
Sep. 30, 2012
Organization, Consolidation and Presentation Of Financial Statements [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Nature of Operations

 

Revolutions Medical Corporation, a Nevada corporation (“the Company”), has been endeavoring to design, develop and commercialize auto retractable vacuum safety syringes. Our present product development effort is focused on the RevVac™ Auto Retractable Vacuum Safety Syringe, which is designed specifically to reduce accidental needle stick injuries and lower the spread of blood borne diseases. The Company also has developed a suite of proprietary MRI software tools; RevColor™, Rev3D™, RevDisplay™. These tools are designed to enhance general diagnostic confidence through education and research use and in the future we believe will have specific commercial applications. The Company’s administrative facilities are located in Charleston, South Carolina. The Company’s primary third-party manufacturing facility is located in Wuxi, China.

 

Development Stage Company

 

From its inception in 1996, the Company has been considered a development stage enterprise for financial reporting purposes as significant efforts have been devoted to raising capital and to research and development of various safety syringes and its proprietary MRI software tools.

 

Cash and Cash Equivalents

 

The Company considers highly liquid investments (those readily convertible to cash) purchased with original maturity dates of three months or less to be cash equivalents.

 

Generally Accepted Accounting Principles

 

On July 1, 2009, the Financial Accounting Standards Board (“FASB”) released its Accounting Standards Codification (“ASC”). The ASC became effective for interim or annual financial statements issued after September 15, 2009. The ASC is the single source of generally accepted accounting principles.

 

Income Taxes

 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, “Income Taxes.” Under the liability method, deferred taxes are determined based on the differences between the financial statement and tax basis of assets and liabilities at enacted tax rates in effect in the years in which the differences are expected to reverse.

 

Segment Information

 

The Company follows the guidance in ASC 280, “Segment Reporting”. The Company identifies its operating segments based on business activities, management responsibility and geographical location.  During the period covered by these financial statements, the Company operated in a single business segment engaged in developing selected healthcare products.

 

Earnings (Loss) per Share

 

The Company computes net income per share in accordance with ASC 260, “Earnings per Share”. Under these provisions, basic net income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the weighted average shares of common stock of the Company outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. The calculation of diluted income (loss) per share of common stock assumes the dilutive effect of stock options and warrants outstanding. During a loss period, the assumed exercise of outstanding stock options and warrants has an anti-dilutive effect. Therefore, the outstanding stock options were not included in the September 30, 2012, and December 31, 2011, calculations of loss per share.

Accounts receivable

 

The Company records trade receivables when revenue is recognized. No product has been consigned to customers.  The Company’s allowance for doubtful accounts is primarily determined by review of specific trade receivables.  Those accounts that are doubtful of collection are included in the allowance.  These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts.  Trade receivables are charged off when there is certainty as to their being uncollectible.  Trade receivables are considered delinquent when payment has not been made within contract terms.

 

The Company requires certain distributors to make a prepayment prior to beginning production or shipment of their order. Distributors may apply such prepayments to their outstanding invoices or pay the invoice and continue to carry forward the deposit for future orders.  Such amounts are included in Other accrued liabilities on the Balance Sheet. The Company records an allowance for estimated returns as a reduction to Accounts receivable and Gross profit. To date, returns have been immaterial.

 

Inventories

 

Inventories are valued at the lower of cost or market, with cost being determined using actual average cost.  The Company compares the average cost to the market price and records the lower value.  Management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time to sell such inventory, the shelf life of inventory, and current market conditions when determining excess or obsolete inventories.  A reserve is established for any excess or obsolete inventories or they may be written off.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.

 

Reclassifications

 

Certain reclassifications may have been made to the prior year financial statements to conform to the current period presentation.

 

Revenue Recognition

 

Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment from the manufacturing facility in Wuxi, China or from our warehouse facility in Ladson, South Carolina.

 

 

Valuation of Derivative Instruments

 

ASC 815-40 (formerly SFAS No. 133 “Accounting for derivative instruments and hedging activities”), requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 (formerly EITF 00-19 “Accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock”) to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. At September 30, 2012, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its statement of operations.

 

Fair Value Measurements

 

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. exit price), in an orderly transaction between market participants at the measurement date. The Company categorizes its assets and liabilities measured at fair value based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs, as defined by ASC 820-10, are as follows:

 

  · Level 1 – quoted prices in active markets for identical assets or liabilities.

 

 

  · Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

 

 

  · Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

 

The following table summarizes fair value measurements by level at September 30, 2012, for assets and liabilities measured at fair value on a recurring basis:

 

 

    Level 1     Level 2     Level 3    

Total

 
Cash and cash equivalents   $ 1,073     $     $     $ 1,073  
                                 
Derivative liability   $     $     $ (314,928 )   $ (314,928 )

  

Derivative liability was valued under the Black-Scholes model with the following assumptions:

 

Risk free interest rate   0.18% to 0.19 %
Expected life   0 to 3 years  
Dividend Yield     0 %
Volatility   0% to 162 %
         

 

The following is a reconciliation of the derivative liability:

 

Value at December 31, 2011   $ 442,311  
Issuance of instruments   $ 174,447  
Decrease in Value   $ (162,014 )
Reclassification   $ (139,816 )
Value at September 30, 2012   $ 314,928  

 

Notes and Loans Payable

 

At September 30, 2012 and December 31, 2011, notes and loans payable consist of:

 

    September 30,
2012
    December 31,
2011
 
Convertible Promissory Note Payable to JMJ Financial, secured by the Company’s assets, one time interest charge of 8%, due February 22, 2014   $ 191,663     $ 207,161  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before April 26, 2012           40,000  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before June 1, 2012     ---       45,000  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before August 7, 2012     ---       42,500  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0%  per annum, with payment due on or before September 19, 2012     ---       53,000  
Convertible Promissory Note Payable to TCA Global Credit Master Fund, LP secured by the Company’s assets,  interest rate of 12.0%  per annum, with payment due on or before January 3, 2013     175,000       ---  
                 
                 
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before February 15, 2013     53,000       ---  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before March 21, 2013     42,500       ---  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets,  interest rate of 8.0%  per annum, with payment due on or before May 10, 2013     42,500          
              ---  
Convertible Promissory Note Payable issued in the course of a private placement to individual investors secured by the Company’s assets,  interest rate of 8.0%  per annum, with payment due one year from the date of each note     240,000       ---  
                 
Total     744,663       387,661  
Less: Unamortized Discount     (200,278 )     (307,126 )
    $ 544,385     $ 80,535  

 

Commitments and Contingencies

 

JMJ Financial

 

On February 22, 2011, the Company issued a $1,050,000 Convertible Promissory Note to JMJ Financial, Inc. (“JMJ”), a private investor.  The note bears interest in the form of a onetime interest charge of 8%, payable with the note’s principle amount on the maturity date, February 22, 2014.  All or a portion of this note’s principle and interest is convertible at the option of JMJ from time to time, into shares of the Company’s common stock, originally fixed at a per share conversion price equal to 70% of the average of the 3 lowest closing prices for the Company’s common stock in the 20 trading days previous to the effective date of each such conversion.

 

On February 28, 2011, the Company issued a $500,000 Convertible Promissory Note to JMJ.  The note bears interest in the form of a onetime interest charge of 8%, payable with the note’s principle amount on the maturity date, February 28, 2014.  All or a portion of this note’s principle and interest is convertible at the option of JMJ from time to time, into shares of the Company’s common stock, originally fixed at a per share conversion price equal to 70% of the average of the 3 lowest closing prices for the Company’s common stock in the 20 trading days previous to the effective date of each such conversion. The principal amount owed to JMJ Financial at September 30, 2012, is $191,663 from the $1,050,000 Convertible Promissory Note. No amount is owed to JMJ Financial from the $500,000 Convertible Promissory Note.

 

On March 12, 2012 the Company filed a lawsuit against Justin Keener and JMJ Financial in Charleston County, South Carolina. The Company sought a rescission and financial relief for the convertible debt agreement signed February 22, 2011. The Company claimed that it was unable to deliver the shares requested in the common stock conversion requests dated January 9, 2012 for 1,000,000 shares and January 30, 2012 for 1,226,049 shares due to the risk of defaulting on the convertible debt agreement by losing Depository Trust Company “DTC” eligibility. The contract stated that the Company would be considered in default of the agreement if the Company lost DTC eligibility due to a “chill” placed upon the electronic transfer of the stock. The Company had previously been made aware of other companies that had entered into similar agreements losing DTC eligibility and felt that JMJ had put the Company in an untenable position of either defaulting by losing DTC eligibility or defaulting by failing to issue the requested shares. The Company claimed that JMJ’s unreasonably high demands for conversion caused a “frustration” of the principal purpose of the contract and supports the rescission of the contract and a return of the parties to their respective positions before the contract was signed. On April 12, 2012 the Company withdrew the lawsuit filed in South Carolina to pursue its rights and counterclaims in Miami-Dade County, Florida.

 

The Company also claims the default notice issued by JMJ obligated the Company to pay JMJ the outstanding principal balance under the note along with the accrued and unpaid interest. The principal balance due at the time JMJ issued the default notice amounted to $191,663. The Company disputes JMJ’s claims that the Company was liable for a sum far in excess of this based upon the default provision of the contract.

 

A lawsuit was filed against the Company by JMJ Financial in Miami-Dade County, Florida on March 15, 2012. The lawsuit claims that the Company breached the terms of the convertible debt agreement by failing to issue shares requested in a stock conversion by JMJ on January 9, 2012 for 1,000,000 shares and on January 30, 2012 for 1,226,049 shares. JMJ is seeking the delivery of 2,226,049 shares of common stock of the Company, plus costs and prejudgment interest. On August 30, 2012, the Company filed its counterclaims against JMJ Financial which included Fraud by Concealment, among other claims. The Company alleges that Keener and JMJ had a responsibility and obligation under Florida law to disclose not to conceal during the negotiations of the agreement the fact that Keener and JMJ had outstanding and current issues with these type of convertible notes with DTC which could do detrimental harm to liquidity and electronic transfer of the Company's stock if DTC eligibility was "chilled". This would severely hamper future capital raising and harm its current shareholders but would solely benefit Keener and JMJ under the default clauses in this agreement.

