UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-K/A


(Amendment No. 1)





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





For the Fiscal Year Ended:December 31, 2012





or





 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934





REVOLUTIONS MEDICAL CORPORATION(Exact name of registrant as specified in its charter)





Nevada
001-15165
73-1526138(State or other jurisdiction of

incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification

Number)





670 MARINA DRIVE, 3RD FLOOR

CHARLESTON, SC 29492(Address of principal executive offices, including zip code)





(843) 971-4848(Registrant’s telephone number, including area code)





Securities registered pursuant to Section 12(b) of the Act:  None





Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes  ̈ No þ





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ̈ No þ




Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days.


Yes þ No  ̈





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





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈




1





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





Large Accelerated Filer  ̈
Accelerated Filer  ̈Non-Accelerated Filer  ̈
Smaller reporting company þ





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈ No þ





The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 29, 2012, based on a closing price of $0.17 per share, was approximately $10,253,579.  As of April 22, 2013, the registrant had 77,610,014 shares of its common stock, par value $0.001 per share, outstanding.





Documents Incorporated By Reference: None.




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Explanatory Note
 
 This Amendment No. 1 (this “Amendment”) to Revolutions Medical Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Securities and Exchange Commission on May 2, 2013 (the “Form 10-K”), is being filed with the limited purpose of amending the Report of Independent Registered Public Accounting Firm on page F-2 to correct a scrivener’s error with respect to the date thereof.  This Amendment does not amend or otherwise update any other information in the original Form 10-K.  Accordingly, this Amendment should be read in conjunction with the original Form 10-K.




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REVOLUTIONS MEDICAL CORPORATION


FOR THE FISCAL YEAR ENDED


DECEMBER 31, 2012





TABLE OF CONTENTS





PagePART IItem 1.
Business.
6Item 1A.
Risk Factors.
15Item 1B.
Unresolved Staff Comments.
29Item 2.
Properties.
29Item 3.
Legal Proceedings.
29Item 4.
Mine Safety Disclosures.
30PART IIItem 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
31Item 6.
Selected Financial Data.
32Item 7.
Management’s Discussion and Analysis of Financial Condition and Results Of Operations.
32Item 7A.
Quantitative And Qualitative Disclosures About Market Risk.
36Item 8.
Financial Statements and Supplementary Data.
36Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
36Item 9A.
Controls and Procedures.
37Item 9B.
Other Information.
38PART IIIItem 10.
Directors, Executive Officers and Corporate Governance.
39Item 11.
Executive Compensation.
41Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
44Item 13.
Certain Relationships and Related Transactions, and Director Independence.
45Item 14.
Principal Accounting Fees and Services.
45PART IVItem 15.
Exhibits, Financial Statement Schedules.
47





4





FORWARD LOOKING STATEMENTS





Included in this Form 10-K are “forward-looking” statements, as well as historical information.  Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct.  Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative.  Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements.  We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.




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PART I





Item 1.  Business.





Since 1996, Revolutions Medical Corporation (“Revolutions Medical,” the “Company,” “we,” “us” or “our”) has been endeavoring to design, develop and commercialize auto retractable vacuum safety syringes. Our present product development effort is focused on the RevVacTM 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; RevColorTM, Rev3DTM, RevDisplayTM, and RevScanTM. “MRI” refers to “Magnetic Resonance Imaging,” a widely used imaging system that safely creates many different and detailed views of selected portions of the internal anatomy.  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.





On February 22, 2009, the Company announced that it had received notification from the Federal Drug Administration (“FDA”) that the 510(k) application for the 3ml RevVacTM safety syringe was cleared. Furthermore, FDA clearance is not needed for educational and research use of our RevDisplayTM, RevColorTM and Rev3DTM MRI software tools but future applications will most likely require FDA 510(k) clearance. The Company believes that FDA approval is not presently required for our MRI technology.  Section 510(b) of the Federal Food, Drug and Cosmetic Act requires that anyone engaged in the manufacture of a device register their establishment with FDA, and the Company has so registered with FDA and therefore complies with this requirement.  Sec. 510(k) of the Federal Food, Drug and Cosmetic Act requires that anyone who is required to register submit a report to FDA at least 90 days before such person proposes to "...begin the introduction or delivery for introduction into interstate commerce for commercial distribution of a device intended for human use...".  Because the Company intends to make our MRI coloring technology available for educational and evaluation purposes to physicians primarily at teaching institutions, and the Company does not intend at this time for the technology to be used for diagnostic purposes, the Company does not believe that this constitutes commercial distribution and, therefore, the Company is not required to submit a 510(k) report for its MRI technology to FDA at this time.  The Company believes that this technology is an accessory to MRI and is therefore a medical device, and because MRI devices require  marketing clearance by the FDA, our technology would require such clearance were the Company to begin selling it for diagnostic purposes.





According to the Company’s manufacturing agreement with Medical Investment Group (MIG), signed in September 2010, the RevVacTM auto-retractable vacuum safety syringe was required to be in full production by May 2011.  MIG was not able to perform and on September 6, 2011, the Company terminated its manufacturing agreement with MIG and signed a Memorandum of Understanding with Wuxi Yushou Medical Appliances Co., Ltd., a limited liability company organized and existing under the laws of the People’s Republic of China (“Yeso-med”), on September 8, 2011, for the manufacturing and supply of the Company's proprietary RevVacTM safety syringes, including the 1ml, 3ml, 5ml, and 10ml sizes.  On December 1st, 2011 a formal manufacturing agreement was signed between Revolutions Medical and Yeso-med. Yeso-med opened its new production workshop in March 2012 and began full scale manufacturing of the 3ml RevVacTM safety syringe.





The Company’s partnership with the Yeso-med enabled Revolutions Medical to establish manufacturing capabilities.  In September 2011, Yeso-med began establishing a new, state-of-the-art manufacturing facility dedicated to the manufacture of safety syringes.   The new facility, which began operations in March 2012, consists of 21 injection molding machines with complete assembly lines, capable of producing 100,000,000 safety syringes per year and expansion capability to produce 300,000,000 units per annum.  The new facility is over 300,000 sq. ft. with a Class 8 clean room totaling over 32,000 sq. ft.  Yeso-med employs over 470 employees and has been producing medical devices since 1997.  The manufacturing processes have been certified by the FDA, European Community (CE Mark) and ANVISA and has been issued an ISO 13485 certificate of compliance in recognition of their current good manufacturing practices (cGMP).




6





During 2010, Revolutions Medical entered into two university clinical studies utilizing its proprietary MRI software tools. These first two clinical studies are for cases involving head trauma and brain masses. These results are expected to clinically validate the use of its MRI software tools as an additional application to enhance the diagnostic confidence of physicians. In preparation for the expected commercial launch of the MRI software suite of products, the Company hired Strata Corporation in March 2012. Strata is an expert in computer software and programming and the Company believes that by the end of 2013 the first application of  RevColorTM, RevDisplayTM and Rev3DTM will be  available.  The launch of this product will be a “software as a service” (SaaS) business model, where customers will log on to our secure website and send current black and white images to the Company via high speed internet (teleradiology), and the images will be sent back to the customer in color and three dimensional with auto segmentation. At first the Company will charge a per-use fee but can expand depending upon volume into monthly service agreements. Potential Revolutions Medical customers could include MRI centers, doctors, hospitals and even patients.





An MRI scanner is a large tunnel-shaped machine that will accommodate an adult lying down. Within the MRI scanner is a large magnet which directs harmless radio signals around sections of the body. When these signals pass through the body, they release a signal. The released signals are picked up by a receiver inside the MRI scanner and then sent to a computer. The computer analyzes the signals and converts them to a visual image that is displayed on a viewing monitor and then printed on special film. The images produced by the scanner are gray-scale images similar to an x-ray.  These gray-scale images can be difficult and time consuming to “read.” A radiologist “reads” these images on film by comparing the different scans of each tissue slice, sometimes evaluating one hundred to three hundred individual gray images to obtain a diagnosis. The successful diagnosis of a condition, using MRI, depends not only on the ability of the radiologist to detect the subtle differences in shades of gray, but also the radiologist’s ability to compare visually the vast number of images.





The Company is 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 data base, the user can obtain similar, identified images to aid the user in interpretation of the image being studied. The Company filed four US patent applications in June of 2007, each of which received USPTO office actions during 2010 and 2011.  As Revolutions Medical continues to improve and enhance its proprietary software capabilities, and as new information and technologies advance with the imaging market, the Company is ready to protect and preserve its technology by filing additional patents, copyrighting, and other protection measures.





The Company has launched sales of its 3ml RevVacTM safety syringe and recorded revenue in 2012 of $1,189 from the sale of syringes.  These sales have been made primarily to distributors the Company has contracted for use in product demonstrations.  Through increased sales orders, the Company hopes to have enough capital to meets its financial needs in 2013.





Principal Markets





Our 3ml RevVacTM safety syringe is currently being marketed to healthcare providers in the U.S. and internationally which include, but are not limited to, acute care hospitals, alternate care facilities, doctors’ offices, clinics, emergency centers, surgical centers, convalescent hospitals, Veterans Administration facilities, military organizations, public health facilities, and prisons.





The syringe and needle device market continues to be a market in transition.  The nature of the products comprising the market is gradually changing from standard to safety devices.  The impetus for the change to safety devices is the risk that is carried with each needlestick injury which includes the transmission of over 20 blood borne pathogens, including the human immunodeficiency virus (“HIV,” which causes AIDS), hepatitis B, and hepatitis C.  Because of the occupational and public health hazards posed by conventional disposable syringes, public health policy makers, domestic organizations, and government agencies have been involved in the effort to get more effective safety needle products to healthcare workers.  Federal legislation was signed into law on November 6, 2000, by former President William Jefferson Clinton.  This legislation, which became effective for most states on April 12, 2001, now requires safety needle products be used for the vast majority of procedures.  However, even with this requirement, hospitals are slow to follow the law intended to protect healthcare workers.




7





Distribution Method of Products and Services





In the U.S., the vast majority of decisions relating to the contracting for and purchasing of medical supplies are made by the representatives of group purchasing organizations (“GPOs”) rather than the end-users of the product (nurses, doctors, and testing personnel). GPOs and manufacturers often enter into long-term exclusive contracts which can prohibit entry in the marketplace by competitors. In the needle and syringe market, the market share leader, Becton-Dickinson, has utilized, among other things, long-term exclusive contracts which have restricted entry into the market by most of our competitors. The Company has been in direct communication and has shown samples of its RevVacTM safety syringes to many GPOs. We believe that we have a superior product compared to the competition which would allow us to penetrate the market. However, we may not be successful in obtaining any contracts with GPOs, which would severely limit our product’s marketability in the United States. See “RISK FACTORS.”





We presently have our 3ml RevVacTM safety syringe for sale and expect to have additional products for sale in 2013.  The Company has signed a sales and marketing contract with MedPro Associates, Inc. (MedPro) in October 2012. MedPro has 30 sales representatives throughout the United States who act as an extension of Revolutions Medical sales force. MedPro is responsible for selling the RevVacTM safety syringe line of products primarily to the long term care market and to provide in servicing and marketing support to other distributors and customers.





In November 2012, Revolutions Medical signed a distribution agreement with McKesson, Inc. for the RevVacTM safety syringe line of products.  All current sizes and gauges are listed in the McKesson catalog so customers can easily order product directly through the McKesson sales and distribution ordering system.   A stocking order for inventory was placed and delivered by Revolutions Medical and a new sales initiative program was began in February 2013. McKesson has over 600 sales representatives in the United States and completed its merger with PSS WorldMed in March 2013, bringing its new total to over 1.300 sales representatives.





The Company believes with its sales and distribution relationships with McKesson and MedPro, it is strategically positioned for future growth in market share in the United States for its RevVacTM safety syringe product line.





In 2012, the Company has signed international non- exclusive distribution agreements with several firms, together covering the countries of Israel, Mexico, Malaysia, Brazil, Puerto Rico, Caribbean. Virgin Islands, Qatar, Thailand, and South Korea. The Company believes it will continue to sign new international distribution agreements as the RevVacTM safety syringe product line gets introduced to more markets.





Status of Planned Products





The RevVacTM safety syringe uses vacuum technology to retract the needle into the plunger immediately after use. The syringe cannot be reused once the vacuum is activated. The Company believes its safety syringe has many advantages over its competition including price, ease of use, and safety. We believe that it will help reduce accidental needle stick injuries and also aid in reducing the spread of contagious diseases. The Company also believes that, with the help of government regulation initiatives, individual state laws, and the importance of world health concerns, the safety syringe market will continue to have substantial growth into the foreseeable future. The Company expects to launch sales of its RevVacTM safety syringe in the 1ml size, including insulin and tuberculin syringes, along with the 5ml and 10ml sizes, in 2013.





The Company is currently working on developing, enhancing and securing its proprietary MRI software tools for commercial launch.  The Company believes that once clinical application validations using its MRI software suite of products including RevColorTM, RevDisplayTM and Rev3DTM directed at concussions, stroke, Alzheimer’s and breast disease are achieved, it will eventually aid in the enhanced diagnosis, detection, and monitoring of such diseases and afflictions.





When an MRI is taken, the black and white images are sent to a picture archiving and communication system (“PACS”), which displays the images for a radiologist to view. By using high speed internet, these images can be securely sent to the Company’s secure website, after a secure account is opened. This process is called teleradiology. For a nominal fee the Company will use its proprietary software, based upon specific parameters and information provided, and sends back the images in enhanced color and sorted in correct sequence along with the original black and white images in a matter of minutes.




8





Competitive Business Conditions, Competitive Position and Methods of Competition





The safety medical device market is highly competitive. The leading manufacturers and marketers of safety medical devices are Becton-Dickinson, Covidien (Kendall Healthcare Products Company), B. Braun, Terumo Medical Corporation of Japan, Smith Medical, and Johnson & Johnson. Developers of safety medical devices, which we compete against for license and collaborative arrangements with medical device and pharmaceutical companies, include Med-Design Corporation, New Medical Technologies, Retractable Technologies, Inc., Unilife, Inc. and Specialized Health Products International. Our competitors have substantially greater assets, technical staffs, established market shares, and greater financial and operating resources than we do. There is no assurance that we can successfully compete.





Traditionally, competition regarding non-safety medical devices was primarily based upon price with little differentiation between products. We expect our products to compete against both safety products and non-safety products based upon safety and ease of use and disposal. Most of the safety medical devices we will compete with are priced substantially above the cost of non-safety products. Market demand for safety devices is being driven by the estimated costs associated with accidental needle sticks and by government mandates.





We compete primarily on the basis of product performance and quality.  We believe our competitive advantages include, but are not limited to, our superior design and innovation. We believe the RevVacTM safety syringe to be the most effective safety syringe on the market.  Our syringe products include passive safety activation, require less disposal space, and are activated while in the patient, virtually eliminating exposure to the contaminated needle.  Our price per unit is competitive or even lower than the competition once all the costs incurred during the life cycle of a syringe are considered. Such life cycle costs include disposal costs, testing and treatment costs for accidental needlestick injuries, and treatment for contracted illnesses through accidental needlestick injuries.  With our unique design, the disposal costs can be drastically reduced by requiring, in certain situations, just the plunger with the retracted needle to be disposed of in a sharps container. This dramatically cuts the disposal costs compared to other safety syringes on the market that require the entire syringe to be disposed of in a sharps container.





