LIQUIDITY AND CAPITAL RESOURCES
For the six months ended April 30, 2012, net cash used in operating activities was $323,246. Net loss was $2,482,874 for the nine months ended April 30, 2012. The loss included $1,527,022 of stock compensation cost related to the Share Exchange Agreement for 545,364,919 shares of common stock issued to a consultant who facilitated the transaction. The shares were valued at $0.0028, the market value of the common stock on the date of their issuance. Also included in the current period loss were non-cash expenses of $223,776 for the beneficial conversion feature related to the conversion of $100,000 of convertible notes, $149,514 for amortization regarding discount on debentures payable and amortization of deferred financing costs and $113,121 for the fair market value change in derivative liabilities.
Net cash provided by financing activities for the nine months ended April 30, 2012 was $290,900. For the nine months ended April 30, 2012, the Company received $188,500 on the issuance of convertible debentures, $100,000 on the issuance of convertible notes, $10,400 on the issuance of related notes payable, and $5,000 form a private placement. During the nine months ended April 30, 2012 the Company paid $12,500 closing costs on newly issued convertible debentures and $500 repayment of notes payable.
For the nine months ended April 30, 2012, cash and cash equivalents decreased by $33,771. Ending cash and cash equivalents was $15,240 as of April 30, 2012.
We will require substantial additional financing in order to execute our business plans and we may require additional financing in order to sustain substantial future business operations for an extended period of time. We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.
Pursuant to the Share Exchange Agreement we have assumed certain liabilities of the Registrant of approximately $1,659,000, as of September 1, 2011. As of April 30, 2012 our liabilities are approximately $1,777,000. Included in this amount is a derivative liability of $303,967 related to convertible notes and debentures that is subject to the change in market price of our common stock and ultimately will be satisfied upon the final conversion of the associated debt. Additionally we have face value convertible notes and debentures of approximately $226,000. These amounts, plus other notes payable of $375,759 and related party loans of $46,543 and accrued and unpaid interest may be converted to common stock, thereby reducing considerably our debt service obligations. Nevertheless, we will be required to raise funds in order to fund our operations and costs associated with being a public company. We estimate that amount to be $400,000, annually.
REVENUES
For the three and nine months ended April 30, 2012 the Company had revenues of $16,010 and $119,158 consisting of sales to customers of the Company’s surgical implant products.
COSTS OF REVENUES
For the three and nine months ended April 30, 2012 the Company had costs of revenues of $5,841 and $67,242 related to the costs of our surgical implant products sold during the respective periods.
OPERATING EXPENSES
Operating expenses for the three and nine months ended April 30, 2012 was $62,131 and $1,993,203. The current year expenses include $1,527,022 of costs related to issuance of 545,364,919 shares of common stock pursuant to a consulting agreement regarding the merger with SurgLine. Also included in the three and nine month expenses are management and consulting fees of $12,450 and $236,200 comprised of management fees to our executive staff. Additional nine month operating costs include $80,000 for our FDA consultant and $7,500 to our Government Services consultant. Legal and accounting costs were $61,250 and $68,781 for general and administrative costs.
OTHER INCOME (EXPENSE)
Other expenses for the three and nine months ended April 30, 2012 was $120,650 and $541,587 respectively and consisted primarily of the beneficial conversion feature expense of $223,976 (for the nine months) related to the conversion of $100,000 of convertible promissory notes, interest expense of $69,517 (three months) and $204,690 (nine months), including $1,028 (three months) and $2,937 (nine months) to related parties.
10Q just released