 

Asher Enterprises, Inc.

 

During the three months ended September 30, 2012, Asher elected to convert $88,500 in convertible debt agreements into common stock. The conversion price was based upon 55% of the 3 lowest closing bid prices in the previous 10 days to conversion. This resulted in the conversion of 1,270,101 shares of common stock to satisfy this debt.

 

The Company entered into one securities purchase agreement in the third quarter of 2012 with Asher Enterprises, pursuant to which the Company issued a convertible promissory note to Asher Enterprises for an original principal amount of $42,500 on August 15, 2012, in return for aggregate gross cash proceeds of $42,500.  The note bears interest at a rate of 8% per annum and provides for the payment of all principal and interest 9 months from the date of the notes’ respective issuance.  The principal amount owed to Asher Enterprises at September 30, 2012, is $138,000. This includes the note issued for $42,500 in the third quarter of 2012 and the notes from May 15, 2012 for $53,000 and from June 21, 2012 for $42,500. The notes are convertible at the election of Asher Enterprises into that number of shares of the Company’s common stock determined by multiplying 55% by the average of the lowest three closing bid prices of the Company’s common stock on the OTC Markets OTCQB during the 10 business days immediately preceding the date of conversion, subject to adjustment.

 

TCA Global Credit Master Fund, LP

 

The Company entered into a securities purchase agreement in the first quarter of 2012 with TCA Global Credit Master Fund, LP (“TCA”), pursuant to which the Company issued a convertible promissory note to TCA for an original principal amount of $225,000 on January 3, 2012.  The note bears interest at a rate of 12% per annum and provides for the payment of all principal and interest 12 months from the date of the note’s respective issuance. TCA elected to convert $50,000 of the convertible debt agreement into common stock on August 15, 2012. The conversion price was determined by multiplying 95% by the average of the two lowest daily volume weighted average prices of the Company’s common stock on the OTC Markets OTCQB during the 5 business days immediately preceding the date of conversion. This resulted in the conversion of 294,118 shares of common stock to satisfy this debt.  The principal amount owed to TCA at September 30, 2012, is $175,000. The note is convertible at the election of TCA into that number of shares of the Company’s common stock determined by multiplying 95% by the average of the two lowest daily volume weighted average prices of the Company’s common stock on the OTC Markets OTCQB during the 5 business days immediately preceding the date of conversion, subject to adjustment.

 

Private convertible debt placement with individual investors

 

The Company entered into nine securities purchase agreements in the third quarter of 2012, with individual investors, pursuant to which the Company issued nine convertible promissory notes for an original principal amount of $25,000 on July 12, 2012, for $100,000 on July 13, 2012, for $50,000 on July 13, 2012, for $75,000 on July 26, 2012, for $25,000 on August 2, 2012, for $25,000 on August 30, 2012, for $25,000 on September 4, 2012 and for $15,000 on September 20, 2012, respectively, in return for aggregate gross cash proceeds of $390,000. The notes bear interest at a rate of 8% per annum and provide for the payment of all principal and interest 12 months from the date of the notes’ respective issuance. The notes also feature detachable warrants exercisable within one year of the agreement. All warrants issued along with the convertible debt agreements are outstanding, with a total of 3,666,005 warrants issued at 25 cents and 1,833,002 warrants issued at 50 cents.  In determining the cost associated with the issuance of this debt and the appropriate fair value for the warrants, the Company uses the Black-Scholes option pricing formula.  The principal amount owed according to these notes as of September 30, 2012, is $240,000. The notes are convertible at the election of the individual into that number of shares of the Company’s common stock determined by multiplying 75% by the average of the daily volume weighted average prices of the Company’s common stock on the OTC Markets OTCQB during the 5 business days immediately preceding the date of conversion, subject to adjustment.

 

During the three months ended September 30, 2012, seven investors elected to convert $350,000 in aggregate in convertible debt agreements into common stock. The conversion price was based upon 75% of the average of the daily volume weighted average prices of the Company’s common stock during the 5 business days immediately preceding the date of conversion, subject to adjustment. This resulted in the conversion of 2,725,136 shares of common stock to satisfy this debt.

 

Debt Discount

 

In connection with the two notes converted and the $138,000 outstanding from Asher Enterprises in the third quarter of 2012, we recorded interest expense to amortize the debt discount in the amount of $98,558 during the quarter ended September 30, 2012.

 

In connection with the sale of a Convertible Promissory Note Agreement on February 22, 2011, with JMJ, relating to a private placement of a total of up to $1,050,000 in principal amount, we recorded interest expense to amortize the debt discount in the amount of $21,701 during the quarter ended September 30, 2012. This amount is based upon the remaining unconverted amount of $191,663 from the $450,000 we received in four tranches from this agreement.

 

In connection with partial conversion of $50,000 and the $175,000 outstanding from TCA pursuant to a short-term note issued on January 3, 2012, we recorded interest expense to amortize the debt discount in the amount of $51,333 during the quarter ended September 30, 2012.

 

There remains a total of $200,278 of debt discount yet to be amortized as of September 30, 2012.

 

Beneficial Conversion Feature

 

From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with the guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The notes issued by Asher in 2012 contain a beneficial conversion feature due to a fixed conversion price of $0.00009 and no adjustment due to dilutive issuance. Additionally, the notes issued through the private placement to individual investors all contain a beneficial conversion feature due to an amendment featuring a fixed conversion price of $0.00009 and no adjustment due to dilutive issuance. The total paid in capital for this beneficial conversion feature for these agreements as of September 30, 2012 is $530,807. Of this, $289,377 is due to the agreements with Asher Enterprises and $241,430 is due to the agreements with private investors.

 

Gifford Mabie Settlement

 

On April 8, 2008, the Company entered into a Memorandum of Understanding with its former Chief Executive Officer to settle an outstanding obligation through the issuance of its common stock on a quarterly basis commencing May 8, 2008, for one year. The value of the issuance of the common stock will be determined by the market value of the ten-day average price at the time of each quarterly issuance of common stock. During 2008, the Company issued 271,491 shares at a total value of $133,030 to partially repay this debt.

 

In 2010, the Company determined the final liability balance upon the complete liquidation of Mr. Mabie’s account and issued 400,000 shares of the Company’s common stock as additional repayment for this debt. The initial balance for this settlement debt as of October 12, 2010 was $924,568.

 

The agreement reached with the SEC on behalf of Gifford Mabie specifies that the Company is to periodically issue shares to the special account for Gifford Mabie in order that 2,500 shares can be sold each day the market is open until the liability is satisfied. When the 400,000 shares were placed in the special account on December 14, 2010, to be sold over the course of the next 160 days the market was open, an estimated value for these shares was determined based upon the 10 day average share price following the date of issuance. As of September 30, 2012, the remaining principal balance to be paid was $708,187 based upon this valuation.

 

Share Based Compensation

 

The Company relies on the guidance provided by ASC 718, (“Share Based Payments”). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.

 

In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility, and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.

 

The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

 

The Company’s 2007 Stock Option Plan, revised July 2011, permits the granting of stock options to its employees, directors, consultants and independent contractors for up to 20 million shares of its common stock. The Company believes that such awards encourage employees to remain employed by the Company and also to attract persons of exceptional ability to become employees of the Company. The plan allows the Company to issue either stock options or common shares.

 

On January 3, 2012, under the terms of The Company’s 2007 Stock Option Plan, 1,000,000 options were issued to Dr. Thomas Beahm, a Company director exercisable at 15 cents each.

 

On January 3, 2012, under the terms of The Company’s 2007 Stock Option Plan, 1,000,000 options were issued to the Company’s CEO, Rondald Wheet, exercisable at 15 cents each

 

On January 3, 2012, under the terms of The Company’s 2007 Stock Option Plan, 500,000 options were issued to the Company’s COO, Vincent Olmo, exercisable at 15 cents each.

 

On March 14, 2012, under the terms of The Company’s 2007 Stock Option Plan, 200,000 options were issued for consulting services exercisable at 40 cents each.

 

Consulting Agreements

 

Periodically, the Company issues consulting agreements to individuals who are obligated under the terms of the agreement, to market the Rev Vac safety syringe within various spheres of influence. These spheres of influence include, but are not limited to, medical product distributors, hospitals, doctors and government agencies. Consultants are vetted to the best of the Company’s abilities through due diligence reviews before the Company enters into any agreements. The purpose of these reviews is to determine a consultant’s ability to market the product for the Company.

 

The fair value of all stock compensation issued is determined by calculating the difference between the option exercise price and the closing price at the day of the option grant. Because the options were issued under a limited window for exercise (10 days), with very little expected volatility, no dividend yield and a negligible effect from interest, the value of the option based compensation was recorded as the difference between option exercise price and the closing share price upon the date of the grant. A valuation of these options was performed using the Black-Scholes model and due to the limited exercise window, the value under this method is the same as the difference between option exercise price and the closing price at the day of the option grant.

 

Long-Lived Assets

 

Property, plant and equipment, including significant improvements, are stated at cost.  Expenditures for maintenance and repairs are charged to operating expenses as incurred.  When properties are retired or otherwise disposed of, the cost of the asset and the related accumulated depreciation are removed from the accounts with the resulting gain or loss being reflected in results of operations.

 

Intangible assets include patents and trademarks, which are valued at acquisition through independent appraisals. Debt issuance costs are amortized over the terms of the various agreements. Patents and trademarks are amortized on a straight-line basis over periods varying from 7 to 40 years.