We have several major competitors including BD and Covidien Ltd. (“Covidien”) domestically and Terumo Medical Corp. (“Terumo”), and B. Braun internationally.





Included as safety-engineered devices manufactured by BD are the SafetyLokTM, a syringe that utilizes a tubular plastic sheath that must be manually slid over the needle after an injection, and the SafetyGlideTM, a needle which utilizes a hinged lever to cover the needle tip.  BD also manufactured the Integra 3mL retracting needle product based on a license agreement with Specialized Health Products International, Inc. (formerly the Med-Design Corporation).  Terumo manufactures conventional and auto-disable syringes and operates internationally with sales in more than 150 countries.





Both BD’s SafetyLokTM and Covidien’s Monoject® safety syringes require the use of two hands and several extra steps to activate the tubular plastic shield which must be slid and locked into place to protect the needle.  These products must be removed from the patient prior to activation, resulting in exposure to the contaminated needle.  In contrast, use of the RevVacTM syringe is identical to that of a standard syringe until the end of an injection, when the automated vacuum retraction mechanism retracts the needle directly from the patient safely into the barrel of the syringe.  This allows both hands to remain safely out of harm’s way.





Our safety syringe products have an advantage over non-retracting safety syringes because minimal training and changes to practitioners’ normal routines are required.  Use of our products also prohibits unfortunate and improper reuse.  Several factors could materially and beneficially affect the marketability of our products.  Demand could be increased by existing legislation and other legislative and investigative efforts.  Licensing agreements could provide entry into new markets and generate additional revenue.




9





Sources of Raw Materials and the Names of Principal Suppliers





On December 1, 2011, the Company entered into an International Manufacturing Agreement (the “Yeso-med Agreement”) with Yeso-med. The term of the Yeso-med Agreement is for a period of sixty (60) months commencing on the Effective Date (the “Term”). Pursuant to the Yeso-med Agreement, during the Term, Yeso-med will serve as the Company’s exclusive manufacturer in China of the Company’s RevVacTM safety syringes, including the 1ml, 3ml, 5ml and 10ml sizes. The Company is also pursuing manufacturing capabilities outside of China as market demand increases and the need for more supply grows.





The Company is obligated under the terms of the Yeso-med Agreement to place a minimum of 2,500,000 units per month.  Since its initial order the Company has not met this obligation.  As market conditions and demand improves, the Yeso-med Agreement provides for the Company to satisfy this obligation through orders of additional units. In reaction to the high market demand for the 1ml RevVacTM safety syringe, including insulin and tuberculin, and the possibility of increased sales of the whole product line, both parties are negotiating an acceleration of the production of the 1ml size and the granting of limited licensing and distribution rights in China and other countries. The parties are negotiating an amendment to the Yeso-med agreement to allow both parties more opportunity for success.





Dependence on One or Few Major Customers





We anticipate that our safety syringe will be marketed to the entire field of medical professionals. We do not anticipate being dependent on any particular customer, however, at this time we cannot know if any one customer will account for more than 1% of our anticipated safety syringe sales.





Patents, Trademarks, Licenses, Royalty Agreements or Labor Contracts





Our success depends in part on our ability to maintain proprietary protection surrounding our product candidates, technology and know-how; to operate without infringing the proprietary rights of others; and to prevent others from infringing our proprietary rights. Our policy is to seek to protect our proprietary position by filing U.S. and foreign patent applications related to our proprietary technology, including both new inventions and improvements of existing technology, that are important to the development of our business, unless this proprietary position would be better protected using trade secrets.





Our patent strategy includes obtaining patent protection, where possible, on compositions of design, methods of manufacture and methods of use. We also rely on trade secrets, know-how, continuing technological innovation, in-licensing and partnership opportunities to develop and maintain our proprietary position.





Reflecting our commitment to safeguarding proprietary information, we require our employees and consultants to sign confidentiality agreements.  Furthermore, we enter into research agreements in which we exchange proprietary materials and information with collaborators including material transfer agreements, research agreements, development agreements and clinical trial agreements.  These agreements prohibit unauthorized disclosure of our proprietary information.   To the extent that our consultants, contractors or collaborators use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems.





Even though we employ a number of safeguards to protect our proprietary information, including confidentiality agreements and implementation of physical security and electronic security of information technology systems, we cannot be assured that our proprietary information is protected. Despite our efforts to protect our proprietary information, unauthorized parties may attempt to obtain and use our proprietary information.  Policing unauthorized use of our proprietary information is difficult and the steps we have taken might not prevent misappropriation, particularly in foreign countries where the laws may not protect our proprietary rights as fully as do the laws of the U.S.





In some cases, litigation or other proceedings may be necessary to enforce our patents or protect our know-how or other intellectual property rights.  Any additional potential litigation is likely to result in a substantial cost to us and a diversion of our resources.  We cannot be sure that any of our patents will ultimately be held valid.  An adverse outcome in any litigation or proceeding could subject us to significant liability.




10





We focus special attention on filing patent applications for formulations and delivery regimens for our products in development to further enhance our patent exclusivity for those products. We seek to protect our proprietary technology and processes, in part, by contracting with our employees, collaborators, scientific advisors and our commercial consultants to ensure that any inventions resulting from the relationship are disclosed promptly, maintained in confidence until a patent application is filed and preferably until publication of the patent application, and assigned to us or subject to a right to obtain a license.





We do not know whether any of our own patent applications will result in the issuance of any patents. Furthermore, because of the extensive time required for development, testing and regulatory review of a potential product, it is possible that any related patent may expire prior to or shortly after commencing commercialization, thereby reducing the advantage of the patent to our business and products.





As part of our product development, we have filed or may file patent applications related to new product designs and production methods in the U.S. and in many of the major international markets.





Individual patents extend for varying time periods depending on the effective date of filing the patent application or the date of patent issuance, and the legal term of the patents in the countries in which they are obtained. Generally, patents issued in the U.S. are effective for:





·
The longer of 17 years from the issue date or 20 years from the earliest effective filing date, if the patent application was filed prior to June 8, 1995; or





·
20 years from the earliest effective filing date, if the patent application was filed on or after June 8, 1995.





The term of foreign patents varies in accordance with provisions of applicable local law, but typically is 20 years from the earliest effective filing date.





In September 2005, we filed an additional patent on our RevVacTM safety syringe under a joint venture agreement with Globe Med Tech which gives a 50% ownership of this patent to the Company and 50% to Globe Med Tech. The Company filed a lawsuit to rescind, terminate and seek monetary damages for the non-fulfillment and breach of the joint venture agreement and other related agreements with Globe Med Tech in March 2007, in addition to an accounting of expenditures of funds under the terms and provisions of the agreements and to give 100% ownership back to the Company (see Item 3 - Legal Proceedings and “RISK FACTORS”). This patent was issued January 13, 2009. A summary judgment hearing was held in May, 2011, in Tulsa, OK. On August 15, 2011, the District Court of Tulsa County, State of Oklahoma granted Revolutions Medical summary judgment against Globe Medical Tech. On October 21, 2011, Revolutions Medical received journal entry of judgment. The Court requires Globe Med Tech to pay to Revolutions Medical the sum of $311,440, the return of all syringes, design files and sample molds, the return of 266,667 shares of common stock, to assign all rights to the January 2009 issued patent number 11/115,446 and to cease and be prohibited from claiming any interest or ownership to the RevVacTM auto-retractable vacuum safety syringe.  Globe Med Tech’s appeal was denied on December 13, 2011.  On January 30, 2013 the court ruled a Nunc Pro Tunc judgment dismissing all third party and counterclaims by Globe Med Tech. Globe Med Tech is appealing that decision. Revolutions Medical is executing its rights under the judgment against Globe Med Tech to seek all relief and damages.





·
RMCP SAFETY SYRINGE PATENTS. A U.S. patent covering our retractable safety syringe design was published on January 28, 2005. This patent will expire on April 9, 2023. The Company has filed applications for foreign patent protection for the following countries: Canada, Mexico, Taiwan, Japan, China, Australia, and in Europe. An international patent has been issued in Mexico, Japan and China. See “RISK FACTORS.”





·
RMCP BLOOD SAMPLING DEVICE PATENT. A U.S. patent covering the Company’s blood sampling device was published on April 10, 2003. The Company has not filed any applications for foreign patent protection. See “RISK FACTORS.”




11




·
The Company filed a provisional patent with the U.S. Patent and Trademark Office on May 3, 2011 and  on May 2, 2012 filed an international provisional PCT patent  These provisional patents provide additional protection for the Company’s auto-retractable vacuum technology for use with prefilled designs.





·
PATENT APPLICATIONS FOR COLOR AND 3D MRI SOFTWARE TECHNOLOGY. In June 2007, the Company filed four patent applications with the USPTO related to the Color and 3D MRI technology, none of which has yet been published. The Company also filed an application for foreign patent protection in Europe. All of these patent applications received office actions in 2010 and 2011 requiring the Company to provide more information to the issuing authorities. Although the Company continues to supplement information, there is no assurance that any of the patent applications will be issued or that any patent protection for the Color MRI technology can or will be obtained. See “RISK FACTORS.”





In November 2010, the Company filed a trademark on its logo and several word marks for its product line which include: RevColorTM, RevDisplayTM, Rev3DTM, RevScanTM and RevVacTM.





On December 31, 2010, the Company completed a reworking of a worldwide exclusive license with Traxsys, LLC, for a guided navigational Breast Biopsy System (BBS). This BBS facilitates accurate and fast non-palpable lesions and micro calcification localization in the treatment of breast cancer. The BBS localization needle can be modified to use the Company’s proprietary RevVacTM safety syringe technology. Additionally, one of the patents covering the stabilization technology could be used to further enhance the Company's MRI software tools by providing for a proprietary platform for image fusion between MRI and X-Ray. This technology has already received 510(k) clearance from the FDA. After a full due diligence review of the technology, the Company sees a potential synergy between its proprietary MRI software tools and this technology for breast imaging. However, the Company has decided not to invest additional capital at this time and to focus its resources on its RevVacTM safety syringe line of products and applications for its MRI software technology. In the future, the Company could re-license this technology for future products.




Need for Governmental Approval





Pursuant to the Federal Food, Drug and Cosmetic Act, the FDA regulates the research, design, testing, manufacture, safety, labeling, storage, record keeping, advertising and promotion, distribution, and production of medical devices in the United States.  The Company’s safety needle devices are considered to be medical devices, are subject to FDA regulation, and must receive FDA approval prior to sale in the United States.





Medical devices are classified into one of three classes, depending on the controls deemed by FDA to be necessary to reasonably ensure their safety and effectiveness. Class I devices are subject to general controls (e.g. labeling, pre-market notification and adherence to Quality System regulations, which have replaced Good Manufacturing Practice regulations.) These devices are subject to the lowest level of regulatory control. Class II devices are subject to general controls and to special controls (e.g. performance standards, post-market surveillance, patient registries, and FDA guidelines). Generally, Class III devices are those that must receive pre-market approval by the FDA to ensure their safety and effectiveness, and require clinical testing and FDA approval prior to marketing and distribution. Class III devices are the most rigorously regulated.





Generally, before a new device can be introduced into the market in the United States, the manufacturer must obtain FDA clearance through a 510(k) pre-market notification or approval of a premarket approval (“PMA”) application. If a medical device manufacturer can establish that a device is “substantially equivalent” to a legally marketed Class I, Class II device, or a Class III device for which FDA has not called for PMAs, the manufacturer may seek clearance from FDA to market the device by filing a 510(k) pre-market notification. The 510(k) pre-market notification will need to be supported by appropriate data establishing the claim of substantial equivalence to the satisfaction of the FDA.





If the Company or its collaborative partners cannot establish that the Company’s safety needle devices are substantially equivalent to legally marketed predicate devices, pre-market approval of the device through submission of a PMA application must be obtained.  A PMA application must be supported by valid scientific evidence, including pre-clinical and clinical trial data, as well as extensive literature to demonstrate a reasonable assurance of the safety and effectiveness of the device.  The PMA represents the most rigorous form of FDA regulatory approval.




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The Medical Device User Fee and Modernization Act, enacted in 2002, authorizes the FDA to assess and collect review fees for Section 510(k) pre-market notifications and pre-market approval applications filed on or after October 1, 2002. Fees for fiscal year 2007 for small businesses (companies with less than $100 million in sales) range from $3,326 for Section 510(k) pre-market notifications to $107,008 for PMAs, although fee reductions and waivers are available for companies qualifying as small businesses.





There is no assurance that any of our other planned products will qualify for the 510(k) pre-market notification approval process or that the Company will have the funds necessary to seek FDA approval. There is no assurance that any of our other planned products will obtain FDA approval.





If FDA approval is received on future planned products, however, then the Company and/or its collaborative partner (relating to manufacturing and marketing) would also be required to comply with FDA post-market reporting requirements, including the submission of reports on certain adverse events and malfunctions, and requirements governing the promotion of medical devices. In addition, modifications to our devices may require the filing of new 510(k) submissions or pre-market approval supplements, and we will need to comply with FDA regulations governing medical device manufacturing practices. The FDA requires medical device manufacturers to register as such and subjects them to periodic FDA inspections of their manufacturing facilities. The FDA requires that medical device manufacturers produce devices in accordance with the FDA’s current Quality System Regulation (QSR), which governs the methods, facilities and controls used for the design, manufacture, testing, packaging, labeling and storage of medical devices.





There is a different set of regulatory requirements in place for the European Union (EU). In the EU, a company putting a medical device onto the market must comply with the requirements of the Medical Devices Directive (MDD) and affix the CE mark to the product to attest to such compliance. To achieve this, the medical devices in question must meet the “essential requirements” defined under the MDD relating to safety and performance, and the relevant company must successfully undergo a verification of its regulatory compliance by a third party standards certification provider, known as a “Notified Body.” The nature of the assessment will depend on the regulatory class of products concerned, which in turn determines the precise form of testing to be undertaken by the Notified Body.





The requirements of the MDD must be complied with by the “manufacturer of the device,” which is defined as the party responsible for the design, manufacture, packaging and labeling of the device before it is placed on the EU market, regardless of whether these operations are carried out by this entity or on its behalf.





Accordingly, where medical devices are marketed by our potential licensees or by collaborative partners under their names, compliance with the MDD will be their responsibility. In the event that we decide to manufacture devices to be distributed in the EU market under our name, all compliance responsibilities will be borne by us.





There may be numerous other approvals needed before our products can be sold in countries other than the United States or the European Union. There is no assurance that the Company or its collaborative partners, if any, will be successful in obtaining such approvals.





Effect of Existing or Probable Governmental Regulation





The World Health Organization estimates that 1.3 million people die each year as a result of unsafe injection practices, which can include syringe re-use and needlestick injuries. Unsafe injection practices result in the transmission of a number of blood-borne diseases such as HIV/AIDS and hepatitis C. The U.S. Centers for Disease Control and Prevention estimates that 385,000 needlestick and other sharps-related injuries are sustained by U.S. hospital-based healthcare personnel each year. The U.S. Occupational Safety and Health Administration, or OSHA, estimates that when other secondary healthcare settings are also taken into account, there are as many as 800,000 needlestick injuries to U.S. healthcare workers each year. To help minimize the transmission of blood-borne pathogens caused by unsafe injection practices, many international healthcare and pharmaceutical markets are transitioning to the mandatory use of safety syringes.