 

In 2007, the Company acquired a 62.2% interest in Clear Image, Inc. (“Clear Image”). Clear Image was a privately held company and was conducting research and development on Color MRI Technology. Clear Image was not able to secure the funding needed to keep this research and development going into the future.  Clear Image had expensed the research and development costs in accordance with accounting standards in effect at the time. The Company believed it to be advantageous to acquire a controlling interest in Clear Image and keep the technology in development rather than starting all over again. The Company exchanged 8.2 million of its common shares which were trading at a market price of $0.40 at the date of acquisition.  To arrive at a value for the Color MRI Technology, the Company and Clear Image determined the amount of funding provided for the research and development of this technology by looking at the amount expended from 1999 until the acquisition date.  The value of the Company’s stock exchanged for the controlling interest exceeded those expensed amounts by approximately $23,000, which was recorded as goodwill because there were no other assets to value.

 

Critical Accounting Policies

 

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the SEC, have been superseded by the Codification.  All other non-grandfathered, non-SEC accounting literature not included in the Codification has become non-authoritative.  The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database.  The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts our financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of our financial statements or disclosures during the quarter ended September 30, 2012, as a result of implementing the Codification.

 

Date of Management’s Review

 

Subsequent events have been evaluated through November 13, 2012, the date the financial statements were available to be issued.

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UNCERTAINTIES
9 Months Ended
Sep. 30, 2012
Uncertainties [Abstract]
UNCERTAINTIES

NOTE 2 - UNCERTAINTIES

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has just entered the production and sales stage and has not established sources of revenues to fully fund the development of business and pay operating expenses, resulting in a cumulative net loss of $(34,038,821) for the period from inception (August 16, 1996) to September 30, 2012. The ability of the Company to continue as a going concern during the next year depends on the successful completion of the Company’s capital raising and initial production and sales efforts to fund the development of its retractable safety syringe.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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MAXXON/GLOBE JOINT VENTURE AGREEMENT
9 Months Ended
Sep. 30, 2012
Join Venture Agreement Disclosure [Abstract]
MAXXON/GLOBE JOINT VENTURE AGREEMENT

NOTE 3 - MAXXON/GLOBE JOINT VENTURE AGREEMENT

 

On November 3, 2005, the Maxxon, Inc. (“Maxxon,” the former name of the Company) and Globe Med Tech, Inc. (“Globe”) entered into a definitive joint venture agreement to patent, develop, manufacture, market and distribute safety needle products throughout the world. Maxxon and Globe each own 50% of the joint venture.  Maxxon contributed its safety syringe technology and patent rights related thereto and Globe contributed its safety syringe IV catheter and patent rights related thereto. In connection with the agreement, Maxxon issued restricted shares of its common stock, valued at $625,066, to Globe. Subsequent to December 31, 2006, the Company ended the joint venture and cancelled the shares of common stock and options that were issued to Globe pursuant to the agreement. On March 1, 2007, the Company filed a lawsuit in the District Court of Tulsa County, Oklahoma against Globe to rescind, terminate and seek monetary damages for the non-fulfillment and breach of a joint venture agreement entered into November 3, 2005, and other related agreements, in addition to an accounting of expenditures of funds under the terms and provisions of the agreements. On October 29, 2008, the Company filed a lawsuit in the District Court of Harris county Texas, a lawsuit for fraud and contempt of court for Globe and Andy Hu, individually. On October 24, 2011, the Company was granted its request for summary judgment against Globe and awarded $311,440 and the return of 266,667 shares of the Company’s common stock by a Federal District Court in Tulsa County, Oklahoma. In addition to the monetary award and the return of the Company’s common stock, Globe is also required to return all syringes, design files, and sample molds to the Company. Furthermore, the Court ordered that Globe assign to the Company all rights to the January 2009 issued United States patent for the RevVac™ auto-retractable vacuum safety syringe. Globe is prohibited from claiming any interest or ownership in the Company’s safety vacuum syringes going forward. On December 14, 2011, the Supreme Court of Oklahoma denied Globe’s appeal. The Company is currently going through the process of collecting on this judgment.

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OTHER COMMITMENTS AND CONTINGENCIES
9 Months Ended
Sep. 30, 2012
Commitments and Contingencies Disclosure [Abstract]
OTHER COMMITMENTS AND CONTINGENCIES

NOTE 4 - OTHER COMMITMENTS AND CONTINGENCIES

 

Employment Agreement with Rondald L. Wheet, Chief Executive Officer

 

Effective April 1, 2012, the Company and Mr. Wheet, our Chief Executive Officer, entered into a two (2) year employment agreement.  The agreement provides for an annual salary of $247,500.  He is responsible for the Company’s substantive and financial reporting requirements of the Securities Exchange Act of 1934, as amended, and is specifically allowed to hire any and all professionals necessary to assist that process.  The Company will provide him with all reasonable and customary fringe benefits, including, but not limited to, participation in pension plans, profit sharing plans, employee stock ownership plans, stock option plans (whether statutory or not), stock appreciation rights plans, hospitalization, medical dental disability and life insurance, car allowance, vacation and sick leave.  The Company will reimburse of all his reasonable and necessary travel, entertainment or other related expenses incurred by him in carrying out his duties and responsibilities under the agreement.  The Company will also provide him with a cell phone, suitable office space, and membership dues in professional organizations and for any seminars and conferences related to Company business.

 

Mr. Wheet may elect, by written notice to the Company, to terminate his employment with continued pay through the employment agreement term if (i) the Company sells all of its assets, (ii) the Company merges with another business entity with a change in control,(iii) more than 50% of the outstanding stock is acquired by a third party, (iv) the Company requires Mr. Wheet to relocate or assigns duties not commensurate with his position as Chief Executive Officer, (v) Mr. Wheet is removed from the Board of Directors and (vi) the Company defaults in making payments required to Mr. Wheet under this agreement. For two years following his resignation or termination, Mr. Wheet will not work for or provide any services in any capacity to any competitor and will not solicit any of the Company’s customers or accounts.

 

Employment Agreement with Vincent Olmo, Chief Operating Officer

 

Effective April 11, 2011, the Company and Mr. Olmo, our Chief Operating Officer, entered into a three (3) year employment agreement. The agreement provides for an annual salary of $165,000 modified with a cost of living adjustment annually.  He is responsible for all daily operating and production activities of the Company. The Company will provide him with all reasonable and customary fringe benefits, including, but not limited to, participation in pension plans, profit sharing plans, employee stock ownership plans, stock option plans (whether statutory or not), stock appreciation rights plans, hospitalization, medical dental disability and life insurance, car allowance, vacation and sick leave.  The Company will reimburse all of his reasonable and necessary travel, entertainment or other related expenses incurred by him in carrying out his duties and responsibilities under the agreement.  The Company will also provide him with a cell phone, suitable office space, and membership dues in professional organizations and for any seminars and conferences related to Company business.

 

Mr. Olmo may elect, by written notice to the Company, to terminate his employment with continued pay through the employment agreement term if (i) the Company sells all or substantially all of its assets, (ii) the Company merges with another business entity with a change in control,(iii) more than 50% of the outstanding stock is acquired by a third party, (iv) the Company requires Mr. Olmo to relocate or assigns duties not commensurate with his position as the Chief Operating Officer  and (v) the Company defaults in making payments required to Mr. Olmo under this agreement.  For two years following his resignation or termination, Mr. Olmo will not work for or provide any services in any capacity to any competitor and will not solicit any of the Company’s customers or accounts.

 

Employment Agreement with Burton Hodges, Chief Financial Officer

 

Effective June 1, 2011, the Company and Mr. Hodges, our Chief Financial Officer, entered into a three (3) year employment agreement. The agreement provides for an annual salary of $165,000 modified with a cost of living adjustment annually.  He is responsible for all financial functions and capital resources of the Company, including corporate finance, project finance, corporate accounting, reporting and risk management.  The Company will provide him with all reasonable and customary fringe benefits, including, but not limited to, participation in pension plans, profit sharing plans, employee stock ownership plans, stock option plans (whether statutory or not), stock appreciation rights plans, hospitalization, medical dental disability and life insurance, car allowance, vacation and sick leave.  The Company will reimburse all of his reasonable and necessary travel, entertainment or other related expenses incurred by him in carrying out his duties and responsibilities under the agreement.  The Company will also provide him with a cell phone, suitable office space, and membership dues in professional organizations and for any seminars and conferences related to Company business.

 

Mr. Hodges may elect, by written notice to the Company, to terminate his employment with continued pay through the employment agreement term if (i) the Company sells all or substantially all of its assets, (ii) the Company merges with another business entity with a change in control,(iii) more than 50% of the outstanding stock is acquired by a third party, (iv) the Company requires Mr. Hodges to relocate or assigns duties not commensurate with his position as the Chief Financial Officer  and (v) the Company defaults in making payments required to Mr. Hodges under this agreement.  For two years following his resignation or termination, Mr. Hodges will not work for or provide any services in any capacity to any competitor and will not solicit any of the Company’s customers or accounts.

 

Amounts Due Pursuant to Employment and Consulting Agreements

 

As of September 30, 2012, the Company had accrued $149,140 pursuant to employment agreements. Although the Company plans to settle these amounts, there is no assurance that its efforts to settle will be successful. No litigation related to these previous employment agreements has been initiated or threatened.  There is no assurance, however, that such litigation will not be initiated in the future.

 

Amounts Due Pursuant to Employee Payroll Liabilities

 

As of September 30, 2012, the Company had accrued $319,052 pursuant to employment payroll liabilities. Although the Company plans to settle these amounts, there is no assurance that its efforts to settle will be successful. A tax lien has been filed against the Company by the South Carolina Department of Revenue due these delinquent payments. Action by federal taxing authorities has not been initiated or threatened at this point. There is no assurance, however, that such action will not be initiated in the future.