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In many sophisticated healthcare markets, governments are focused on the mandatory use of safety devices within healthcare facilities to protect healthcare workers from the risk of acquiring blood-borne pathogens via needlestick injuries. Regulatory actions at the federal and state level promote the use of safety needles to reduce the risk of accidental needle sticks. On July 1, 1999, California, through its state Occupational Safety and Health Administration (OSHA) program, began requiring the use of safety needles. Other states such as Texas, Tennessee, Maryland and New Jersey have passed similar legislation.





On November 6, 2000, President Clinton signed the Needle Stick Safety and Prevention Act amending OSHA’s Blood Borne Pathogens Standard to require that employers implement the use of safer medical devices in their facilities. To implement the statutory mandates in the Needle stick Safety and Prevention Act, OSHA has issued a number of further revisions to its Blood borne Pathogens Standard. The revised standard became effective on April 18, 2001. The new standard provisions impose several needle device safety requirements on employers, including:





·
evaluation and implementation of safer needle devices as part of the re-evaluation of appropriate engineering controls during an employer’s annual review of its exposure control plan;





·
documentation of the involvement of non-managerial, frontline employees in choosing safer needle devices; and





·
establishment and maintenance of a sharps injury log for recording injuries from contaminated sharps.





On November 27, 2001, OSHA issued a compliance directive (CPL 2-2.69) that advises OSHA’s regional offices on the proper interpretation and enforcement of the revised Blood borne Pathogens Standard provisions. The compliance directive confirms that the consideration of safer needle devices, in annually reviewing and updating the exposure control plan, is a critical element of the Blood borne Pathogens Standard. The directive also stresses that the standard requires employers to use engineering controls (e.g., safer needle devices) if such controls will remove or eliminate the hazards to employees.





OSHA differentiates safety features in two primary ways. First, it differentiatespassive safety features which “remain in effect before, during and after use” fromactive devices which “require the worker to activate the safety mechanism.” Second, OSHA regulations state that products with an “integrated safety design that is an integral part of the device and cannot be removed” are usually preferred to those with an accessory safety device with safety features that are “external” and “dependent on employee compliance.” We believe the majority of safety syringe products used in U.S. healthcare facilities incorporate active safety features which are not fully integrated within the barrel of the syringe.




The European Union has also introduced a directive in March 2010 requiring member countries to introduce laws within three years requiring the use of needlestick prevention products within healthcare facilities. On May 11, 2013 the European Union's new legislation regarding the use of safety syringes will go into effect. Other countries such as Canada, Brazil and Australia have also taken steps to encourage the use of safety syringes. As a result of this existing and proposed legislation, safety syringes are now commonly used within the healthcare facilities in a number of countries. As a result of these regulatory actions, we anticipate that the demand for safety medical devices such as those we have designed and are designing will continue to increase for the foreseeable future.





Amount Spent on Research and Development





Research and development expenses were $35,544 and $57,000 in 2012 and 2011, respectively.





Costs and effects of environmental compliance





The Company has not spent any sums on environmental compliance and does not expect to be required to spend any sums on environmental compliance in the future, unless the Company chooses to become a manufacturer of its own products. All environmental costs would be borne by the contract manufacturer.




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Number of total employees and number of full time employees





We presently have four full-time employees.  Services such as product design and development and sales consulting are provided by third parties on a contract basis. Consequently, developing our business may require a greater period of time than if we had full time employees.





Our success depends in large measure on our ability to attract and retain capable executive officers and highly skilled employees who are in great demand.  None of our employees are represented by a labor union and we believe that our relations with our employees are generally good. Generally, our employees are at-will employees.  However, we have entered into employment agreements with certain of our executive officers.





Available information





We file electronically with the U.S. Securities and Exchange Commission (SEC) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. We make available on our website at http://www.revolutionsmedical.com, free of charge, copies of these reports as soon as reasonably practicable after filing these reports with, or furnishing them to, the SEC.  The public can also obtain materials that we file with the SEC through the SEC’s website at http://www.sec.gov or at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  Information on the operation of the Public Reference Room is available by calling the SEC at 800-SEC-0330.





Item 1A.  Risk Factors.





You should carefully consider the risks described below, together with all of the other information included in this report, in considering our business and prospects.  The risks and uncertainties described below are not the only ones facing the Company.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.  The occurrence of any of the following risks could harm our business, financial condition or results of operations.





Risks Related to the Our Business and Industry





WE REQUIRE SUBSTANTIAL ADDITIONAL CAPITAL TO CONTINUE DEVELOPING OUR PLANNED PRODUCTS. WE MAY HAVE DIFFICULTY RAISING CAPITAL WHEN WE NEED IT, OR AT ALL. RAISING SUCH CAPITAL MAY DILUTE STOCKHOLDER VALUE. IF WE ARE UNABLE TO RAISE CAPITAL, WE MAY BE REQUIRED TO LIMIT OR CEASE OUR OPERATIONS, OR OTHERWISE MODIFY OUR BUSINESS STRATEGY.





We will require substantial additional capital thereafter to commercialize our planned products. Our commercialization efforts will include, but are not limited to, entering into agreements with third parties for manufacturing (including building molds, designing manufacturing processes and obtaining specialized equipment for our retractable safety syringe), marketing and distribution, and obtaining FDA and/or other regulatory approvals, all of which are necessary before our planned products can be sold and which may take a significant amount of time, if not years, to complete.





Due to the current economic conditions and the risks and uncertainties surrounding our Company, we may not be able to secure additional financing on acceptable terms, if at all.  Our estimated working capital requirement for the next 12 months is $2,700,000 with an estimated burn rate of $190,000 per month.  In order to implement our business plan and meet our liquidity needs going forward, the Company may sell shares of its common stock, issue additional convertible debt notes or permit warrant exercises.  If we implement any of the foregoing financing alternatives to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock. To the extent that services are paid for with common stock or stock options that are exercised and sold into the market, the market price of our common stock could decline and your ownership interest will be diluted.  If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.




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IF WE DO NOT OBTAIN FDA APPROVAL FOR OUR FUTURE PLANNED PRODUCTS THEN OUR FUTURE PROSPECTS WILL BE HARMED.





Our future planned products may require FDA approval before they can be sold in the United States. There are some planned products for which we have not yet applied for or received FDA approval. However, we have received FDA 510(k) clearance on our 3ml RevVacTM safety syringe.  Our RevColorTM and Rev3DTM MRI software technology does not require FDA approval for educational and research purposes, however, future applications may require 510(k) clearance.  There is no assurance that our other planned products will qualify for the FDA’s 510(k) pre-market notification approval process. The FDA approval process can take years and be expensive, especially if a pre-market approval (PMA) is required. A PMA is much more rigorous and expensive to complete than a 510(k). In addition, the Medical Device User Fee and Modernization Act, enacted in 2002, allows the FDA to assess and collect user fees for 510(k) and for PMA applications. There is no assurance that we will qualify for fee reductions or waivers or that we will have the funds necessary to apply for or obtain FDA approval for our planned products. The FDA approval process could take a significant amount of time, if not years, to complete and there is no assurance that FDA approval will ever be obtained. If FDA approval is not obtained, then we will not be able to sell our future planned products in the United States, which would have a material adverse effect on our future business prospects.




OUR PLANNED PRODUCTS MAY PROVE TO BE TOO EXPENSIVE TO MANUFACTURE AND MARKET SUCCESSFULLY, WHICH WOULD HARM OUR FUTURE PROSPECTS.





Our planned products may prove to be too expensive to manufacture and market successfully. Market acceptance of our products will depend in large part upon our ability to demonstrate the operational and safety advantages of our product as well as the cost effectiveness of our product compared to both standard and other safety needle products. If we are unable to produce products that are competitive with standard products, we will not be able to sell our products. This could have a material adverse effect on our operations.





IF WE ARE NOT ABLE TO ESTABLISH MARKETING, SALES AND DISTRIBUTION ARRANGEMENTS FOR OUR SAFETY SYRINGES, THEN OUR FUTURE PROSPECTS WILL BE HARMED.





If we do not enter into successful relationships with third parties to market, sell and distribute our planned products, we will need to develop our own such capabilities. If we choose to establish a direct sales force, we will incur substantial additional expenses in developing, training and managing such an organization. We may not be able to build a sales force on a cost effective basis or at all. Any such direct marketing and sales efforts may prove to be unsuccessful. In addition, we will compete with many other companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be unable to compete against these other companies. We may be unable to engage qualified distributors. Even if engaged, they may fail to satisfy financial or contractual obligations to us. They may fail to adequately market our products. They may cease operations with little or no notice to us or they may offer, design, manufacture or promote competing products.





IF WE ARE UNABLE TO PROTECT OUR FUTURE PLANNED PRODUCTS, OR TO AVOID INFRINGING ON THE RIGHTS OF OTHERS, OUR ABILITY TO COMPETE WILL BE IMPAIRED.





Our commercial success depends in part on our avoiding the infringement of patents and proprietary rights of other parties and developing and maintaining a proprietary position with regard to our own technologies and products. We cannot predict with certainty whether we will be able to enforce our patents. Patents that may be issued, or publications or other actions could block our ability to obtain patents or to operate as we would like. Others may develop similar technologies or duplicate technologies that we have developed or claim that we are infringing their patents.





Although we rely on trade secrets to protect our technology and require certain parties to execute nondisclosure and non-competition agreements, these agreements could be breached, and our remedies for breach may be inadequate. In addition, our trade secrets may otherwise become known or independently discovered by our competitors. If we lose any of our trade secrets, our business and ability to compete could be harmed.




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Despite our efforts to protect our proprietary rights, we face the risks that pending patent applications may not be issued, that patents issued to us may be challenged, invalidated or circumvented; that unauthorized parties may obtain and use information that we regard as proprietary; that intellectual property laws may not protect our intellectual property; and effective protection of intellectual property rights may be limited or unavailable in China, where we plan to manufacture our retractable safety syringe, or in other foreign countries where we may manufacture and/or sell our retractable safety needle devices. The lack of adequate remedies and impartiality under any foreign legal system may adversely impact our ability to protect our intellectual property.





We may become involved in litigation or interference proceedings declared by the U.S. Patent and Trademark Office, or oppositions or other intellectual property proceedings outside of the United States. If any of our competitors have filed patent applications or obtained patents that claim inventions that we also claim, we may have to participate in an interference proceeding to determine who has the right to a patent for these inventions in the United States. If a litigation or interference proceeding is initiated, we may have to spend significant amounts of time and money to defend our intellectual property rights or to defend against infringement claims of others. Litigation or interference proceedings could divert our management’s time and effort. Even unsuccessful claims against us could result in significant legal fees and other expenses, diversion of management time and disruption in our business. Any of these events could harm our ability to compete and adversely affect our business.





An adverse ruling arising out of any intellectual property dispute could invalidate or diminish our intellectual property position. An adverse ruling could also subject us to significant liability for damages, prevent us from using processes or products, or require us to license intellectual property from third parties. Costs associated with licensing arrangements entered into to resolve litigation or an interference proceeding may be substantial and could include ongoing royalties. We may not be able to obtain any necessary licenses on satisfactory terms or at all.




WE MUST OBTAIN REGULATORY APPROVALS IN FOREIGN JURISDICTIONS TO MARKET OUR PRODUCTS ABROAD.





Whether or not FDA approval has been obtained, we must secure approval for our future planned products by the comparable non-U.S. regulatory authorities prior to the commencement of marketing of the product in a foreign country. The process of obtaining these approvals will be time consuming and costly. The approval process varies from country to country and the time needed to secure additional approvals may be longer than that required for FDA approval. These applications may require the completion of pre-clinical and clinical studies and disclosure of information relating to manufacturing and controls. Unanticipated changes in existing regulations or the adoption of new regulations could affect the manufacture and marketing of our products.





IF WE ARE NOT ABLE TO COMPETE SUCCESSFULLY, THEN OUR BUSINESS PROSPECTS WILL BE MATERIALLY ADVERSELY AFFECTED.





Our retractable safety syringe competes in the United States and abroad with the safety needle devices and standard non-safety needle devices manufactured and distributed by companies such as Becton Dickinson (BD), Covidien, (Kendall Healthcare Products Company), B. Braun, Terumo Medical Corporation of Japan, Smith Medical, and Johnson & Johnson. Developers of safety needle devices against which we could compete include Med-Design Corp., New Medical Technologies, Retractable Technologies, Inc., Unilife, Inc. and Specialized Health Products International, Inc. Our MRI software tools, if developed, approved and commercialized, will compete in the United States and abroad against technologies manufactured and distributed by companies such as General Electric and Siemens. Most of our competitors are substantially larger and better financed than we are and have more experience in developing medical devices and/or software than we do. These competitors may use their substantial resources to improve their current products or to develop additional products that may compete more effectively with our planned products, or may render our planned products obsolete. In addition, new competitors may develop products that compete with our planned products, or new technologies may arise that could significantly affect the demand for our planned products. Even if we are successful in bringing our planned products to market, there is no assurance that we can successfully compete. We cannot predict the development of future competitive products or companies.





In the U.S., the vast majority of decisions relating to the contracting for and purchasing of medical supplies are made by the representatives of group purchasing organizations (“GPOs”), rather than the end-users of the product (nurses, doctors, and testing personnel). GPOs and manufacturers often enter into long-term exclusive contracts which can prohibit entry in the marketplace by competitors. In the needle and syringe market, the market share leader, BD, has utilized, among other things, long-term exclusive contracts which have restricted entry into the market by most of our competitors. We may not be successful in developing profitable relationships with GPOs, which would severely limit our product’s marketability in the U.S. We will be materially adversely affected if we are unable to compete successfully.




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WE RELY ON THIRD PARTIES FOR RESEARCH AND DEVELOPMENT ACTIVITIES NECESSARY TO COMMERCIALIZE OUR PRODUCT.  THIS COULD HAVE A MATERIALLY ADVERSE EFFECT ON OUR FUTURE PROSPECTS.





We do not maintain our own laboratory and we do not employ our own researchers. We have contracted with third parties in the past to conduct research, development and testing activities and we expect to continue to do so in the future. Because we rely on such third parties, we have less direct control over those activities and cannot assure you that the research will be done properly or in a timely manner, or that the results will be reproducible. The cost and time to establish or locate an alternative research and development facility to develop our technology could have a materially adverse effect on our future prospects.





IF WE CANNOT GENERATE ADEQUATE, PROFITABLE SALES OF OUR PLANNED PRODUCTS, WE WILL NOT BE SUCCESSFUL.





In order to succeed, we must develop commercially viable products and sell adequate quantities at a high enough price to generate a profit. We may not accomplish these objectives. Even if we succeed in developing a commercially viable product, a number of factors may affect future sales of our product. These factors include:




·
Whether physicians, patients and clinicians accept our product as a viable, safe alternative to the standard medical syringe;





·
Whether the cost of our product is competitive in the medical marketplace; and





·
Whether we successfully contract the manufacture and marketing of the syringe to third parties or develop such capabilities ourselves




OUR PLANNED PRODUCTS, IF SUCCESSFULLY COMMERCIALIZED, COULD BE EXPOSED TO SIGNIFICANT PRODUCT LIABILITY CLAIMS WHICH COULD BE TIME CONSUMING AND COSTLY TO DEFEND, DIVERT MANAGEMENT ATTENTION AND ADVERSELY IMPACT OUR ABILITY TO OBTAIN AND MAINTAIN INSURANCE COVERAGE, WHICH COULD JEOPARDIZE OUR LICENSE.





The testing, manufacture, marketing and sale of our planned products will involve an inherent risk that product liability claims will be asserted against us. We currently have an insurance policy in place with the Hartford Insurance Group for coverage of five million dollars per incident; however, this insurance may prove inadequate to cover claims and/or costs related to potential litigation. Even with insurance in place, product liability claims or other claims related to our planned products, regardless of their outcome, could require us to spend significant time and money in litigation or to pay significant settlement amounts or judgments. Any successful product liability or other claim could increase our insurance premiums to the extent that it may prevent us from maintaining adequate liability insurance in the future on commercially desirable or reasonable terms. In addition, product liability coverage in the future may cease to be available in sufficient amounts or at an acceptable cost. Any inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the commercialization of our planned product. A product liability claim could also significantly harm our reputation and delay market acceptance of our planned products.





STRINGENT, ONGOING GOVERNMENT REGULATION AND INSPECTION OF OUR PLANNED PRODUCTS COULD LEAD TO DELAYS IN MANUFACTURE, MARKETING AND SALES.





The FDA continues to review products even after they receive FDA approval. Manufacturing and marketing will be subject to ongoing regulation, including compliance with current Good Manufacturing Practices, adverse reporting requirements and the FDA’s general prohibitions against promoting products for unapproved or “off-label” uses. We and any third party manufacturers we may use are also subject to inspection and market surveillance by the FDA for compliance with these and other requirements. Any enforcement action resulting from failure to comply with these requirements could affect the manufacture and marketing of our planned products. In addition, the FDA can withdraw a previously approved product from the market at any time, upon receipt of newly discovered information.




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UNCERTAINTY OF THIRD-PARTY REIMBURSEMENT COULD AFFECT OUR ABILITY TO SELL OUR PLANNED PRODUCTS AT A PROFIT.





Sales of medical products largely depend on the reimbursement of patients’ medical expenses by governmental healthcare programs and private health insurers. There is no guarantee that governmental healthcare programs or private health insurers will cover the cost of some of our products, if and when they are commercially available, or permit us to sell our products at a high enough price to generate a profit.





OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR STOCK MORE DIFFICULT.





Since inception in 1996, we have engaged primarily in research and development, technology licensing, and raising capital. This limited history may not be adequate to enable you to fully assess our ability to develop and commercialize our planned products and to achieve market acceptance of our planned products and to respond to competition.





WE HAVE A HISTORY OF LOSSES AND EXPECT FUTURE LOSSES.





We have had annual losses since our inception in 1996. We expect to continue to incur losses until we can sell enough products at prices high enough to generate a profit. As of December 31, 2012, we had accumulated a deficit of $37,938,721. There is no assurance that our planned products will be commercially viable. There is no assurance that we will generate revenue from the sale of our planned products or that we will achieve or maintain profitable operations.





To achieve and maintain profitability, we need to generate significant revenues from our existing and future product sales.  Because of the numerous risks and uncertainties associated with medical device development and commercialization, we are unable to predict the extent of any future losses.  We may never successfully commercialize any products, generate significant future revenues or achieve and sustain profitability.





WE HAVE RECEIVED AN AUDIT REPORT WITH A GOING CONCERN DISCLOSURE ON OUR CONSOLIDATED FINANCIAL STATEMENTS.





The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and/or raising additional capital. Our independent registered public accounting firm included, in their audit report on our consolidated financial statements for the year ended December 31, 2012, an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the liquidity condition of the Company. As a result of this uncertainly we may have a more difficult time obtaining necessary financing.





OUR SUCCESS DEPENDS IN LARGE PART ON OUR ABILITY TO SUCCESSFULLY MANUFACTURE OUR PRIMARY PRODUCT, THE REVVACTM SAFETY SYRINGE, AND ACHIEVE SUBSTANTIAL COMMERCIAL SALES OF THIS PRODUCT TO CUSTOMERS. IF WE EXPERIENCE PROBLEMS OR DELAYS IN MANUFACTURING OR SECURING FAVORABLE AGREEMENTS TO SUPPLY THE REVVACTM SAFETY SYRINGE TO CUSTOMERS, OUR BUSINESS, INCLUDING OUR ABILITY TO GENERATE SIGNIFICANT REVENUES, WILL BE MATERIALLY AND ADVERSELY AFFECTED.





We have commenced commercial sale of the RevVacTM safety syringe, beginning in the 2nd quarter of 2012. Since the RevVacTM safety syringe is our primary product, any failure or significant delay in successfully commercializing the syringe could materially harm our business and our ability to generate any significant amount of revenues for the foreseeable future. Our ability to generate significant revenues will directly depend on our ability to negotiate successfully one or more supply agreements for the RevVacTM syringe with distributors and to begin supplying substantial quantities of the product under such agreements. We cannot predict with certainty the ability of our distributors to enter into supply agreements for the RevVacTM syringe or what the terms of any such agreements will be. If we are unable to secure favorable supply agreements for the RevVacTM syringe in a timely manner, our ability to generate significant revenues will be materially and adversely affected.




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OUR RESEARCH AND DEVELOPMENT AND OTHER OPERATING EXPENSES ARE SIGNIFICANT AND WE DO NOT EXPECT TO BE PROFITABLE UNLESS AND UNTIL WE BEGIN TO MANUFACTURE OUR REVVAC SAFETY SYRINGE ON A CONSISTENT BASIS, NEGOTIATE SUPPLY AGREEMENTS WITH DISTRIBUTORS AND ADVANCE COMMERCIAL SALE OF THE REVVAC SAFETY SYRINGE.





We have incurred and will continue to incur significant research and development expenses for other product variants of our technology. We will also incur general and administrative expenses related to increasing our operations, expanding our sales and marketing capabilities, seeking regulatory approvals, and complying with the requirements related to being a public company in the United States. We will not be profitable unless we are successful in developing and commercializing the RevVacTM safety syringe and other new products, obtaining regulatory approvals, and manufacturing, marketing and selling commercial products.





OUR ABILITY TO SUCCESSFULLY MARKET AND SELL OUR SAFETY SYRINGES MAY BE IMPAIRED UNTIL WE ARE ABLE TO OFFER A FULL RANGE OF SAFETY SYRINGES IN SIZES COMMONLY USED IN ACUTE-CARE FACILITIES.





In addition to the 3ml RevVacTM safety syringe, our planned product portfolio will also include the 1ml, 5ml, and 10ml RevVacTM safety syringe sizes. Acute-care hospitals are the largest single healthcare market for clinical syringes. These facilities use a range of clinical syringes, including 1ml, 3ml and 5ml sizes, for the subcutaneous and intramuscular administration of therapeutic drugs and vaccines. We have completed development and secured regulatory approvals only for the marketing and sale of our 3ml RevVacTM safety syringe. While we intend to market the 3ml RevVacTM safety syringe to other healthcare sectors in addition to acute-care facilities, our ability to market and sell our safety syringes successfully may be impaired until we are able to offer clinical syringes in a full range of sizes.




OUR SUCCESS WILL DEPEND ON THE FULL COMMERCIALIZATION OF OUR CURRENT PRODUCTS, AND THE DEVELOPMENT AND COMMERCIALIZATION OF OTHER PIPELINE PRODUCTS. THERE CAN BE NO ASSURANCE THAT WE WILL BE SUCCESSFUL IN THESE EFFORTS.





A significant element of our strategy focuses on developing products that deliver greater benefits to pharmaceutical companies, healthcare workers and patients. The development of these products requires significant research and development, clinical evaluations and regulatory approvals. The results of our product development efforts may be affected by a number of factors, including our ability to innovate, develop and manufacture new products, complete clinical trials, obtain regulatory approvals and secure customer orders for these products. In addition, patents attained by others can preclude or delay our commercialization of a product. There can be no assurance that any products now in development, or that we may seek to develop in the future, will achieve technological feasibility, obtain regulatory approval or gain market acceptance.





WE MAY ENCOUNTER DIFFICULTIES MANAGING OUR GROWTH, WHICH COULD MATERIALLY HARM OUR BUSINESS.





We expect to expand our operations and grow our research and development, product development, regulatory, manufacturing, sales, marketing and administrative operations. This expansion has placed, and is expected to continue to place, a significant strain on our management, operational and financial resources. To manage our growth and to develop and commercialize our products, we will be required to improve existing, and implement new, operational and financial systems, procedures and controls and expand, train and manage our growing employee base. In addition, we will need to manage relationships with various manufacturers, suppliers, customers and other organizations. Our ability to manage our operations and growth will require us to improve our operational, financial and management controls, as well as our internal reporting systems and controls. We may not be able to implement such improvements to our management information, disclosure controls and procedures and internal control systems in an efficient and timely manner and may discover deficiencies in existing systems and controls. Our failure to accomplish any of these tasks could materially harm our business.




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WE DEPEND ON OUR EXECUTIVE OFFICERS AND KEY PERSONNEL AND THE LOSS OF THEM COULD ADVERSELY AFFECT OUR BUSINESS.





Our success depends upon the efforts and abilities of our executive officers and other key personnel, particularly Mr. Rondald Wheet, our Chief Executive Officer, Vincent Olmo, our Chief Operating Officer and Burt Hodges, our Chief Financial Officer to provide strategic direction, manage our operations and maintain a cohesive and stable environment. Although we have employment agreements with Mr. Wheet, Mr. Olmo, Mr. Hodges and other key personnel, as well as incentive compensation plans that provide various economic incentives for them to remain with us, these agreements and incentives may not be sufficient to retain them. Further, the SEC has brought suit against the Company and Mr. Wheet relating to the alleged issuance of misleading press releases, and although the Company and Mr. Wheet are defending against such allegations, the outcome of such lawsuit could result in Mr. Wheet’s separation from the Company.  Our ability to operate successfully and manage our potential future growth also depends significantly upon our ability to attract, retain and motivate highly skilled and qualified personnel. We face intense competition for such personnel, and we may not be able to attract, retain and motivate these individuals. The loss of our executive officers or other key personnel for any reason or our inability to hire, retain and motivate additional qualified personnel in the future could prevent us from sustaining or growing our business. In addition, we have a limited history of operations under our current officers and directors. Our officers have not worked together for an extensive length of time. If for any reason our management members cannot work efficiently as a team, our business will be adversely affected.




THE MANUFACTURING FACILITIES OF OUR SUPPLIERS MUST COMPLY WITH APPLICABLE REGULATORY REQUIREMENTS. IF THEY FAIL TO ACHIEVE OR MAINTAIN REGULATORY APPROVAL FOR THESE MANUFACTURING FACILITIES, OUR BUSINESS AND OUR RESULTS OF OPERATIONS WOULD BE HARMED.





Commercialization of our products requires access to, or the development of, manufacturing facilities that meet applicable regulatory standards to manufacture a sufficient supply of our products. In addition, the FDA must approve facilities that manufacture our products for U.S. commercial purposes, as well as the manufacturing processes and specifications for the product. Suppliers of components of, and products used to manufacture, our products must also comply with FDA and foreign regulatory requirements, which often require significant time, money and record-keeping and quality assurance efforts and subject us and our suppliers to potential regulatory inspections and stoppages. If our suppliers do not achieve or maintain required regulatory approval for our manufacturing operations, our commercialization efforts could be delayed, which would harm our business and our results of operations.





THE COSTS OF RAW MATERIALS HAVE A SIGNIFICANT IMPACT ON THE LEVEL OF EXPENSES THAT WE INCUR. IF THE PRICES OF RAW MATERIALS AND RELATED FACTORS SUCH AS ENERGY PRICES INCREASE, AND WE CANNOT PASS THOSE PRICE INCREASES ON TO OUR CUSTOMERS, OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION WOULD SUFFER.





We use a number of raw materials including polymer plastics. The prices of many of these raw materials, such as those sourced from petroleum-based raw materials, are cyclical and volatile. While we would generally attempt to pass along increased costs to our customers in the form of sales price increases, we might not be able to do so, for competitive or contract-related reasons or otherwise. If we are not able to set our prices to reflect the costs of our raw materials, our results of operations and our financial condition could suffer.




DISRUPTIONS IN THE SUPPLY OF KEY RAW MATERIALS AND DIFFICULTIES IN THE SUPPLIER QUALIFICATION PROCESS COULD ADVERSELY IMPACT OUR OPERATIONS.





We employ a supply chain management strategy which seeks to source components and materials from a number of established third party companies. Where possible, we seek to establish dual contracts for the supply of particular components or services. However, there is a risk that our supply lines may be interrupted in the event of a supplier production problem, material recall or financial difficulties. If one of our suppliers is unable to supply materials required for production of our products or our strategies for managing these risks are unsuccessful, we may be unable to complete the production of sufficient quantities of product to fulfill customer orders, or complete the qualification of new replacement materials for some programs in time to meet future production requirements. Prolonged disruptions in the supply of any of our key raw materials, difficulty in completing qualification of new sources of supply, or in implementing the use of replacement materials or new sources of supply, could have a material adverse effect on our results of operations, our financial condition or cash flows.




21





SOME COMPANIES WE MAY UTILIZE FOR THE SUPPLY OF COMPONENTS ARE ALSO COMPETITORS, AND THEY COULD ELECT TO CEASE SUPPLY RELATIONSHIPS WITH US IN THE FUTURE FOR COMPETITIVE REASONS.





Some companies we may utilize for the supply of components for the RevVacTM safety syringe also develop and market their own safety products. These companies may elect to cease supply relationships with us in the future for competitive reasons. This may disrupt our supply chain, cause difficulties in the qualification of new sources of supply and impair our ability to supply customer orders. Such events may have a material adverse effect on our results of operations, our financial condition or cash flows.





THE MEDICAL DEVICE INDUSTRY IS VERY COMPETITIVE.





Competition in the medical device industry is intense. We face this competition from a wide range of companies. These include large medical device companies, most of which have greater financial and human resources, distribution channels and sales and marketing capabilities than we do. Our ability to compete effectively depends upon our ability to distinguish our company and our products from our competitors and their products. Factors affecting our competitive position include, for example, product design and performance, product safety, sales, marketing and distribution capabilities, success and timing of new product development and introductions and intellectual property protection.





OUR COMPETITORS HAVE GREATER RESOURCES.





The three leading manufacturers of hypodermic syringes and blood collection products are BD, Covidien, and Terumo. All three companies offer both standard syringes and at least one safety syringe alternative. These competitors have greater financial resources, larger and more established sales and marketing and distribution organizations, and greater market influence, including long-term contracts. These competitors may be able to use these resources to improve their products through research and acquisitions or develop new products, which may compete more effectively with our products. If our competitors choose to use their resources to create products superior to ours, we may be unable to sell our products and our ability to continue operations would be weakened.