 

Amounts Due Pursuant to Accounts Payable Liabilities

 

As of September 30, 2012, the Company had accrued $875,320 pursuant to accounts payable with vendors. Although the Company plans to settle these amounts, there is no assurance that its efforts to settle will be successful. Of this balance, $236,630 is due to YesoMed, the Company’s manufacturing partner in Wuxi, China. $206,227 is due to YesoMed for the remaining balance of the first purchase order the Company placed with the manufacturer. The remaining balance of accounts payable of $432,463 is due for various services such as legal, accounting and consulting work.

 

Patent Applications for the Company’s Retractable Safety Syringes

 

The Company owns one (1) published patent on its Auto Retractable Vacuum RevVac™ safety syringe issued in January 2005 and one (1) published patent on its safety blood drawing device issued in June 2003. In January 2009, a second patent for the RevVac™ auto retractable vacuum safety syringe was issued by the U.S. patent office and published in April 2009 related to the Globe/Revolutions Medical Joint Venture. Upon the ruling in the Globe Med Tech lawsuit, the Company now has full ownership of the entire patent. The Company also filed international patent protection rights regarding the RevVac™ Auto Retractable Vacuum Safety Syringe in the following countries: Australia, China, Japan, Taiwan, Mexico, Canada and in Europe. Patents in Mexico and in China were issued in the 3rd and 4th quarters of 2011, respectfully.

 

The Company filed a U.S. provisional patent on May 2, 2011, on it new vacuum design for the pre-filled market. On May 2, 2012, the Company filed an international Patent Cooperation Treaty (PCT) for this new design.

 

The Company is also engaged in the development of technology which can segment and reference MRI images.  By “segmenting” an image, the Company’s technology will let the user select a part of the image (bone, fluid, tissue) and render that selection in three dimensions. Essentially, different components of an image are given different colors and the user can choose the color or colors to be studied, thus eliminating those portions colored with the colors being discarded.  By “referencing” the image to a database, the user can obtain similar, identified images to aid the user in interpretation of the image being studied. The Company currently owns four (4) separate patent applications, filed in June of 2007, each of which received USPTO office actions during 2010. The Company expects to receive issuances or additional office actions on some if not all of these patents over the next 12 months.

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PREFERRED STOCK AND COMMON STOCK TRANSACTIONS
9 Months Ended
Sep. 30, 2012
Stockholders' Equity Note [Abstract]
PREFERRED STOCK AND COMMON STOCK TRANSACTIONS

NOTE 5 - PREFERRED STOCK AND COMMON STOCK TRANSACTIONS

 

SERIES 2006 PREFERRED STOCK

 

Currently, 1,000,000 shares of Series 2006 Preferred Stock are outstanding. Rondald L. Wheet, our Chairman and Chief Executive Officer, has been issued the 1,000,000 shares.

 

SERIES 2009 PREFERRED STOCK

 

Currently no shares of Series 2009 Preferred Stock are outstanding.  Tom O’Brien, our former President, returned 500,000 shares of Series 2009 Preferred Stock upon his resignation.

 

Dividends: The holder of the Series 2006 and the Series 2009 Preferred stock is entitled to receive, ratably, dividends when, as and if declared by the board of directors out of funds legally available therefore. If any dividend or other distributions are declared on our common stock, then a dividend or other distribution must also be declared on the outstanding Series 2006 and Series 2009 Preferred stock at the same time and on the same terms and conditions, so that each holder of Series 2006 and Series 2009 Preferred stock will receive the same dividend or distribution such holder would have received if the holder had converted his Series 2006 and Series 2009 Preferred stock as of the record date for determining stockholders entitled to receive such dividend or distribution.

 

Liquidation Preference: In the event of the liquidation, dissolution or winding up, the holders of Series 2006 or 2009 Preferred stock are entitled to receive a liquidation preference of $0.001 for each share of Series 2006 or Series 2009 Preferred stock prior to payment being made to any junior stock.

 

Conversion: The holders of Series 2006 and Series 2009 Preferred stock may convert each share into 1 share of common stock.

 

Preemption: The holders of Series 2006 and Series 2009 Preferred stock have no preemptive rights and they are not subject to further calls or assessments.

 

Voting Rights: The holders of Series 2006 and Series 2009 Preferred stock are entitled to 125 votes for each share of common stock into which their Series 2006 and Series 2009 Preferred stock is then convertible (currently 1 share), voting together with our common stock as a single class. Cumulative voting is not permitted. Upon conversion of a Series 2006 or Series 2009 Preferred share, each share of common stock issued upon the conversion will be entitled to only one (1) vote per share.

 

Redemption: There are no redemption or sinking fund provisions applicable to the Series 2006 or Series 2009 Preferred stock.

 

BLANK CHECK PREFERRED STOCK

 

The Company’s Articles of Incorporation authorize its board of directors to establish one or more additional series of preferred stock and to determine, with respect to any such series of preferred stock, its terms and rights, including: the designation of each series; the voting powers, if any, associated with each such series whether dividends, if any, will be cumulative or noncumulative and the dividend rate of each series; the redemption rights and price or prices, if any, for shares of each series; and preferences and other special rights, if any, of shares of each series in the event of any liquidation, dissolution, or distribution of the Company’s assets.

 

2012 COMMON STOCK TRANSACTIONS

 

During the nine months ended September 30, 2012, 400,000 shares were issued under the terms of the SEC settlement agreement with Gifford Mabie.  The initial value of these shares totaled $140,160.

 

Pursuant to consulting agreements issued in first nine months of 2012, the Company issued stock from the exercise of options issued with these agreements in the amount of 475,000 shares with a total value of $108,025.

 

Also, during the first nine months of 2012, the Company issued stock from the exercise of warrants issued through a stock subscription agreement in 2010 in the amount of 800,000 shares with a total value of $394,136.

 

Also during the nine months ended September 30, 2012, the Company issued an additional 1,808,390 shares of common stock with a total value of $410,675 in lieu of cash as payment for outside services.

 

Also during the nine months ended September 30, 2012, the Company issued an additional 7,415,913 shares of common stock with a total value of $1,171,826 due to conversions of convertible debt agreements with Asher Enterprises, JMJ Financial and individual investors.

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STOCK OPTIONS AND WARRANTS OUTSTANDING
9 Months Ended
Sep. 30, 2012
Stock Options and Warrants Outstanding [Abstract]
STOCK OPTIONS AND WARRANTS OUTSTANDING

NOTE 6 - STOCK OPTIONS AND WARRANTS OUTSTANDING

 

The following tables summarize information about the stock options and warrants outstanding at September 30, 2012:

 

    OPTIONS     WARRANTS     TOTAL     WEIGHTED
AVERAGE
EXERCISE
PRICE
 
                                 
Balance at December 31, 2011     15,473,750       3,371,600       18,845,350     $ 0.27  
Granted     2,675,000       5,649,007       8,324,007       0.28  
Exercised     75,000       800,000       875,000       0.25  
Expired/Forfeited           2,571,600       2,571,600       0.25  
                                 
BALANCE AT September 30, 2012     18,073,750       5,649,007       23,722,757       0.26  

 

 

          OPTIONS OUTSTANDING       EXERCISABLE  
 

Range of 

Exercise Price

     

Number 

Outstanding

at 

September 30,

2012

     

Weighted

Average 

Remaining 

Contractual Life

     

Weighted 

Average

Exercise

Price

     

Number 

Exercisable at

September 30,

2012

     

Weighted

Average 

Exercise

Price

 
  OPTIONS                                          
  0.08 - 0.25       10,453,750       1.25     $ 0.12       10,453,750     $ 0.12  
  0.26-1.00       7,620,000       .73       0.40       7,620,000       0.40  
  1.00-10.00                                          
                                             
          18,073,750                       18,073,750          
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RELATED PARTY TRANSACTIONS
9 Months Ended
Sep. 30, 2012
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS

NOTE 7 - RELATED PARTY TRANSACTIONS

 

On September 1, 2009, the Company entered into a five (5) year lease agreement with Osprey South, LLC (“Osprey”), to lease the property at 670 Marina Drive, Suite 301, Building F, Charleston, South Carolina, 29492. The leased property is approximately 2,395 square feet.  During the course of the five (5) year lease, ending on August 31, 2014, the Company is to pay Osprey $4,500 in monthly rental installments payable on the first day of each succeeding month.  On July 1, 2011, the Company entered into a lease with Osprey for the office space adjacent to the existing office space on the third floor at 670 Marina Drive. The leased property is approximately 2,395 square feet. During the course of the five (5) year lease, ending on July 1, 2016, the Company is to pay Osprey a total of $10,000 in monthly rental installments payable on the first day of each succeeding month. The Company paid $30,000 in office rent to Osprey South, LLC for the third quarter of 2012. Ron Wheet is the sole member of Osprey South, LLC.  The contract is a triple net lease with terms based upon market rates for class A office space at the time of the lease signing.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
9 Months Ended
Sep. 30, 2012
Organization, Consolidation and Presentation Of Financial Statements [Abstract]
Organization and Nature Of Operations [Policy Text Block]

Organization and Nature of Operations

 

Revolutions Medical Corporation, a Nevada corporation (“the Company”), has been endeavoring to design, develop and commercialize auto retractable vacuum safety syringes. Our present product development effort is focused on the RevVac™ Auto Retractable Vacuum Safety Syringe, which is designed specifically to reduce accidental needle stick injuries and lower the spread of blood borne diseases. The Company also has developed a suite of proprietary MRI software tools; RevColor™, Rev3D™, RevDisplay™. These tools are designed to enhance general diagnostic confidence through education and research use and in the future we believe will have specific commercial applications. The Company’s administrative facilities are located in Charleston, South Carolina. The Company’s primary third-party manufacturing facility is located in Wuxi, China.

Development Stage Company [Policy Text Block]

Development Stage Company

 

From its inception in 1996, the Company has been considered a development stage enterprise for financial reporting purposes as significant efforts have been devoted to raising capital and to research and development of various safety syringes and its proprietary MRI software tools.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

 

The Company considers highly liquid investments (those readily convertible to cash) purchased with original maturity dates of three months or less to be cash equivalents.