WE MAY BE ADVERSELY IMPACTED BY NEXT GENERATION DRUG DELIVERY TECHNOLOGIES.





Much of our potential sales and potential profitability depends to a large extent on the sale of drug products delivered by subcutaneous or intramuscular injection. Other device companies, and pharmaceutical companies, are attempting to develop alternative therapies or drug administration systems such as needle-free or intradermal injection technology for the treatment or prevention of various diseases. The development of new or improved products, processes or technologies by other companies may render our products or proposed products obsolete or less competitive. If the products developed in the future by our customers or potential customers use another delivery system, our sales and potential profitability could suffer. Furthermore, we will be largely reliant upon the receipt of revenues from the sale of the RevVacTM safety syringe and will not have the benefit of diversification.




WE MAY FACE SIGNIFICANT UNCERTAINTY IN THE INDUSTRY DUE TO GOVERNMENT HEALTHCARE REFORM.





The healthcare industry in the United States is subject to fundamental changes due to the ongoing healthcare reform and the political, economic and regulatory influences. In March 2010, comprehensive healthcare reform legislation was signed into law in the United States through the passage of the Patient Protection and Affordable Health Care Act and the Health Care and Education Reconciliation Act. Among other initiatives, the legislation provides for a 2.3% annual excise tax on the sale of certain medical devices in the United States, commencing in January 2013. This enacted excise tax may adversely affect our operating expenses and results of operations. In addition, various healthcare reform proposals have also emerged at the state level. We cannot predict with certainty what healthcare initiatives, if any, will be implemented at the state level, or what ultimate effect of federal healthcare reform or any future legislation or regulation may have on us or on our customers’ purchasing decisions regarding our products and services.




22





WE ARE SUBJECT TO REGULATION BY GOVERNMENTS AROUND THE WORLD, AND IF THESE REGULATIONS ARE NOT COMPLIED WITH, EXISTING AND FUTURE OPERATIONS MAY BE CURTAILED, AND WE COULD BE SUBJECT TO LIABILITY.





The design, development, manufacturing, marketing and labeling of our products are subject to regulation by governmental authorities in the United States, Europe and other countries, including the FDA. The regulatory process can result in required modification or withdrawal of existing products and a substantial delay in the introduction of new products. Also, it is possible that regulatory approval may not be obtained for a new product. Our business may be adversely affected by changes in the regulation of drug products and medical devices.





Our target customers are also subject to government regulations for the manufacturing, approval, marketing and labeling of medical products. An effect of the governmental regulation of our customers’ injectable drug products and manufacturing processes is that compliance with regulations makes it costly and time consuming to transition to the use of our devices for existing products, or to secure approval for pipeline products targeted for use with our devices. If regulation of our customers’ products incorporating our devices increases over time, it is likely that this would adversely affect our sales and profitability.





IF OUR PRODUCTS ARE FOUND TO HAVE DEFECTS OR FAIL TO MEET INDUSTRY STANDARDS, WE WILL INCUR SUBSTANTIAL LITIGATION, JUDGMENT, PRODUCT LIABILITY AND PRODUCT RECALL COSTS, WHICH WILL INCREASE OUR LOSSES AND NEGATIVELY AFFECT OUR BRAND NAME REPUTATION AND PRODUCT SALES.





We may be subject to liability for errors that occur with our technologies due to claims of negligence or product malfunction. Pursuant to our manufacturing agreement, the Company has the right to claim reimbursement for damages due to manufacturing defects but will have product liability insurance in place before delivery of its products. We can still suffer litigation as a result of perceived product malfunctioning, adversely affecting our reputation, planned revenue stream and company. Despite purchasing product liability insurance at the industry standard amount, product liability claims could increase our costs and adversely affect our reputation, planned revenues and, ultimately, lead to additional losses. In addition, product defects could result in product recalls and warranty claims. A product recall could delay or halt production of our product until we are able to remedy the product defects. The occurrence of any claims, judgments or product recalls will negatively affect our brand name image and product sales, lead to additional costs, and adversely affect our financial condition and results of operation.





INTELLECTUAL PROPERTY LITIGATION COULD BE COSTLY AND DISRUPTIVE TO US.





The retractable syringe product lines in which we compete are relatively new inventions with numerous companies having patents. In recent years, there have been several patent infringement suits involving other industry participants. To-date, we have not been subject to any such patent infringement suits and also hold freedom to operate reports which we believe indicate that our technology and associated products are substantially different from other known patents. There is no assurance, however, that third parties will not assert any patent, copyright, trademark and other intellectual property rights to technologies used in our business. Any claims, with or without merit, could be time-consuming, result in costly litigation, divert the efforts of our technical and management personnel or require us to pay substantial damages. If we are unsuccessful in defending ourselves against these types of claims, we may be required to do one or more of the following:





·
stop, delay or abandon our ongoing or planned commercialization of the product that is the subject of the suit;





·
attempt to obtain a license to sell or use the relevant technology or substitute technology, which license may not be available on reasonable terms or at all; or





·
redesign those products that use the relevant technology.




23




IF WE ARE UNABLE TO PROTECT THE CONFIDENTIALITY OF OUR PROPRIETARY INFORMATION AND KNOW-HOW, THE VALUE OF OUR TECHNOLOGY AND PRODUCTS COULD BE ADVERSELY AFFECTED.





In addition to patented technology, we rely on our unpatented proprietary technology, trade secrets, processes and know-how. We generally seek to protect this information by confidentiality agreements with our employees, consultants, scientific advisors and third parties. These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors. To the extent that our employees, consultants or contractors use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.





WE PURCHASE SOME OF THE KEY COMPONENTS OF OUR PRODUCTS FROM SINGLE SUPPLIERS. THE LOSS OF THESE SUPPLIERS COULD PREVENT OR DELAY SHIPMENTS OF OUR PRODUCTS OR DELAY OUR CLINICAL TRIALS OR OTHERWISE ADVERSELY AFFECT OUR BUSINESS.





All of the key components of our products and related services are currently purchased from a single supplier with which we have a five year contract. Our current supplier is located outside of the United States, which could make us subject to foreign export laws and U.S. import and customs statutes and regulations, thus complicating and delaying shipments of components. If necessary or desirable, we could source our product components and related services from other suppliers. However, establishing additional or replacement suppliers for these components, and obtaining any necessary regulatory clearances or approvals, could take a substantial amount of time and could result in increased costs and impair our ability to produce our products, which would adversely impact our business, operating results and prospects. If our independent contract manufacturer fails to timely deliver to us sufficient quantities of some of our products and components in a timely manner, our operations may be harmed.





OUR RELIANCE ON INDEPENDENT CONTRACT MANUFACTURERS TO MANUFACTURE MOST OF OUR PRODUCTS AND COMPONENTS INVOLVES SEVERAL RISKS, INCLUDING:





·
inadequate capacity of the manufacturer’s facilities;





·
financial difficulties experienced by manufacturers due to the recent economic recession and continuing economic uncertainty;





·
interruptions in access to certain process technologies; and





·
reduced control over product availability, quality, delivery schedules, manufacturing yields and costs.





Shortages of raw materials, production capacity or financial constraints, or delays by our contract manufacturers could negatively affect our ability to meet our production obligations. Any such reduction, constraint or delay may result in delays in shipments of our products which could have a material adverse effect on our business.




IF WE, OUR CONTRACT MANUFACTURERS OR OUR COMPONENT SUPPLIERS FAIL TO COMPLY WITH THE FDA’S QUALITY SYSTEM REGULATIONS, THE MANUFACTURING AND DISTRIBUTION OF OUR DEVICES COULD BE INTERRUPTED, AND OUR PRODUCT SALES AND OPERATING RESULTS COULD SUFFER.





We, our contract manufacturers and our component suppliers are required to comply with the FDA’s quality system regulations, which is a complex regulatory framework that covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our devices. The FDA enforces its quality system regulations through periodic unannounced inspections. We cannot assure you that our facilities or our contract manufacturers’ or component suppliers’ facilities would pass any future quality system inspection. If our or any of our contract manufacturers’ or component suppliers’ facilities fails a quality system inspection, the manufacturing or distribution of our devices could be interrupted and our operations disrupted. Failure to take adequate and timely corrective action in response to an adverse quality system inspection could force a suspension or shutdown of our packaging and labeling operations or the manufacturing operations of our contract manufacturers, or a recall of our devices. If any of these events occurs, we may not be able to provide our customers with the quantity of RevVacTM safety syringes they require on a timely basis, our reputation could be harmed and we could lose customers, any or all of which may have a material adverse effect on our business, financial condition and results of operations.




24





OUR OPERATING RESULTS MAY BE ADVERSELY IMPACTED BY WORLDWIDE POLITICAL AND ECONOMIC UNCERTAINTIES AND SPECIFIC CONDITIONS IN THE MARKETS WE ADDRESS.





In the recent past, general worldwide economic conditions have experienced a downturn due to slower economic activity, concerns about inflation, increased energy costs, decreased consumer confidence, reduced corporate profits and capital spending, and adverse business conditions. Any continuation or worsening of the current global economic and financial conditions could materially adversely affect (i) our ability to raise, or the cost of, needed capital, (ii) demand for our current and future products and (iii) our ability to commercialize products. We cannot predict the timing, strength, or duration of any economic slowdown or subsequent economic recovery, worldwide, or in the display industry.





BECAUSE WE PLAN TO CONTINUE USING FOREIGN CONTRACT MANUFACTURERS, OUR OPERATING RESULTS COULD BE HARMED BY ECONOMIC, POLITICAL, REGULATORY AND OTHER FACTORS IN FOREIGN COUNTRIES.





We currently use a contract manufacturer in Asia to manufacture our RevVacTM safety syringe, and we plan to use foreign manufacturers to manufacture future products, where appropriate. These international operations are subject to inherent risks, which may adversely affect us, including:





·
political and economic instability;





·
high levels of inflation, historically the case in a number of countries in Asia;





·
burdens and costs of compliance with a variety of foreign laws;





·
foreign taxes;





·
changes in tariff rates or other trade and monetary policies; and





·
changes or volatility in currency exchange rates.





IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, OUR REVENUE AND EXPENSES COULD BE ADVERSELY AFFECTED.





Our ability to successfully offer products and implement our business plan in a rapidly evolving market requires an effective planning and management process. The growth in business and relationships with customers and other third parties has placed, and will continue to place, a significant strain on our management systems and resources. We will need to continue to improve our financial and managerial controls, reporting systems and procedures and will need to continue to train and manage our work force.





INCREASES IN FREIGHT AND ENERGY PRICES WOULD INCREASE OUR OPERATING COSTS AND WE MAY BE UNABLE TO PASS THESE INCREASES ON TO OUR CUSTOMERS IN THE FORM OF HIGHER PRICES, WHICH MAY ADVERSELY AFFECT OUR OPERATING RESULTS.





We use energy to process and transport our products. The prices for and availability of energy resources are subject to volatile market conditions, which are affected by political, economic and regulatory factors beyond our control. Our operating costs increase if energy costs, including electricity, diesel fuel and natural gas, rise. During periods of higher freight and energy costs, we may not be able to recover our operating cost increases through price increases without reducing demand for our products. In addition, we typically do not hedge our exposure to higher freight or energy prices.




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THE MANUFACTURE OF MANY OF OUR PRODUCTS IS A HIGHLY EXACTING AND COMPLEX PROCESS, AND IF WE OR ONE OF OUR SUPPLIERS SHOULD ENCOUNTER PROBLEMS MANUFACTURING PRODUCTS, OUR BUSINESS COULD SUFFER.





The manufacture of many of our products is a highly exacting and complex process, in part due to strict regulatory requirements. Problems may arise during the manufacturing process for a variety of reasons, including equipment malfunction, failure to follow specific protocols and procedures, problems with raw materials, maintenance of our manufacturing environment, natural disasters, various contagious diseases and process safety issues. If problems arise during the production of a batch of product, that batch of product may have to be discarded. This could, among other things, lead to increased costs, lost sales, damage to customer relations, time and expenses being spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the affected product is released to the market, recall and product liability costs as well as reputational damage may also be incurred. To the extent that we or one of our suppliers experience significant manufacturing problems, this could have a material adverse effect on our business.





IF WE FAIL TO INCREASE OUR PRODUCTION AND MANUFACTURING CAPACITY TO MEET DEMAND, WE WILL BE UNABLE TO GROW AND OUR ABILITY TO PRODUCE NEW PRODUCTS AND ENTER INTO MARKETS WILL BE LIMITED.





Global growth and demand for our products could increase the utilization of our production and manufacturing facilities, including manufacturing capacity provided by third-party manufacturers and packaging capacity with respect to our products. If we are unable to successfully expand our production and manufacturing capacity, we will be unable to grow and expand our markets or enter into additional geographic markets or new product categories. In addition, failure to successfully expand our production and manufacturing capacity will limit our ability to introduce and distribute new products, including our existing pipeline of innovations and product improvements, or otherwise take advantage of opportunities in new markets. Further, increasing our production and manufacturing facilities requires significant investment and time to build. Delays in increasing capacity could also limit our ability to grow and materially adversely affect our business.





THE SEC HAS BROUGHT SUIT AGAINST THE COMPANY AND ITS CHIEF EXECUTIVE OFFICER, AND IF THE COMPANY DOES NOT PREVAIL IN ITS DEFENSE, THE COMPANY MAY BE OBLIGATED TO PAY CERTAIN AMOUNTS TO THE SEC, WHICH COULD ADVERSELY AFFECT OUR FINANCIAL POSTION





The SEC filed a civil complaint in Federal District Court in Georgia against the Company, alleging that the Company issued four misleading press releases during the period from August 2010 through October 2010 and one misleading press release in July 2011, related to the Company’s production schedule of its auto retractable safety syringe. The SEC names the Company’s current Chief Executive Officer, Rondald L. Wheet, as a co-defendant. Among other relief, the SEC seeks an order requiring the defendants to disgorge money received from its equity line financing from August 2010 through May 2011, in addition to other civil penalty amounts.  The Company believes that these claims are unfounded and is vigorously defending against them; however, should the Company not prevail in such defense the amount of damages owed to the SEC could be substantial and could adversely affect the Company’s financial condition or cause the Company to cease operations.




FLUCTUATIONS IN FOREIGN CURRENCY EXCHANGE RATES COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION AND RESULTS FROM OPERATIONS.




Changes in foreign currency exchange rates can affect the value of our assets and liabilities, and the amount of our revenues and expenses. We do not currently try to mitigate our exposure to currency exchange rate risks by using hedging transactions. We cannot predict future changes in foreign currency exchange rates, and as a result, we may suffer losses as a result of future fluctuations.




26





Risks Related to Our Common Stock





YOUR OWNERSHIP INTEREST MAY BE DILUTED AND THE VALUE OF THE SHARES OF OUR COMMON STOCK MAY DECLINE BY THE EXERCISE OF STOCK OPTIONS WE HAVE GRANTED OR MAY GRANT IN THE FUTURE AND BY THE COMMON STOCK WE HAVE ISSUED OR WILL ISSUE IN THE FUTURE.