Generally Accepted Accounting Principles [Policy Text Block]

Generally Accepted Accounting Principles

 

On July 1, 2009, the Financial Accounting Standards Board (“FASB”) released its Accounting Standards Codification (“ASC”). The ASC became effective for interim or annual financial statements issued after September 15, 2009. The ASC is the single source of generally accepted accounting principles.

Income Tax, Policy [Policy Text Block]

Income Taxes

 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740, “Income Taxes.” Under the liability method, deferred taxes are determined based on the differences between the financial statement and tax basis of assets and liabilities at enacted tax rates in effect in the years in which the differences are expected to reverse.

 

Segment Reporting, Policy [Policy Text Block]

Segment Information

 

The Company follows the guidance in ASC 280, “Segment Reporting”. The Company identifies its operating segments based on business activities, management responsibility and geographical location.  During the period covered by these financial statements, the Company operated in a single business segment engaged in developing selected healthcare products.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) per Share

 

The Company computes net income per share in accordance with ASC 260, “Earnings per Share”. Under these provisions, basic net income (loss) per share is calculated by dividing net income (loss) available to common stockholders for the period by the weighted average shares of common stock of the Company outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding during the period. The calculation of diluted income (loss) per share of common stock assumes the dilutive effect of stock options and warrants outstanding. During a loss period, the assumed exercise of outstanding stock options and warrants has an anti-dilutive effect. Therefore, the outstanding stock options were not included in the September 30, 2012, and December 31, 2011, calculations of loss per share.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Accounts receivable

 

The Company records trade receivables when revenue is recognized. No product has been consigned to customers.  The Company’s allowance for doubtful accounts is primarily determined by review of specific trade receivables.  Those accounts that are doubtful of collection are included in the allowance.  These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts.  Trade receivables are charged off when there is certainty as to their being uncollectible.  Trade receivables are considered delinquent when payment has not been made within contract terms.

 

The Company requires certain distributors to make a prepayment prior to beginning production or shipment of their order. Distributors may apply such prepayments to their outstanding invoices or pay the invoice and continue to carry forward the deposit for future orders.  Such amounts are included in Other accrued liabilities on the Balance Sheet. The Company records an allowance for estimated returns as a reduction to Accounts receivable and Gross profit. To date, returns have been immaterial.

Inventory, Policy [Policy Text Block]

Inventories

 

Inventories are valued at the lower of cost or market, with cost being determined using actual average cost.  The Company compares the average cost to the market price and records the lower value.  Management considers such factors as the amount of inventory on hand and in the distribution channel, estimated time to sell such inventory, the shelf life of inventory, and current market conditions when determining excess or obsolete inventories.  A reserve is established for any excess or obsolete inventories or they may be written off.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.

Reclassification, Policy [Policy Text Block]

Reclassifications

 

Certain reclassifications may have been made to the prior year financial statements to conform to the current period presentation.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

 

Revenue is recognized for sales when title and risk of ownership passes to the customer, generally upon shipment from the manufacturing facility in Wuxi, China or from our warehouse facility in Ladson, South Carolina.

Derivatives, Policy [Policy Text Block]

Valuation of Derivative Instruments

 

ASC 815-40 (formerly SFAS No. 133 “Accounting for derivative instruments and hedging activities”), requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 (formerly EITF 00-19 “Accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock”) to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula. At September 30, 2012, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its statement of operations.

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurements

 

The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. exit price), in an orderly transaction between market participants at the measurement date. The Company categorizes its assets and liabilities measured at fair value based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs, as defined by ASC 820-10, are as follows:

 

  · Level 1 – quoted prices in active markets for identical assets or liabilities.

 

 

  · Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

 

 

  · Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

 

The following table summarizes fair value measurements by level at September 30, 2012, for assets and liabilities measured at fair value on a recurring basis:

 

 

    Level 1     Level 2     Level 3    

Total

 
Cash and cash equivalents   $ 1,073     $     $     $ 1,073  
                                 
Derivative liability   $     $     $ (314,928 )   $ (314,928 )

  

Derivative liability was valued under the Black-Scholes model with the following assumptions:

 

Risk free interest rate   0.18% to 0.19 %
Expected life   0 to 3 years  
Dividend Yield     0 %
Volatility   0% to 162 %
         

 

The following is a reconciliation of the derivative liability:

 

Value at December 31, 2011   $ 442,311  
Issuance of instruments   $ 174,447  
Decrease in Value   $ (162,014 )
Reclassification   $ (139,816 )
Value at September 30, 2012   $ 314,928  
Notes and Loans Payable [Policy Text Block]

Notes and Loans Payable

 

At September 30, 2012 and December 31, 2011, notes and loans payable consist of:

 

    September 30,
2012
    December 31,
2011
 
Convertible Promissory Note Payable to JMJ Financial, secured by the Company’s assets, one time interest charge of 8%, due February 22, 2014   $ 191,663     $ 207,161  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before April 26, 2012           40,000  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before June 1, 2012     ---       45,000  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before August 7, 2012     ---       42,500  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0%  per annum, with payment due on or before September 19, 2012     ---       53,000  
Convertible Promissory Note Payable to TCA Global Credit Master Fund, LP secured by the Company’s assets,  interest rate of 12.0%  per annum, with payment due on or before January 3, 2013     175,000       ---  
                 
                 
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before February 15, 2013     53,000       ---  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before March 21, 2013     42,500       ---  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets,  interest rate of 8.0%  per annum, with payment due on or before May 10, 2013     42,500          
              ---  
Convertible Promissory Note Payable issued in the course of a private placement to individual investors secured by the Company’s assets,  interest rate of 8.0%  per annum, with payment due one year from the date of each note     240,000       ---  
                 
Total     744,663       387,661  
Less: Unamortized Discount     (200,278 )     (307,126 )
    $ 544,385     $ 80,535
Commitments and Contingencies, Policy [Policy Text Block]

Commitments and Contingencies

 

JMJ Financial

 

On February 22, 2011, the Company issued a $1,050,000 Convertible Promissory Note to JMJ Financial, Inc. (“JMJ”), a private investor.  The note bears interest in the form of a onetime interest charge of 8%, payable with the note’s principle amount on the maturity date, February 22, 2014.  All or a portion of this note’s principle and interest is convertible at the option of JMJ from time to time, into shares of the Company’s common stock, originally fixed at a per share conversion price equal to 70% of the average of the 3 lowest closing prices for the Company’s common stock in the 20 trading days previous to the effective date of each such conversion.

 

On February 28, 2011, the Company issued a $500,000 Convertible Promissory Note to JMJ.  The note bears interest in the form of a onetime interest charge of 8%, payable with the note’s principle amount on the maturity date, February 28, 2014.  All or a portion of this note’s principle and interest is convertible at the option of JMJ from time to time, into shares of the Company’s common stock, originally fixed at a per share conversion price equal to 70% of the average of the 3 lowest closing prices for the Company’s common stock in the 20 trading days previous to the effective date of each such conversion. The principal amount owed to JMJ Financial at September 30, 2012, is $191,663 from the $1,050,000 Convertible Promissory Note. No amount is owed to JMJ Financial from the $500,000 Convertible Promissory Note.

 

On March 12, 2012 the Company filed a lawsuit against Justin Keener and JMJ Financial in Charleston County, South Carolina. The Company sought a rescission and financial relief for the convertible debt agreement signed February 22, 2011. The Company claimed that it was unable to deliver the shares requested in the common stock conversion requests dated January 9, 2012 for 1,000,000 shares and January 30, 2012 for 1,226,049 shares due to the risk of defaulting on the convertible debt agreement by losing Depository Trust Company “DTC” eligibility. The contract stated that the Company would be considered in default of the agreement if the Company lost DTC eligibility due to a “chill” placed upon the electronic transfer of the stock. The Company had previously been made aware of other companies that had entered into similar agreements losing DTC eligibility and felt that JMJ had put the Company in an untenable position of either defaulting by losing DTC eligibility or defaulting by failing to issue the requested shares. The Company claimed that JMJ’s unreasonably high demands for conversion caused a “frustration” of the principal purpose of the contract and supports the rescission of the contract and a return of the parties to their respective positions before the contract was signed. On April 12, 2012 the Company withdrew the lawsuit filed in South Carolina to pursue its rights and counterclaims in Miami-Dade County, Florida.

 

The Company also claims the default notice issued by JMJ obligated the Company to pay JMJ the outstanding principal balance under the note along with the accrued and unpaid interest. The principal balance due at the time JMJ issued the default notice amounted to $191,663. The Company disputes JMJ’s claims that the Company was liable for a sum far in excess of this based upon the default provision of the contract.

 

A lawsuit was filed against the Company by JMJ Financial in Miami-Dade County, Florida on March 15, 2012. The lawsuit claims that the Company breached the terms of the convertible debt agreement by failing to issue shares requested in a stock conversion by JMJ on January 9, 2012 for 1,000,000 shares and on January 30, 2012 for 1,226,049 shares. JMJ is seeking the delivery of 2,226,049 shares of common stock of the Company, plus costs and prejudgment interest. On August 30, 2012, the Company filed its counterclaims against JMJ Financial which included Fraud by Concealment, among other claims. The Company alleges that Keener and JMJ had a responsibility and obligation under Florida law to disclose not to conceal during the negotiations of the agreement the fact that Keener and JMJ had outstanding and current issues with these type of convertible notes with DTC which could do detrimental harm to liquidity and electronic transfer of the Company's stock if DTC eligibility was "chilled". This would severely hamper future capital raising and harm its current shareholders but would solely benefit Keener and JMJ under the default clauses in this agreement.

 

Asher Enterprises, Inc.

 

During the three months ended September 30, 2012, Asher elected to convert $88,500 in convertible debt agreements into common stock. The conversion price was based upon 55% of the 3 lowest closing bid prices in the previous 10 days to conversion. This resulted in the conversion of 1,270,101 shares of common stock to satisfy this debt.

 

The Company entered into one securities purchase agreement in the third quarter of 2012 with Asher Enterprises, pursuant to which the Company issued a convertible promissory note to Asher Enterprises for an original principal amount of $42,500 on August 15, 2012, in return for aggregate gross cash proceeds of $42,500.  The note bears interest at a rate of 8% per annum and provides for the payment of all principal and interest 9 months from the date of the notes’ respective issuance.  The principal amount owed to Asher Enterprises at September 30, 2012, is $138,000. This includes the note issued for $42,500 in the third quarter of 2012 and the notes from May 15, 2012 for $53,000 and from June 21, 2012 for $42,500. The notes are convertible at the election of Asher Enterprises into that number of shares of the Company’s common stock determined by multiplying 55% by the average of the lowest three closing bid prices of the Company’s common stock on the OTC Markets OTCQB during the 10 business days immediately preceding the date of conversion, subject to adjustment.

 

TCA Global Credit Master Fund, LP

 

The Company entered into a securities purchase agreement in the first quarter of 2012 with TCA Global Credit Master Fund, LP (“TCA”), pursuant to which the Company issued a convertible promissory note to TCA for an original principal amount of $225,000 on January 3, 2012.  The note bears interest at a rate of 12% per annum and provides for the payment of all principal and interest 12 months from the date of the note’s respective issuance. TCA elected to convert $50,000 of the convertible debt agreement into common stock on August 15, 2012. The conversion price was determined by multiplying 95% by the average of the two lowest daily volume weighted average prices of the Company’s common stock on the OTC Markets OTCQB during the 5 business days immediately preceding the date of conversion. This resulted in the conversion of 294,118 shares of common stock to satisfy this debt.  The principal amount owed to TCA at September 30, 2012, is $175,000. The note is convertible at the election of TCA into that number of shares of the Company’s common stock determined by multiplying 95% by the average of the two lowest daily volume weighted average prices of the Company’s common stock on the OTC Markets OTCQB during the 5 business days immediately preceding the date of conversion, subject to adjustment.

 

Private convertible debt placement with individual investors

 

The Company entered into nine securities purchase agreements in the third quarter of 2012, with individual investors, pursuant to which the Company issued nine convertible promissory notes for an original principal amount of $25,000 on July 12, 2012, for $100,000 on July 13, 2012, for $50,000 on July 13, 2012, for $75,000 on July 26, 2012, for $25,000 on August 2, 2012, for $25,000 on August 30, 2012, for $25,000 on September 4, 2012 and for $15,000 on September 20, 2012, respectively, in return for aggregate gross cash proceeds of $390,000. The notes bear interest at a rate of 8% per annum and provide for the payment of all principal and interest 12 months from the date of the notes’ respective issuance. The notes also feature detachable warrants exercisable within one year of the agreement. All warrants issued along with the convertible debt agreements are outstanding, with a total of 3,666,005 warrants issued at 25 cents and 1,833,002 warrants issued at 50 cents.  In determining the cost associated with the issuance of this debt and the appropriate fair value for the warrants, the Company uses the Black-Scholes option pricing formula.  The principal amount owed according to these notes as of September 30, 2012, is $240,000. The notes are convertible at the election of the individual into that number of shares of the Company’s common stock determined by multiplying 75% by the average of the daily volume weighted average prices of the Company’s common stock on the OTC Markets OTCQB during the 5 business days immediately preceding the date of conversion, subject to adjustment.

 

During the three months ended September 30, 2012, seven investors elected to convert $350,000 in aggregate in convertible debt agreements into common stock. The conversion price was based upon 75% of the average of the daily volume weighted average prices of the Company’s common stock during the 5 business days immediately preceding the date of conversion, subject to adjustment. This resulted in the conversion of 2,725,136 shares of common stock to satisfy this debt.

Debt, Policy [Policy Text Block]

Debt Discount

 

In connection with the two notes converted and the $138,000 outstanding from Asher Enterprises in the third quarter of 2012, we recorded interest expense to amortize the debt discount in the amount of $98,558 during the quarter ended September 30, 2012.

 

In connection with the sale of a Convertible Promissory Note Agreement on February 22, 2011, with JMJ, relating to a private placement of a total of up to $1,050,000 in principal amount, we recorded interest expense to amortize the debt discount in the amount of $21,701 during the quarter ended September 30, 2012. This amount is based upon the remaining unconverted amount of $191,663 from the $450,000 we received in four tranches from this agreement.

 

In connection with partial conversion of $50,000 and the $175,000 outstanding from TCA pursuant to a short-term note issued on January 3, 2012, we recorded interest expense to amortize the debt discount in the amount of $51,333 during the quarter ended September 30, 2012.

 

There remains a total of $200,278 of debt discount yet to be amortized as of September 30, 2012.

Beneficial Conversion Feature [Policy Text Block]

Beneficial Conversion Feature

 

From time to time, the Company may issue convertible notes that may have conversion prices that create an embedded beneficial conversion feature pursuant to the Emerging Issues Task Force guidance on beneficial conversion features. A beneficial conversion feature exists on the date a convertible note is issued when the fair value of the underlying common stock to which the note is convertible into is in excess of the remaining unallocated proceeds of the note after first considering the allocation of a portion of the note proceeds to the fair value of any attached equity instruments, if any related equity instruments were granted with the debt. In accordance with the guidance, the intrinsic value of the beneficial conversion feature is recorded as a debt discount with a corresponding amount to additional paid in capital. The debt discount is amortized to interest expense over the life of the note using the effective interest method. The notes issued by Asher in 2012 contain a beneficial conversion feature due to a fixed conversion price of $0.00009 and no adjustment due to dilutive issuance. Additionally, the notes issued through the private placement to individual investors all contain a beneficial conversion feature due to an amendment featuring a fixed conversion price of $0.00009 and no adjustment due to dilutive issuance. The total paid in capital for this beneficial conversion feature for these agreements as of September 30, 2012 is $530,807. Of this, $289,377 is due to the agreements with Asher Enterprises and $241,430 is due to the agreements with private investors.

Gifford Mabie Settlement [Policy Text Block]

Gifford Mabie Settlement

 

On April 8, 2008, the Company entered into a Memorandum of Understanding with its former Chief Executive Officer to settle an outstanding obligation through the issuance of its common stock on a quarterly basis commencing May 8, 2008, for one year. The value of the issuance of the common stock will be determined by the market value of the ten-day average price at the time of each quarterly issuance of common stock. During 2008, the Company issued 271,491 shares at a total value of $133,030 to partially repay this debt.

 

In 2010, the Company determined the final liability balance upon the complete liquidation of Mr. Mabie’s account and issued 400,000 shares of the Company’s common stock as additional repayment for this debt. The initial balance for this settlement debt as of October 12, 2010 was $924,568.

 

The agreement reached with the SEC on behalf of Gifford Mabie specifies that the Company is to periodically issue shares to the special account for Gifford Mabie in order that 2,500 shares can be sold each day the market is open until the liability is satisfied. When the 400,000 shares were placed in the special account on December 14, 2010, to be sold over the course of the next 160 days the market was open, an estimated value for these shares was determined based upon the 10 day average share price following the date of issuance. As of September 30, 2012, the remaining principal balance to be paid was $708,187 based upon this valuation.

Share Based Compensation Stock Option Plan [Policy Text Block]

Share Based Compensation

 

The Company relies on the guidance provided by ASC 718, (“Share Based Payments”). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.

 

In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility, and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.

 

The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

 

The Company’s 2007 Stock Option Plan, revised July 2011, permits the granting of stock options to its employees, directors, consultants and independent contractors for up to 20 million shares of its common stock. The Company believes that such awards encourage employees to remain employed by the Company and also to attract persons of exceptional ability to become employees of the Company. The plan allows the Company to issue either stock options or common shares.

 

On January 3, 2012, under the terms of The Company’s 2007 Stock Option Plan, 1,000,000 options were issued to Dr. Thomas Beahm, a Company director exercisable at 15 cents each.

 

On January 3, 2012, under the terms of The Company’s 2007 Stock Option Plan, 1,000,000 options were issued to the Company’s CEO, Rondald Wheet, exercisable at 15 cents each

 

On January 3, 2012, under the terms of The Company’s 2007 Stock Option Plan, 500,000 options were issued to the Company’s COO, Vincent Olmo, exercisable at 15 cents each.

 

On March 14, 2012, under the terms of The Company’s 2007 Stock Option Plan, 200,000 options were issued for consulting services exercisable at 40 cents each.

Consulting Agreements [Policy Text Block]

Consulting Agreements

 

Periodically, the Company issues consulting agreements to individuals who are obligated under the terms of the agreement, to market the Rev Vac safety syringe within various spheres of influence. These spheres of influence include, but are not limited to, medical product distributors, hospitals, doctors and government agencies. Consultants are vetted to the best of the Company’s abilities through due diligence reviews before the Company enters into any agreements. The purpose of these reviews is to determine a consultant’s ability to market the product for the Company.

 

The fair value of all stock compensation issued is determined by calculating the difference between the option exercise price and the closing price at the day of the option grant. Because the options were issued under a limited window for exercise (10 days), with very little expected volatility, no dividend yield and a negligible effect from interest, the value of the option based compensation was recorded as the difference between option exercise price and the closing share price upon the date of the grant. A valuation of these options was performed using the Black-Scholes model and due to the limited exercise window, the value under this method is the same as the difference between option exercise price and the closing price at the day of the option grant.

Impairment or Disposal of Long-Lived Assets, Including Intangible Assets, Policy [Policy Text Block]

Long-Lived Assets

 

Property, plant and equipment, including significant improvements, are stated at cost.  Expenditures for maintenance and repairs are charged to operating expenses as incurred.  When properties are retired or otherwise disposed of, the cost of the asset and the related accumulated depreciation are removed from the accounts with the resulting gain or loss being reflected in results of operations.