As of December 31, 2012, there were 12,100,000 options outstanding, which consisted of options to purchase common stock at exercise prices ranging from $0.08 to $0.50 per share, all of which are exercisable. 5,000,000 options still outstanding were granted in 2007 at an exercise price of $0.08 per share and are considered in the money as of December 31, 2012. 2,500,000 options issued in 2012 exercisable at $0.15 per share are considered out of the money. An additional 1,000,000 options issued at an exercise price of $0.50 are considered out of the money. 3,300,000 options issued in 2011 at an exercise price of $0.30 are considered out of the money. 300,000 options issued in 2012 at an exercise price of $0.40 are considered out of the money. Additionally, as of December 31, 2012, there were 2,880,000 warrants outstanding. All of these warrants were issued in 2012 according to the terms of 21 convertible debt agreements. 1,920,000 of these warrants are exercisable at $0.25 and 960,000 are exercisable at $0.50. The warrants exercisable at $0.25 were originally to expire on March 31, 2013, but were modified to expire on June 30, 2013 . The warrants exercisable at $0.50 were originally to expire on March 31 or June 30, 2013, but were modified to expire on September 30, 2013.




We may decide, however, to modify the terms and/or exercise price of these “out of the money” options. To the extent that the outstanding options to purchase our common stock are exercised, your ownership interest may be diluted. If the options are exercised and sold into the market, they could cause the market price of our common stock to decline.





From time to time the Company has issued and plans to continue to issue shares of its common stock to pay current and future obligations. During 2012, the Company issued 2,751,229 shares for services rendered. If and when, and to the extent that, those shares are sold into the market, they could cause the market price of our common stock to decline.





As of April 22, 2013, we had 250,000,000 shares of common stock authorized and 77,610,014 shares of common stock outstanding. The authorized but unissued shares have the same rights and privileges as the common stock presently outstanding. The unissued authorized shares can be issued without further action of the shareholders. If and when, and to the extent that, the unissued authorized shares are issued and sold into the market, they could cause the market price of our common stock to decline.





OUR STOCK PRICE IS VOLATILE AND YOUR INVESTMENT IN OUR SECURITIES COULD DECLINE IN VALUE, RESULTING IN SUBSTANTIAL LOSSES TO YOU.





The market price of our common stock, which is currently quoted on the OTC Markets, has been, and may continue to be, highly volatile. Our stock began trading on the over the counter bulletin board on May 1, 2008. On April 19, 2010, the Company began trading on the OTC Markets. Factors such as announcements of product development progress, financings, technological innovations or new products, either by us or by our competitors or third parties, as well as market conditions within the medical devices industry may have a significant impact on the market price of our common stock. In general, medical device stocks tend to be volatile even during periods of relative market stability because of the high rates of failure and substantial funding requirements associated with medical device companies. Market conditions and conditions of the medical device sector could also negatively impact the price of our common stock.




27





THE APPLICATION OF THE “PENNY STOCK” RULES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.





The Securities and Exchange Commission (the “SEC”) has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:





·
the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased; and





·
that a broker or dealer approve a person’s account for transactions in penny stocks.





In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:





·
obtain financial information and investment experience objectives of the person; and





·
make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.





The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:





·
sets forth the basis on which the broker or dealer made the suitability determination; and





·
that the broker or dealer received a signed, written agreement from the investor prior to the transaction.





Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.





AS AN ISSUER OF “PENNY STOCK,” THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.





Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, the Company will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement of fact or was misleading in any material respect because of the Company’s failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.




MR. RONDALD L. WHEET, OUR CHIEF EXECUTIVE OFFICER AND CHAIRMAN, HAS VOTING CONTROL OF THE COMPANY AND CAN UNILATERALLY MAKE BUSINESS DECISIONS FOR US. ALTHOUGH WE HAVE ONE OUTSIDE DIRECTOR, THERE ARE NO PROCEDURES IN PLACE TO RESOLVE POTENTIAL CONFLICTS AND TO EVALUATE RELATED PARTY TRANSACTIONS THAT ARE TYPICALLY REVIEWED BY INDEPENDENT DIRECTORS.





Because Mr. Wheet owns 1,000,000 Series 2006 Preferred shares, which gives him the right to vote 125 shares to one in addition to the shares of common stock he already owns, voting together as a single class with the Company’s common stock, he controls a majority of the Company’s common stock and can unilaterally make business decisions on our behalf. Although we appointed an outside director, there are no procedures in place to resolve potential conflicts and evaluate related party transactions that are typically reviewed by independent directors.




WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.





No cash dividends have been paid on the Company’s common stock. We expect that any income received from operations will be devoted to our future operations and growth. The Company does not expect to pay cash dividends in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as the Company’s board of directors may consider relevant. If the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only occur if the Company’s stock price appreciates.




28





Item 1B.  Unresolved Staff Comments.





Not applicable.





Item 2.  Property.





On September 1, 2009, the Company entered into a 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 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 an amended lease with Osprey for the office space adjacent to the existing office space on the third floor at 670 Marina Drive. The combined leased property is approximately 5,000 square feet. This property is considered class A office space.  During the course of the 5-year amended lease, ending on June 30, 2016, the Company is to pay Osprey $10,000 in monthly rental installments payable on the first day of each succeeding month The Company incurred $120,000 in office rent to Osprey South, LLC for 2012.  Rondald 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.





Item 3.  Legal Proceedings.





In September 2005, we filed an additional patent on our RevVacTM safety syringe under a joint venture agreement with Globe Med Tech which gives a 50% ownership of this patent to the Company and 50% to Globe Med Tech. The Company filed a lawsuit to rescind, terminate and seek monetary damages for the non-fulfillment and breach of the joint venture agreement and other related agreements with Globe Med Tech in March 2007, in addition to an accounting of expenditures of funds under the terms and provisions of the agreements and to give 100% ownership back to the Company. This patent was issued January 13, 2009. A summary judgment hearing was held in May 2011, in Tulsa, Oklahoma. On August 15, 2011, the District Court of Tulsa County, State of Oklahoma granted Revolutions Medical summary judgment against Globe Medical Tech. On October 21, 2011, Revolutions Medical received journal entry of judgment. The Court requires Globe Med Tech to pay to Revolutions Medical the sum of $311,440, the return of all syringes, design files and sample molds, the return of 266,667 shares of common stock, to assign all rights to the January 2009 issued patent number 11/115,446 and to cease and be prohibited from claiming any interest or ownership to the RevVacTM auto-retractable vacuum safety syringe. Globe Med Tech’s appeal was denied on December 13, 2011. On January 30, 2013 the court ordered a Nunc Pro Tunc decision denying all counterclaims and third party claims by Globe Med Tech. Globe Med Tech has filed another appeal on March 1, 2013 but the Company has hired legal counsel in Texas to assist in efforts to collect these damages and execute on the court order.





On January 2, 2013, the Company won its arbitration proceeding concerning its counter claims against Richard Theriault, former manufacturer MIG and former consultant SPD.  The monetary award claims included $770,000 in recoupment of production costs plus interest, legal fees and other arbitration costs, which will total close to $1 million dollars. In other claims, Theriault was found guilty of fraud in the inducement and breach of contract and was found to have no rights to any of the Company's proprietary technology, files, drawings, designs, patents or products. The ruling determined that all production mold payments made by the Company to MIG for the manufacturing of production molds had instead been used by Mr. Theriault for other non-production related purposes. The panel of American Arbitration Association ruled that the only assets in which production was funded by MIG from the Company’s production payments were $50,000 in trial molds. The equipment asset on the balance sheet has been reduced by $710,000 and charged to impairment for the payments no longer associated with a production or trial mold. The $770,000 award is for the recovery of damages related to these production payments.  The Company has hired legal counsel in Massachusetts and South Carolina to assist in efforts to collect these damages.




29





On March 12, 2012 the Company filed a lawsuit against Justin Keener and JMJ Financial (“JMJ”) 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 took the position 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, described below.




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, 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.





On September 26, 2012, the Company filed suit in South Carolina Federal District Court against Strategic Product Development ("SPD"), Richard H. Theriault, Vita S. Theriault, Darius R. Theriault, Raminta Theriault, Goddard Technologies, Inc. ("GTI") and others, claiming that the defendants purposely and materially misled and misrepresented capabilities and progress on a variety of initiatives related to the development and manufacture of the Company's RevVacTM Auto-Retractable Vacuum safety syringe to officers and directors of Revolutions Medical, which caused a delay in its production of approximately one year. The suit further alleges that Richard H. Theriault and other defendants defrauded the Company and misappropriated funds in violation of the United States' Racketeer Influenced and Corrupt Organizations ("RICO") Act and that GTI improperly assigned certain rights to the Company's new provisional patents to SPD without authorization. On February 2, 2013, Richard H. Theriault filed for bankruptcy in Massachusetts under Chapter 11.  The South Carolina lawsuit has been temporarily stayed until such time when the arbitration award against Richard H. Theriault and MIG can be ruled on in United States Federal District Court in Massachusetts, granting judgment outside the bankruptcy court. On March 13, 2013, United States Federal District Court in Massachusetts granted an injunction against Richard H. Theriault and MIG, enjoining and restraining them from transferring or alienating any assets in their possession without approval from the Court and a hearing has been scheduled for May 7, 2013.





On October 1, 2012, the Company filed suit in South Carolina Federal District Court against its former President and Director, Thomas G. O'Brien, alleging that O'Brien, as a director and officer of the Company, committed fraud, disregarded his fiduciary duties, and breached other obligations owed to the Company and its shareholders, by facilitating and negotiating contracts on behalf of the Company while at the same time sharing confidential Company information with, and receiving bribes from, Richard H. Theriault, Strategic Product Development (SPD), and Medical Investment Group, (MIG). The complaint seeks to recover actual and punitive damages as well as a return of all salary paid to O'Brien under his employment agreement and over 3.6 million restricted shares.  On January 17, 2013, the South Carolina lawsuit was dismissed without prejudice, so the Company can pursue all of its claims against Thomas G. O'Brien in arbitration.




On September 21, 2012, the Company received notification from the SEC that the SEC had filed a civil complaint in Federal District Court in Georgia against the Company, alleging that the Company issued four misleading press releases during the period from August 2010 through October 2010 and one misleading press release in July 2011, related to the Company’s production schedule of its auto retractable safety syringe. The SEC names the Company’s current Chief Executive Officer, Rondald L. Wheet, as a co-defendant. Among other relief, the SEC seeks an order requiring the defendants to disgorge money received from its equity line financing from August 2010 through May 2011, in addition to other civil penalty amounts.  The Company, in consultation with its legal counsel, intends to vigorously defend itself and its Chief Executive Officer, Rondald L. Wheet, against these claims.





Item 4.  Mine Safety Disclosures.





Not applicable.




30





PART II





Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.





(a) Market Information





The Company’s Common Stock is quoted on the OTC Markets under the symbol “RMCP.”  The following table sets forth the quarterly high and low sale prices for our common shares for the last two completed fiscal years and the subsequent interim periods. The prices set forth below represent interdealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions.





Quarter ended

High


LowDecember 31, 2012

$
0.220


$
0.040September 30, 2012

$
0.250


$
0.070June 30, 2012

$
0.390


$
0.157March 31, 2012

$
0.380


$
0.220December 31, 2011

$
0.320


$
0.120September 30, 2011

$
0.320


$
0.170June 30, 2011

$
0.445


$
0.220March 31, 2011

$
0.480


$
0.330





Quotations on the OTC Markets reflect bid and ask quotations, may reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions.





(b) Holders





As of April 22, 2012, there were approximately 450 holders of record of our common stock. This figure does not take into account those shareholders whose certificates are held in the name of broker-dealers or other nominees.





(c) Dividends





We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our business.




31





(d) Securities Authorized for Issuance under Equity Compensation Plan





The following table shows information with respect this plan as of the fiscal year ended December 31, 2012.





Equity Compensation Plan InformationPlan category

Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights (a)


Weighted-average

Exercise price of

outstanding options,

warrants and rights (b)


Number of securities remaining

available for future issuance

under equity compensation

plans (excluding securities

reflected in column (a)) (c)Equity compensation plans approved by security holders


14,980,000



0.24



5,020,000Equity compensation plans not approved by security holders


—



—



—Total


14,980,000



0.24



5,020,000





Transfer Agent





Our transfer agent is American Stock Transfer and Trust Company at 6201 15th Avenue, Brooklyn, NY 11219.





Item 6.  Selected Financial Data.





Not applicable.





Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.





Plan of Operation





The Company has begun sales of its 3ml RevVacTM safety syringe through introduction to distributors, advertisements through its online sales program, attendance at numerous industry trade shows and a direct marketing campaign. The Company expects to be in full scale production by August 2013 for its 1ml, 5ml and 10ml RevVacTM safety syringe.  When all sizes of the RevVacTM safety syringe are in production, the Company believes that it can ship a total of 30 million RevVacTM safety syringes for the following twelve month period.





This RevVacTM safety syringe uses vacuum technology to retract the needle into the plunger after use. The syringe cannot be reused once the vacuum is activated. Revolutions Medical believes its safety syringe has many advantages over its competition including price, ease of use, and safety. It should virtually eliminate accidental needle stick injuries and also aid in reducing the spread of contagious diseases. You may view a video of the syringe in use on are website at www.revolutionsmedical.com. The Company also believes that with the help of government regulation initiatives, individual state laws, and the importance of world health concerns, the safety syringe market will continue to have substantial growth into the foreseeable future.





During 2010, Revolutions Medical entered into two university clinical studies utilizing its proprietary MRI software tools. These first two clinical studies are for cases involving head trauma and brain masses. These results are expected to clinically validate the use of its MRI software tools as an additional application to enhance the diagnostic confidence of physicians. In preparation for the expected commercial launch of the MRI software suite of products, the Company hired Strata Corporation in March 2012. Strata is an expert in computer software and programming and the Company believes that by the end of 2012, the first application of  RevColorTM, RevDisplayTM and Rev3DTM will be commercially available. The launch of this product will be a “software as a service” (SaaS) business model, where customers will log on to our secure website and send current black and white images to the Company via high speed internet (teleradiology), and the images will be sent back to the customer in color and three dimensional with auto segmentation. At first the Company will charge a per-use fee but can expand depending upon volume into monthly service agreements. Potential Revolutions Medical customers could include MRI centers, doctors, hospitals and even patients.




32





The Company is currently working on developing, enhancing and securing it proprietary MRI software tools for commercial launch.  The Company believes that once clinical application validations using its MRI software suite of products including RevColorTM, RevDisplayTM and Rev3DTM directed at concussions, stroke, Alzheimer’s and breast disease are achieved, it will eventually aid in the enhanced diagnosis, detection, and monitoring of such diseases and afflictions.





When an MRI is taken, the black and white images are sent to a picture archiving and communication system (PACS), which displays the images for a radiologist to view. By using high speed internet, these images can be securely sent to the Company’s secure website, after a secure account is opened. This is called teleradiology. For a small nominal fee or monthly subscription, the Company will use its proprietary software, based upon specific parameters and information provided, and sends back the images in enhanced color and sorted in correct sequence along with the original black and white images, in a matter of minutes. A video of the MRI software can be found on the Company’s website.