 

Intangible assets include patents and trademarks, which are valued at acquisition through independent appraisals. Debt issuance costs are amortized over the terms of the various agreements. Patents and trademarks are amortized on a straight-line basis over periods varying from 7 to 40 years.

 

In 2007, the Company acquired a 62.2% interest in Clear Image, Inc. (“Clear Image”). Clear Image was a privately held company and was conducting research and development on Color MRI Technology. Clear Image was not able to secure the funding needed to keep this research and development going into the future.  Clear Image had expensed the research and development costs in accordance with accounting standards in effect at the time. The Company believed it to be advantageous to acquire a controlling interest in Clear Image and keep the technology in development rather than starting all over again. The Company exchanged 8.2 million of its common shares which were trading at a market price of $0.40 at the date of acquisition.  To arrive at a value for the Color MRI Technology, the Company and Clear Image determined the amount of funding provided for the research and development of this technology by looking at the amount expended from 1999 until the acquisition date.  The value of the Company’s stock exchanged for the controlling interest exceeded those expensed amounts by approximately $23,000, which was recorded as goodwill because there were no other assets to value.

Critical Accounting [Policy Text Block]

Critical Accounting Policies

 

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the SEC, have been superseded by the Codification.  All other non-grandfathered, non-SEC accounting literature not included in the Codification has become non-authoritative.  The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database.  The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts our financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of our financial statements or disclosures during the quarter ended September 30, 2012, as a result of implementing the Codification.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
9 Months Ended
Sep. 30, 2012
Organization, Consolidation and Presentation Of Financial Statements [Abstract]
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table summarizes fair value measurements by level at September 30, 2012, for assets and liabilities measured at fair value on a recurring basis:

 

 

    Level 1     Level 2     Level 3    

Total

 
Cash and cash equivalents   $ 1,073     $     $     $ 1,073  
                                 
Derivative liability   $     $     $ (314,928 )   $ (314,928 )
Fair Value, by Balance Sheet Grouping [Table Text Block]

Derivative liability was valued under the Black-Scholes model with the following assumptions:

 

Risk free interest rate   0.18% to 0.19 %
Expected life   0 to 3 years  
Dividend Yield     0 %
Volatility   0% to 162 %
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following is a reconciliation of the derivative liability:

 

Value at December 31, 2011   $ 442,311  
Issuance of instruments   $ 174,447  
Decrease in Value   $ (162,014 )
Reclassification   $ (139,816 )
Value at September 30, 2012   $ 314,928
Convertible Promissory Notes and Loans Payable [Table Text Block]

At September 30, 2012 and December 31, 2011, notes and loans payable consist of:

 

    September 30,
2012
    December 31,
2011
 
Convertible Promissory Note Payable to JMJ Financial, secured by the Company’s assets, one time interest charge of 8%, due February 22, 2014   $ 191,663     $ 207,161  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before April 26, 2012           40,000  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before June 1, 2012     ---       45,000  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before August 7, 2012     ---       42,500  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0%  per annum, with payment due on or before September 19, 2012     ---       53,000  
Convertible Promissory Note Payable to TCA Global Credit Master Fund, LP secured by the Company’s assets,  interest rate of 12.0%  per annum, with payment due on or before January 3, 2013     175,000       ---  
                 
                 
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before February 15, 2013     53,000       ---  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets, interest rate of 8.0% per annum, with payment due on or before March 21, 2013     42,500       ---  
Convertible Promissory Note Payable to Asher Enterprises secured by the Company’s assets,  interest rate of 8.0%  per annum, with payment due on or before May 10, 2013     42,500          
              ---  
Convertible Promissory Note Payable issued in the course of a private placement to individual investors secured by the Company’s assets,  interest rate of 8.0%  per annum, with payment due one year from the date of each note     240,000       ---  
                 
Total     744,663       387,661  
Less: Unamortized Discount     (200,278 )     (307,126 )
    $ 544,385     $ 80,535
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STOCK OPTIONS AND WARRANTS OUTSTANDING (Tables)
9 Months Ended
Sep. 30, 2012
Stock Options and Warrants Outstanding [Abstract]
Schedule Of Share Based Compensation Stock Options and Warrants Activity [Table Text Block]

The following tables summarize information about the stock options and warrants outstanding at September 30, 2012:

 

    OPTIONS     WARRANTS     TOTAL     WEIGHTED
AVERAGE
EXERCISE
PRICE
 
                                 
Balance at December 31, 2011     15,473,750       3,371,600       18,845,350     $ 0.27  
Granted     2,675,000       5,649,007       8,324,007       0.28  
Exercised     75,000       800,000       875,000       0.25  
Expired/Forfeited           2,571,600       2,571,600       0.25  
                                 
BALANCE AT September 30, 2012     18,073,750       5,649,007       23,722,757       0.26
Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

 

          OPTIONS OUTSTANDING       EXERCISABLE  
 

Range of 

Exercise Price

     

Number 

Outstanding

at 

September 30,

2012

     

Weighted

Average 

Remaining 

Contractual Life

     

Weighted 

Average

Exercise

Price

     

Number 

Exercisable at

September 30,

2012

     

Weighted

Average 

Exercise

Price

 
  OPTIONS                                          
  0.08 - 0.25       10,453,750       1.25     $ 0.12       10,453,750     $ 0.12  
  0.26-1.00       7,620,000       .73       0.40       7,620,000       0.40  
  1.00-10.00                                          
                                             
          18,073,750                       18,073,750        
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2011
Dec. 31, 2010
Aug. 15, 1996
Cash and cash equivalents $ 1,073 $ 4,844 $ 2,804 $ 69,517 $ 0
Derivative liability 314,928 442,311
Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents 1,073
Derivative liability 0
Fair Value, Inputs, Level 2 [Member]
Cash and cash equivalents 0
Derivative liability 0
Fair Value, Inputs, Level 3 [Member]
Cash and cash equivalents 0
Derivative liability $ (314,928)
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1)
9 Months Ended
Sep. 30, 2012
Expected Dividend Rate 0.00%
Maximum [Member]
Risk Free Interest Rate 0.19%
Expected Term 3 years
Expected Volatility Rate 162.00%
Minimum [Member]
Risk Free Interest Rate 0.18%
Expected Term 0 years
Expected Volatility Rate 0.00%
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $)
9 Months Ended
Sep. 30, 2012
Value at December 31, 2011 $ 442,311
Issuance of instruments 174,447
Decrease in Value (162,014)
Reclassification (139,816)
Value at September 30, 2012 $ 314,928
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Convertible Notes Payable $ 744,663 $ 387,661
Debt Instrument, Unamortized Discount (200,278) (307,126)
Convertible promissory notes, net of discounts of $414,412 and 307,126, respectively 544,385 80,535
February 22, 2014 [Member]
Convertible Notes Payable 191,663 207,161
April 26, 2012 [Member]
Convertible Notes Payable 0 40,000
June 1, 2012 [Member]
Convertible Notes Payable 0 45,000
August 7, 2012 [Member]
Convertible Notes Payable 0 42,500
September 19, 2012 [Member]
Convertible Notes Payable 0 53,000
January 3, 2013 [Member]
Convertible Notes Payable 175,000 0
February 15, 2013 [Member]
Convertible Notes Payable 53,000 0
March 21, 2013 [Member]
Convertible Notes Payable 42,500 0
Private Placement [Member]
Convertible Notes Payable 240,000 0
May 10, 2013 [Member]
Convertible Notes Payable $ 42,500 $ 0
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)
0 Months Ended 1 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 9 Months Ended 12 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 3 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended
Aug. 15, 2012
Jul. 31, 2011
Feb. 28, 2011
Sep. 30, 2012
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2011
Sep. 30, 2012
Consulting Services [Member]
Stock Options [Member]
Sep. 30, 2012
Jmj Financial In Charleston [Member]
Feb. 28, 2011
Jmj Financial In Charleston [Member]
Feb. 22, 2011
Jmj Financial In Charleston [Member]
Sep. 30, 2012
Asher Enterprises Inc [Member]
Sep. 30, 2012
Asher Enterprises Inc [Member]
Sep. 30, 2011
Asher Enterprises Inc [Member]
May 15, 2012
Asher Enterprises Inc [Member]
Sep. 30, 2012
Tca Global Credit Master Fund Lp [Member]
Sep. 30, 2012
Gifford Mabie Settlement [Member]
Dec. 31, 2008
Gifford Mabie Settlement [Member]
Sep. 30, 2012
Rondald Wheet [Member]
Stock Options [Member]
Sep. 30, 2012
Vincent Olmo [Member]
Stock Options [Member]
Sep. 30, 2012
Dr.Thomas Beahm [Member]
Sep. 30, 2012
Debt Discount [Member]
Jmj Financial In Charleston [Member]
Sep. 30, 2012
Debt Discount [Member]
Jmj Financial In Charleston [Member]
Feb. 22, 2011
Debt Discount [Member]
Jmj Financial In Charleston [Member]
Sep. 30, 2012
Debt Discount [Member]
Tca Global Credit Master Fund Lp [Member]
Sep. 30, 2012
Debt Discount [Member]
Tca Global Credit Master Fund Lp [Member]
Oct. 31, 2010
Repayment Of Debt [Member]
Gifford Mabie Settlement [Member]
Oct. 31, 2010
Settlement Of Debt [Member]
Gifford Mabie Settlement [Member]
Sep. 30, 2012
Private Placement [Member]
Sep. 30, 2011
Private Placement [Member]
Sep. 20, 2012
Private Placement [Member]
Sep. 04, 2012
Private Placement [Member]
Aug. 30, 2012
Private Placement [Member]
Aug. 02, 2012
Private Placement [Member]
Jul. 26, 2012
Private Placement [Member]
Jul. 13, 2012
Private Placement [Member]
Jul. 12, 2012
Private Placement [Member]
Jun. 11, 2012
Private Placement [Member]
May 22, 2012
Private Placement [Member]
Sep. 30, 2012
Tca [Member]
Sep. 30, 2012
February 22, 2014 [Member]
Jmj Financial In Charleston [Member]
Sep. 30, 2012
February 15, 2013 [Member]
Asher Enterprises Inc [Member]
May 15, 2011
February 15, 2013 [Member]
Asher Enterprises Inc [Member]
Sep. 30, 2012
March 21, 2013 [Member]
Asher Enterprises Inc [Member]
Jun. 21, 2012
March 21, 2013 [Member]
Asher Enterprises Inc [Member]
Sep. 30, 2012
November 10, 2012 [Member]
Asher Enterprises Inc [Member]
Sep. 30, 2012
December 20, 2012 [Member]
Asher Enterprises Inc [Member]
Issuance Of Convertible Promissory Note $ 500,000 $ 1,050,000
Debt Instrument, Interest Rate, Stated Percentage 8.00% 8.00% 8.00% 8.00% 8.00%
Debt Instrument, Maturity Date Feb 28, 2014 Feb 22, 2014
Convertible Notes Payable 744,663 744,663 387,661 53,000 191,663 53,000 53,000 42,500 42,500 46,000 42,500
Requested Shares Of Common Stock Conversion 1,000,000
Risk Defaulting Convertible Debt 1,226,049
Principal Amount Due 191,663
Delivery Of Common Stock Shares 2,226,049
Debt Conversion, Converted Instrument, Amount 88,500 350,000
Debt Conversion, Converted Instrument, Rate 55.00%
Debt Conversion, Converted Instrument, Shares Issued 294,118 1,270,101 2,725,136
Return For Aggregate Cash Gross 42,500 95,500 390,000
Principal Amount Owed 138,000 138,000 240,000 15,000 25,000 25,000 25,000 75,000 175,000
Percentage Of Common Stock Closing Price 55.00% 70.00% 95.00% 75.00%
Debt Conversion, Original Debt, Amount One 25,000
Debt Conversion Original Debt Amount Two 100,000
Debt Conversion, Original Debt, Amount Three 50,000
Debt Conversion, Original Debt, Amount Four 50,000
Debt Conversion Original Debt Amount Five 50,000
Debt Conversion, Original Debt, Interest Rate of Debt 8.00% 12.00%
Debt Conversion Original Debt Issuance Months 12months 12months
Debt Conversion Converted Instrument Warrants Issued One 3,666,005
Amount Of Warrants Issued One 25
Debt Conversion Converted Instrument Warrants Issued Two 1,833,002
Amount Of Warrants Issued Two 50
Long-term Debt, Weighted Average Interest Rate 75.00%
Debt Instrument, Convertible, Interest Expense 98,558 21,701 51,333
Debt Instrument Principal Amount Outstanding 138,000
Convertible Promissory Principal Amount 1,050,000
Debt Instument Remaining Unconverted Amount 450,000
Debt Conversion, Original Debt, Amount 50,000 225,000 175,000,000 225,000
Debt Instrument, Unamortized Discount (200,278) (200,278) (307,126) 200,278 200,278
Debt Instrument, Convertible, Conversion Price $ 0.00009 $ 0.00009 $ 0.00009
Debt Instrument, Convertible, Beneficial Conversion Feature 530,807 389,456 289,377 246,876 241,430 142,580
Stock Issued During Period, Shares, New Issues 271,491 400,000
Stock Issued During Period, Value, New Issues 133,030 924,568
Debt Instrument Periodically Issue Of Share 2,500
Stock Issued During Period Shares For Special Account 400,000
Stock Issued During Period For Additional Shares 400,000
Debt Instument Remaining Amount 708,187 708,187
Amount Of Stock Option Granting For Common Stock 20,000,000
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period 200,000 1,000,000 500,000 1,000,000
Share Based Compensation Arrangement By Share Based Payment Award Exercisable 40 Cents 15 Cents 15 Cents 15 Cents
Finite-Lived Intangible Assets, Remaining Amortization Period 7 to 40 years
Acquired Interest For Long Lived Assets 62.20%
Exchange Of Common Stock Shares Amount 8,200,000
Trading Market Price $ 0.4
Goodwill, Gross $ 23,000 $ 23,000
Debt Instrument, Convertible, Conversion Price Interms Of Percentage 95.00% 95.00%
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UNCERTAINTIES (Details Textual) (USD $)
3 Months Ended 9 Months Ended 193 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2012
NET LOSS $ (1,311,664) $ (695,391) $ (4,204,031) $ (2,777,528) $ (34,038,821)
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MAXXON/GLOBE JOINT VENTURE AGREEMENT (Details Textual) (USD $)
1 Months Ended
Oct. 31, 2010
Nov. 30, 2005
Nov. 03, 2005
Percentage Of Definitive Joint Venture Agreement 50.00%
Stock Issued During Period, Value, Restricted Stock Award, Gross $ 625,066
Granted Request For Summary Judgment Awarded $ 311,440
Return Of Common Stock 266,667
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OTHER COMMITMENTS AND CONTINGENCIES (Details Textual) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Chief Executive Officer [Member]
Sep. 30, 2011
Chief Operating Officer [Member]
Sep. 30, 2011
Chief Financial Officer [Member]
Sep. 30, 2012
Yeso Med [Member]
Sep. 30, 2012
Wuxi [Member]
Annual Salary Agreement $ 247,500 $ 165,000 $ 165,000
Percentage Of Outstanding Stock Acquired By Third Party 50.00% 50.00% 50.00%
Accrued salaries 149,140 120,000
Accrued Payroll Taxes, Current 319,052
Accounts payable and accrued liabilities 1,283,738 719,901
Accounts Payable Related Parties Current Due For Services $ 432,463 $ 236,630 $ 206,227
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PREFERRED STOCK AND COMMON STOCK TRANSACTIONS (Details Textual) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Series 2006 Preferred Stock [Member]
Sep. 30, 2012
Series 2009 Preferred Stock [Member]
Sep. 30, 2012
Common Stock Transactions 2012 [Member]
Sep. 30, 2012
Common Stock Transactions 2012 [Member]
Outside Services [Member]
Sep. 30, 2012
Common Stock Transactions 2012 [Member]
Jmj Financial and Individual Investors [Member]
Asher Enterprises Inc [Member]
Preferred Stock, Shares Outstanding 1,000,000 1,000,000 1,000,000
Preferred stock, shares issued 1,000,000 1,000,000 1,000,000
Preferred Stock Shares Returned 500,000
Convertible Preferred Stock, Shares Issued upon Conversion 1 1
Preferred Stock, Voting Rights Preferred stock are entitled to 125 votes for each share of common stock Preferred stock are entitled to 125 votes for each share of common stock
Stock Issued During Period, Value, Issued for Services $ 140,160
Stock Issued During Period, Shares, Issued for Services 400,000
Preferred Stock, Liquidation Preference Per Share $ 0.001
Options Excercised 475,000
Stock Issued During Period, Value, Stock Options Exercised 108,025
Warrants Exercised 800,000
Stock Issued During Period, Value, Stock Warrants Exercised 394,136
Additional Stock Shares Issued 1,808,390 7,415,913
Additional Stock Value Issued $ 410,675 $ 1,171,826
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STOCK OPTIONS AND WARRANTS OUTSTANDING (Details) (USD $)
9 Months Ended
Sep. 30, 2012
Balance at December 31, 2011 18,845,350
Granted, Total 8,324,007
Exercised, Total 875,000
Expired/Forfeited, Total 2,571,600
BALANCE AT September 30, 2012 23,722,757
WEIGHTED AVERAGE EXERCISE PRICE Balance at December 31, 2011 $ 0.27
WEIGHTED AVERAGE EXERCISE PRICE Granted $ 0.28
WEIGHTED AVERAGE EXERCISE PRICE Exercised $ 0.25
WEIGHTED AVERAGE EXERCISE PRICE Expired/Forfeited $ 0.25
WEIGHTED AVERAGE EXERCISE PRICE BALANCE AT September 30, 2012 $ 0.26
Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number 15,473,750
Options Granted 2,675,000
Options Excercised 75,000
Options Expired/Forfeited 0
Balance 18,073,750
Warrant [Member]
Share Based Compensation Arrangement By Share Based Payment Award Warrants Outstanding Number 3,371,600
Warrants Granted 5,649,007
Warrants Exercised 800,000
Warrants Expired/Forfeited 2,571,600
BALANCE 5,649,007
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STOCK OPTIONS AND WARRANTS OUTSTANDING (Details 1) (USD $)
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2012
Stock Option [Member]
Dec. 31, 2011
Stock Option [Member]
Sep. 30, 2012
Option One [Member]
Sep. 30, 2012
Option Two [Member]
Sep. 30, 2012
Option Three [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Lower Range Limit $ 0.08 $ 0.26 $ 1
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, Upper Range Limit $ 0.25 $ 1 $ 10
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number 18,073,750 15,473,750 10,453,750 7,620,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term 1 year 3 months 8 months 22 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price $ 0.26 $ 0.27 $ 0.12 $ 0.4
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number 10,453,750 7,620,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price $ 0.12 $ 0.4
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RELATED PARTY TRANSACTIONS (Details Textual) (USD $)
1 Months Ended 9 Months Ended 1 Months Ended 9 Months Ended
Jul. 31, 2011
Sep. 30, 2009
Sep. 30, 2012
August 31, 2014 [Member]
Jul. 31, 2011
July 1, 2016 [Member]
Sep. 30, 2012
July 1, 2016 [Member]
Lease Agreements 5 years 5 years
Area Of Leased Property 2,395 2,395
Operating Leases, Rent Expense, Net $ 4,500 $ 10,000
Cash Paid For Office Rent $ 30,000
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