On December 31, 2010, the Company announced that it had acquired the exclusive rights to license a breast biopsy localization system. The Company recently signed a worldwide exclusive license agreement with Traxsys, Inc. for an image-guided navigation system that incorporates high accuracy breast biopsies systems (“BSS”) to conventional mammography systems, which number more than 50,000 globally. This technology has already received 510(k) market clearance by the FDA. BSS facilitates accurate and fast non-palpable lesions and micro calcification localization in the treatment of breast cancer. It is a low-cost, standalone, stereotactic image-based system which uses data from a pair of mammograms to enable radiologists to accurately position a localization needle or biopsy tool at the location of suspicious abnormalities. The system can also be modified to leverage existing popular biopsy tools. The technology can be used to provide a technology platform for future development, including multi-modal breast imaging for the image fusion of MRI and X-Ray images. After a full due diligence of the technology, the Company sees a potential synergy between its proprietary MRI software tools and this technology for breast imaging. However, the Company has decided not to invest additional capital at this time and to focus its resources on its RevVacTM safety syringe line of products and applications for its MRI software technology. In the future, the Company could re-license this technology.





Results of Operations





For the Year Ended December 31, 2012 Compared to the Year Ended December 31, 2011





Revenues





During the year ended December 31, 2012, the Company had $1,189 in revenues as it began making sales to its domestic and international distributors to assist in the introduction of the RevVacTM safety syringe to primary care, ambulatory care and governmental markets. The Company had no revenue in 2011.





General and Administrative Expenses





During the year ended December 31, 2012, the Company incurred $4,046,080 in general and administrative expenses, compared to $3,781,286 for the same period in 2011.  The Company recorded option expenses of $758,962 for the year ended December 31, 2012 compared to option expenses of $525,554 for the same period in 2011. Further, consulting agreement fees and legal fees were $910,046 and $577,426, respectively, for the year ended December 31, 2012, a decrease in consulting fees of $421,718 and an increase in legal fees of $108,442, respectively, compared to $1,331,764 and $468,984, respectively, for the same period in 2011.  The decrease in consulting fees was partly due to a reduction in consultants retained in 2011 to begin promotion of the RevVacTM safety syringe in various markets and an elimination of fees due to MIG.  The increase in legal fees was due primarily due to the arbitration case against MIG and the SEC civil complaint filed against the Company and our CEO, Rondald Wheet.  A total of $281,504 in prepaid consulting agreements was expensed in the year ended December 31, 2012, compared to $636,856 for the same period in 2011 as the company transitioned from hiring individual consultants to retaining larger distributors.




33





Impairment of assets





Also during the year ended December 31, 2012, the Company removed from the balance sheet and impaired equipment valued at $710,000 for the production of the 3 ml production pilot molds, as the Company determined through the arbitration proceeding with MIG in November 2012 that these molds had not been produced and MIG could not account for the whereabouts of the funds the Company paid toward these assets. Additionally, the Company wrote off prepayment of $80,000 made to MIG in 2011due to the uncertainty of the collectability. In 2011, $328,000 of production mold equipment had been reclassified from the balance sheet to consulting expense in 2011 as the Company learned that some of the trial molds and production molds had not been produced by MIG.





The Company also impaired intangible and goodwill of $38,276 and equipment of $50,000 during the year ended December 31, 2012.





Interest expense





Interest expense increased to $1,727,512 during the year ended December 31, 2012, compared to $567,081 for the same period in 2011.  This increase is due to individual convertible debt agreements and additional convertible debt agreements with Asher Enterprises, Inc. and TCA.





Net Loss





Net loss for the year ended December 31, 2012 was $7,164,311 compared to $4,541,518 for the same period in 2011, as the Company incurred greater expenses primarily related to an increase in salaries, consulting and legal fees, expenses associated with the convertible debt agreements and fixed asset impairment.  The Company incurred a net operating loss of $5,854,475 during the year ended December 31, 2012, compared to a net operating loss of $3,855,309 for the same period in 2011.





Liquidity and Capital Resources





As of December 31, 2012, the Company did not have and continues to not have sufficient cash on hand to pay present obligations as they become due.  In addition, due to current economic conditions and the Company’s related risks and uncertainties, there is no assurance that we will be able to raise additional capital on acceptable terms, if at all, to meet our current obligation over the next 12 months.  Because of the foregoing, the Company’s auditors have expressed substantial doubt about our ability to continue as a going concern.





Net cash used for operating activities for the years ended December 31, 2012 and 2011, was $1,674,342 and $2,563,073, respectively.  The net loss for the years ended December 31, 2012 and 2011 was $7,164,311 and $4,541,518, respectively.  This increase is primarily related to an increase in salaries, consulting and legal fees, expenses associated with the convertible debt agreements and asset impairment.





Net cash used for investing activities for the years ended December 31, 2012 and 2011, was $39,224 and $129,091 respectively.  This cash used for investing activities is a result of patent fees and leasehold improvements.





Net cash obtained through all financing activities for year ended December 31, 2012, was $1,708,776, as compared to $2,627,491 for the year ended December 31, 2011.   In order to fund the completion of the RevVacTM safety syringe production molds, we issued stock options and/or common stock when it is acceptable to third parties for services rendered in assisting us in the product distribution and marketing process. Proceeds from issuance of common stock through cash exercise of stock options and warrants were $258,275 for the year ended December 31, 2012 as compared to $1,654,420 for the year ended December 31, 2011. This decrease is due primarily to a decrease in consulting agreements and the options issued under the terms of these agreements. Proceeds from issuance of notes for cash were $1,450,501 for the year ended December 31, 2012 as compared to $770,500 for the year ended December 31, 2011.




34





As of December 31, 2012, the Company did not have and continues to not have sufficient cash to pay present obligations as they become due.  We are searching for additional financing to generate the liquidity necessary to continue our operations.  Due to current economic conditions and the Company’s risks and uncertainties, there is no assurance that we will be able to raise any additional capital on acceptable terms, if at all.  Because of these uncertainties, the auditors have expressed substantial doubt about our ability to continue as a going concern.  If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.  If adequate funds are not available to us on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.





Because we do not currently generate any cash from operations and have no credit facilities available, our only means of funding is through the sale of our common stock.  We presently have 250,000,000 shares of common stock authorized, of which 72,784,907 shares were issued and outstanding as of December 31, 2012.  If we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.  If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.





Our estimated working capital requirement for the next 12 months is $2,700,000 with an estimated burn rate of $225,000 per month.





The Company entered into six new securities purchase agreements in 2012 with Asher Enterprises, Inc. (“Asher Enterprises”), pursuant to which the Company issued convertible promissory notes to Asher Enterprises for an original principal amount of $46,000 on February 10, $42,500 on March 20, $53,000 on May 15, $42,500 on June 21, $42,500 on August 10, and $42,500 on November 27 in return for aggregate gross cash proceeds of $269,000. The notes bear interest at a rate of 8% per annum and provide for the payment of all principal and interest 9 months from the date of the note. The principal amount owed to Asher Enterprises at December 31, 2012 is $92,500. The note is convertible at the election of Asher Enterprises into that number of shares of the Company’s common stock. The conversion price equals to the greater of 1) 55% of the average of the lowest three closing bid prices of the Company’s common stock on the OTC Markets during the 10 business days immediately preceding the date of conversion, subject to adjustment and 2) 0.00009. Over the course of the year, Asher elected to convert a total of $357,000 in principal from the notes issued on July 26, 2011 for $40,000, September 1, 2011 for $45,000, November 7, 2011 for $42,500, December 19, 2011 for $53,000, February 10, 2012 for $46,000, March 20, 2012 for $42,500, May 15, 2012 for $53,000 and June 21, 2012 for $35,000. The June 21, 2012 note still had an outstanding principal balance of $7,500 as of December 31, 2012.





The notes issued by Asher Enterprises in 2012 contain a beneficial conversion feature with a minimum conversion price of $0.00009 and no adjustment due to dilutive issuance. As a result, these notes were not bifurcated and valued with an embedded call option. 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.





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 principal amount on the maturity date, February 22, 2014. All or a portion of this note’s principal 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. During the course of 2012, the Company did not borrow any funds against this note. Over the course of the year, JMJ elected to convert a total of $15,498 in principal from this note. The principal amount owed to JMJ at December 31, 2012, is $191,663.




35





The following table summarizes total current assets, liabilities and working capital at December 31, 2012, compared to December 31, 2011.


December 31,

2012


December 31,

2011

(Restated)


Increase/

(Decrease)Current Assets

$
326,704


$
284,712


$
41,992Current Liabilities

$
4,406,551


$
2,855,821


$
1,550,730Working Capital Deficit

$
(4,079,847
)

$
(2,571,109
)

$
(1,508,738)





As of December 31, 2012, we had a working capital deficit of $4,079,847, as compared to a working capital deficit of $2,571,109 as of December 31, 2011, an increase of $1,508,738.  Factors contributing to the increase in this deficit include an increase in accounts payable due to the initial product purchase with Yeso-med, which increased current liabilities by $208,258, as of December 31, 2012. Payable related to the purchase commitment with Yeso-med accrued in 2012 was $783,593. Accounts payable to other vendors increase by $333,094 from December 31, 2011 to $432,436.  Additionally, the issuance of the convertible notes and the embedded derivatives associated with these notes was $581,557 as of December 31, 2012, as compared to a balance of $522,846 as of December 31, 2011.





Other current assets include the amount related to pre-paid consulting expenses incurred through the issuance and exercise of stock options.  The balance of prepaid consulting fees as of December 31, 2012, was $1,588, compared to $279,868 as of December 31, 2011.





The Company currently generates an insufficient amount of cash from sales to sustain operations and does not have access to traditional credit facilities; however, the Company expects product sales to increase in the second quarter of 2013.  Over the next 12 months, in order to implement our business plan and meet our liquidity needs going forward, the Company may sell shares of its common stock, issue additional convertible debt notes or permit warrant exercises.  If we implement any of the foregoing financing alternatives to pay current or future obligations, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.  If adequate funds are not available to us when needed on satisfactory terms, we may be required to cease operating or otherwise modify our business strategy.





Expected Purchase or Sale of Plant and Significant Equipment





None.





Expected Significant Changes in the Number of Employees





The Company began leasing additional space in the same building as of July 1, 2011, and expects to hire between 3 to 7 office personnel to assist with operations as significant sales commence with the 3ml RevVacTM safety syringe.





Off-Balance Sheet Arrangements





We have no significant known off-balance sheet arrangements.





Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.





We do not hold any derivative instruments and do not engage in any hedging activities.





Item 8.  Financial Statements and Supplementary Data.





Our financial statements are contained in pages F-1 through F-27 which appear at the end of this Annual Report.





Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.





On March 20, 2013, the Company accepted the resignation of Hood & Associates, CPAs, P.C. (“Hood”), as the Company’s independent registered public accounting firm. Hood’s resignation is solely a result of reaching the prescribed term limit as the Company’s independent auditor as required by the auditor rotation rules and regulations prescribed by the SEC and Public Company Accounting Oversight Board.  Hood’s report on the financial statements for the fiscal years ended December 31, 2011 and December 31, 2010, contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principle, other than for a going concern.




36





During the fiscal years ended December 31, 2011 and December 31, 2010, and in the subsequent interim period through March 20, 2013, the date of Hood’s resignation, there were no disagreements with Hood on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Hood, would have caused them to make reference to the subject matter of the disagreements in its reports on the financial statements for such year. During the fiscal years ended December 31, 2011 and December 31, 2010, and in the subsequent interim period through March 20, 2013, the date of Hood’s resignation, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.  Hood provided the Company with a letter addressed to the SEC confirming Hood’s agreement with the foregoing disclosures. A copy of Hood’s letter, dated March 20, 2013, is included with Form 8-K filed with the SEC on March 26, 2013.





On March 22, 2013, the Company approved the engagement of GBH CPAs, PC (“GBH”), as the Company’s new independent registered public accounting firm.  During the fiscal years ended December 31, 2011 and December 31, 2010, and the subsequent interim period prior to the engagement of GBH, the Company has not consulted GBH regarding (i) the application of accounting principles to any specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements, and either a written report was provided to the registrant or oral advice was provided that the new accountant concluded was an important factor considered by the registrant in reaching a decision as to the accounting, auditing or financial reporting issue; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(v)) or a reportable event (as defined in Item 304(a)(1)(v)).





Item 9A.  Controls and Procedures.





(a) Evaluation of Disclosure and Control Procedures





The Company’s disclosure controls and procedures are designed to ensure (i) that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms; and (ii) that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.





Our principal executive officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2012, and concluded that the disclosure controls and procedures were not effective as a whole, and that the deficiency involving internal controls constituted a material weakness as discussed below.





(b) Management’s Assessment of Internal Control over Financial Reporting





Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act Rules 13a-15(f). A system of internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.




37





Under the supervision and with the participation of management, including the principal executive officer and the principal financial officer, the Company’s management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2012, based on the criteria established in a report entitled “Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission in Release No. 34-55929. Based on this evaluation, the Company’s management has evaluated and concluded that the Company’s internal control over financial reporting was ineffective as of December 31, 2012, and identified the following material weaknesses:





·
There is a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles in the US (“GAAP”) and the financial reporting requirements of the U.S. Securities and Exchange Commission.





·
There are insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements.





·
There is a lack of segregation of duties, in that we only had one person performing all accounting-related duties.




·
There are inconsistencies in the application of the Company's policies among business units.


Notwithstanding the existence of these material weaknesses in our internal control over financial reporting, our management believes that the consolidated financial statements included in its reports fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.





The Company will continue its assessment on a quarterly basis and as soon as we start operations we plan to hire personnel and resources to address these material weaknesses. We believe these issues can be solved with hiring in-house accounting support and plan to do so as soon as we have funds available for this.  There has been no change in its internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.





This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. The Company’s registered public accounting firm was not required to issue an attestation on its internal controls over financial reporting pursuant to temporary rules of the Securities and Exchange Commission.  The Company will continue to evaluate the effectiveness of internal controls and procedures on an on-going basis.





(c) Changes in Internal Control over Financial Reporting





There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Item 9B.  Other Information.





None.




38





PART III





Item 10.  Directors, Executive Officers, and Corporate Governance.





The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers at April 22, 2013:





Name

Age

Position

Officer and/or Director SinceRondald Wheet

47

Chairman, Chief Executive Officer

March 2005Thomas Beahm

62

Director

October 2007Burt Hodges

40

Chief Financial Officer

June 2011Vincent Olmo

47

Chief Operating Officer

April 2011





Rondald L. Wheet





Rondald L. Wheet is the Chief Executive Officer and Chairman of the board of directors of Revolutions Medical Corporation and has served in this capacity since March 2005. Mr. Wheet has over 15 years’ experience in the investment banking industry. Working for several registered broker dealers, including Scott and Stringfellow and Cohig and Associates, Mr. Wheet was instrumental in the capital campaigns for several small cap companies, particularly in the medical field. Between January 2002 and March 2005, Mr. Wheet worked as an outside consultant advising numerous micro and small cap companies on capital financing, strategic partnerships, stock awareness, professional recruiting, and the mechanics of public offerings. He received a Bachelor of Science degree from the University of Towson in Finance and International Business, and he is a past President of the Metropolitan Exchange Club of Charleston, SC. In 2009, he was presented the South Carolina Palmetto Patriot Award.





Thomas M. Beahm





Thomas M. Beahm, MD, FACS, is a member of the board of directors of Revolutions Medical. Dr. Beahm is a practicing plastic surgeon, who lives in Chattanooga, Tennessee. He is an active member of the American Society of Plastic Surgeons, American College of Surgeons, and American Medical Association, and simultaneously owns and runs his own practice. In addition, he is Secretary of Integrated Voice Systems, which has software in over 130 hospitals. Dr. Beahm also has experience directing plastic surgery mission work in various third world countries, coming to the aid of thousands of people in Asia, Africa, and South America. Dr. Beahm received a bachelor’s degree from Pittsburg State University in Pittsburg, KS and a medical doctorate degree from the University of Kansas.





Burt Hodges





Mr. Hodges is currently the Company’s Chief Financial Officer. In this role, Mr. Hodges has management oversight and responsibility for all financial functions and capital resources of the Company, including corporate finance, project finance, corporate accounting, and reporting and risk management. Prior to joining the Company, from December, 2004 to June, 2011, Mr. Hodges was a partner with Accel Financial Advisors, LLC and Accel Tax and Business Services, LLC (collectively, “Accel”), where he provided tax, financial reporting and management advice to corporate clients and individuals. Prior to joining Accel, from July 2000 to December 2004, Mr. Hodges served as a tax resolution specialist and financial planner at J.K. Harris & Company, a tax resolution and financial advisory firm where he worked with corporate and individual clients performing business valuations and consulting on tax and financial matters. Mr. Hodges received his BBA in Finance from the University of Georgia and his MBA from the Citadel. He is a licensed Certified Public Accountant and a Certified Financial Planner.




39





Vincent Olmo





Mr. Olmo is currently Chief Operating Officer of the Company. Mr. Olmo combines over five years of experience in information technology and operations senior management, following an eighteen year career as a delivery manager and application architect. Previously, he was involved with several large financial institutions holding various positions, including chief architect and application services executive. From 2001 through 2006, Mr. Olmo was a Chief Architect for EDS, Inc., an information services company. From 2006 to 2007, he was Vice President of Application Delivery for Realogy, Inc., a company managing franchising rights in the real estate industry. From June 2007 to April 2011, he was an Application Services Executive for Hewlett-Packard, Inc., an information services company which focuses on delivering application development and management services for Fortune 500 companies. Mr. Olmo has a Bachelor of Science degree in Electrical Engineering from Fairleigh Dickinson University and an MBA from Rutgers.





Board of Directors





Directors are elected at our annual meeting of shareholders and serve for one year until the next annual meeting of shareholders or until their successors are elected and qualified. We reimburse all directors for their expenses in connection with their activities as directors of the Company.





Board Leadership Structure and Role in Risk Oversight





Although we have not adopted a formal policy on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have traditionally determined that it is in the best interests of the Company and its shareholders to combine these roles. Rondald L. Wheet has served as our Chief Executive Officer and Chairman since March 2005. Due to the small size and early stage of the Company, we believe it is currently most effective to have the Chairman and Chief Executive Officer positions combined.





Our board of directors is primarily responsible for overseeing our risk management processes. The board of directors receives and reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks. The board of directors focuses on the most significant risks facing our company and our company’s general risk management strategy, and also ensures that risks undertaken by our Company are consistent with the board’s appetite for risk. While the board oversees our company’s risk management, management is responsible for day-to-day risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.





Family Relationships





Mr. Olmo is the brother-in-law of Mr. Wheet.  Other than the previously disclosed relationship, there are no family relationships among our directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.





Subsequent Executive Relationships





No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past five years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past five years. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past five years. No director or officer has been found by a court to have violated a federal or state securities or commodities law during the past five years.





None of our directors or executive officers or their respective immediate family members or affiliates are indebted to us.




40





Legal Proceedings





On September 21, 2012, the Company received notification from the SEC that the SEC had filed a civil complaint in Federal District Court in Georgia against the Company, alleging that the Company issued four misleading press releases during the period from August 2010 through October 2010 and one misleading press release in July 2011, related to the Company’s production schedule of its auto retractable safety syringe. The SEC names the Company’s current Chief Executive Officer, Rondald L. Wheet, as a co-defendant. Among other relief, the SEC seeks an order requiring the defendants to disgorge money received from its equity line financing from August 2010 through May 2011, in addition to other civil penalty amounts.  The Company, in consultation with its legal counsel, intends to vigorously defend itself and its Chief Executive Officer, Rondald L. Wheet, against these claims.





Other than with regard to the matter described above, none of the members of the board of directors or other executives has been involved in any bankruptcy proceedings, criminal proceedings, any proceeding involving any possibility of enjoining or suspending members of our board of directors or other executives from engaging in any business, securities or banking activities, and have not been found to have violated, nor been accused of having violated, any Federal or State securities or commodities laws.





Compliance with Section 16(A) of the Exchange Act





Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).





Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended December 31, 2012, were timely.





Code of Ethics





We do not currently have a code of ethics that applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer or Controller, or persons performing similar functions.  Because we have only limited business operations and four officers and directors, we believe a code of ethics would have limited utility.  We intend to adopt such a code of ethics as our business operations expand and we have more directors, officers and employees.





Item 11.  Executive Compensation.





The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the periods ended December 31, 2012, 2011 and 2010.


Name And

Principal Position
Year

Salary

($)


Bonus

($)


Stock

Awards

($)(2)


Option

Awards

($)


Non-Equity

Incentive

Plan

Compen-

sation ($)


All Other

Compen-

sation ($)


Total ($)Rondald L. Wheet
2012

$
240,000


$
0


$
0


$
153,000


$
0


$
0


$
393,000Chief Executive Officer
2011

$
225,000


$
40,580


$
0


$
162,100


$
0


$
0


$
427,6802010

$
225,000


$
0


$
0


$
0


$
0


$
0


$
225,000Thomas O’Brien (1)
2012

$
0


$
0


$
0


$
0


$
0


$
0


$
0Former President
2011

$
124,790


$
0


$
0


$
0


$
0


$
0


$
124,7902010

$
180,000


$
0


$
0


$
0


$
0


$
0


$
180,000Burt Hodges
2012

$
168,217


$
0


$
0


$
41,958


$
0


$
0


$
210,175Chief Financial Officer
2011

$
89,375


$
0


$
0


$
69,163


$
0


$
0


$
158,538Vincent Olmo
2012

$
168,580


$
0


$
0


$
118,458


$
0


$
0


$
287,038Chief Operating Officer
2011

$
124,625


$
0


$
0


$
117,588


$
0


$
0


$
242,213





(1)
Mr. O’Brien resigned from his position on September 21, 2011.(2)
The value of options was based on Black-Scholes Model. See notes to the financial statements.




41


2012 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
  OPTION AWARDS

STOCK AWARDSName (a)

Number of Securities Underlying Unexercised Options

(#)

Exercisable

(b)


Number of Securities Underlying Unexercised Options

(#)

Unexercisable

(c)


Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

(#)

(d)


Option Exercise Price

($)

(e)

Option Expiration Date

(f)

Number of Shares or Units of Stock That Have Not Vested

(#)

(g)


Market Value of Shares or Units of Stock That Have Not Vested

($)

(h)


Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

(#)

(i)


Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

(#)

(j)Rondald L. Wheet

Chief Executive Officer


7,000,000



—



—


$
0.12

12/31/2013


—



—



—



—Thomas O’Brien (1)

Former President


—



—



—



—

12/31/2013


—



—



—



—Burt Hodges

Chief Financial Officer


800,000



—



—


$
0.43

12/31/2013


—



—



—



—Vincent Olmo

Chief Operating Officer


1,500,000



—



—


$
0.32

12/31/2013


—



—



—



—Thomas M. Beahm

Director


1,500,000



—



—


$
0.20

12/31/2013


(1)
Mr. O’Brien resigned from his position on September 21, 2011.




DIRECTOR COMPENSATION





The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named directors by us during the years ended December 31, 2012, 2011 and 2010.


Name

and

Principal

Position
Year

Salary

($)


Bonus

($)


Stock

Awards

($)


Option

Awards

($)


Non-Equity

Incentive

Plan

Compensation

($)


All Other

Compensation

($)


Total

($)(a)
(b)

(b)


(b)


(b)


(b)


(b)


(b)


(b)Rondald L. Wheet
2012

$
0


$
0


$
0


$
153,000


$
0


$
0


$
153,000Director
2011

$
0


$
0


$
0


$
0


$
0


$
0


$
02010

$
0


$
0


$
0


$
0


$
0


$
0


$
0Thomas M. Beahm
2012

$
0


$
0


$
0


$
153,000


$
0


$
0


$
153,000Director
2011

$
0


$
0


$
0


$
0


$
0


$
0


$
02010

$
0


$
0


$
0


$
0


$
0


$
0


$
0Thomas O’Brien (1)
2012

$
0


$
0


$
0


$
0


$
0


$
0


$
0Former Director
2011

$
0


$
0


$
0


$
0


$
0


$
0


$
02010

$
0


$
0


$
0


$
0


$
0


$
0


$
0


(1)
Mr. O’Brien resigned from his position as a member of the board of directors on September 21, 2011.





Employment Agreements





Employment Agreement with Rondald L. Wheet, Chief Executive Officer





Effective May 15, 2012, the Company and Mr. Wheet, our Chief Executive Officer, entered into a two (2) year employment agreement, which provides for an annual salary of $247,500.  Under such agreement, Mr. Wheet shall administer, supervise, manage and control the business development of the Company, including the research, development, manufacture, marketing and sales of its current products and any future products that may be added to the Company's business. 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.


42





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 or (vi) the Company defaults in making payments required to Mr. Wheet under this employment agreement. During the term of his employment, Mr. Wheet will not work for or provide any services in any capacity to any competitor and, during the term of his employment and for two years following termination of his employment, Mr. Wheet will not solicit any of the Company’s employees, consultants, customers, vendors 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.




43





Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.





The following table sets forth, as of April 22, 2013, the number of shares of our common stock owned by (i) each person who is known by us to own of record or beneficially five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our executive officers and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting and investment power with respect to the shares of our common stock beneficially owned.





Name and Address (1)
Beneficial

Relationship to Company

Outstanding

Common Stock


Percentage of

Ownership of

Common Stock

(3)Rondald L. Wheet
Chief Executive Officer, Chairman


4,371,282



5.63
%(2)Dr. Thomas Beahm
Director


3,439,849



4.43
%Burt Hodges
Chief Financial Officer


20,000
(4)


*
%Vincent Olmo
Chief Operating Officer


735,811
(5)


*
%Thomas O’Brien



3,645,625



4.70
%Officers and Directors (4 persons)
-


12,212,567



15.74
%





* less than 1%





(1)
Unless otherwise indicated, the address of each beneficial owner listed above is c/o Rondald L. Wheet, Revolutions Medical Corporation, 670 Marina Drive, 3rd Floor, Charleston, SC 29492.


(2)
This percentage does not include shares of Preferred Stock or options to purchase shares of common stock.


(3)
Based on 77,610,014 shares outstanding as of April 22, 2012.


(4)
This total does not include options to purchase 800,000 shares of the Company’s common stock.


(5)
This total does not include options to purchase 1,500,000 shares of the Company’s common stock.





DESCRIPTION OF SECURITIES





General





We are authorized to issue an aggregate number of 255,000,000 shares of capital stock, of which 250,000,000 shares are common stock, $0.001 par value per share, and 5,000,000 shares are preferred stock, $0.001 par value per share.





Common Stock





We are authorized to issue 250,000,000 shares of common stock, par value $0.001 per share, of which 77,610,014 shares were outstanding as of April 22, 2013.





Holders of our common stock are entitled to one vote per share on all matters submitted to a vote of the shareholders. Shares of our common stock do not have cumulative voting rights, which mean that the holders of a majority of the shareholder votes eligible to vote and voting for the election of the board of directors can elect all members of the board of directors. Holders of a majority of the issued and outstanding shares of common stock may take action by written consent without a meeting. Upon any liquidation, dissolution or winding up, holders of shares of our common stock are entitled to receive pro rata all of our assets available for distribution to shareholders. Holders of our common stock do not have any preemptive rights to subscribe for or to purchase any stock, obligations or other securities.




44





Preferred Stock





The Company has 5,000,000 shares of preferred stock ($0.001 par value) authorized. When the Company issues its preferred stock, it is designated with the year of when it is issued. As of March 29, 2013, there were 1,000,000 shares of preferred stock outstanding. On October 24, 2006, the Company designated 1,000,000 shares as Series 2006 Preferred Stock, which were then issued to Mr. Wheet, the Company’s Chief Executive Officer. Each share of preferred stock is convertible, at any time at the discretion of Mr. Wheet, into one share of the Company’s common stock for each share of series of preferred share. Each series of preferred stock has voting rights of 125 votes per share of series preferred voting together as one class with the Company’s common stock. As a result, Mr. Wheet has effective voting control of the Company’s common stock and as such can unilaterally decide on business matters. Upon conversion of the series preferred, each share of common stock resulting from the conversion shall be entitled to one vote per share-not 125 votes per share.




Common Stock Options and Warrants Outstanding





As of December 31, 2012, there were 12,100,000 options outstanding, which consisted of options to purchase common stock at exercise prices ranging from $0.08 to $0.50 per share, all of which are exercisable. 5,000,000 options still outstanding were granted in 2007 at an exercise price of $0.08 per share and are considered in the money as of December 31, 2012. 2,500,000 options issued in 2011 exercisable at $0.15 per share are considered out of the money. An additional 1,000,000 options issued at an exercise price of $0.50 are considered out of the money. 3,300,000 options issued in 2011 at an exercise price of $0.30 are considered out of the money. 300,000 options issued in 2012 at an exercise price of $0.40 are considered out of the money. Additionally, as of December 31, 2012, there were 2,880,000 warrants outstanding. All of these warrants were issued in 2012 according to the terms of 21 convertible debt agreements. 1,920,000 of these warrants are exercisable at $0.25 and 960,000 are exercisable at $0.50.The warrants exercisable at $0.25 expire on June 30, 2013. The warrants exercisable at $0.50 expire on September 30, 2013.




Item 13.  Certain Relationships and Related Transactions, and Director Independence.





Related Transactions





The Company incurred $120,000 in office rent to Osprey South, LLC in 2012. The Company’s CEO and Chairman of the Board, Rondald 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. The monthly rent under such lease is $10,000.





Director Independence





The common stock of the Company is currently quoted on the OTC Markets, an exchange which currently does not have director independence requirements.  On an annual basis, each director and executive officer will be obligated to disclose any transactions with the Company in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with Item 407(a) of Regulation S-K.  Following completion of these disclosures, the Board will make an annual determination as to the independence of each director using the current standards for “independence” that satisfy both the criteria for the Nasdaq and the American Stock Exchange.





As of December 31, 2012, the Board determined that the no directors are independent under these standards.





Item 14.  Principal Accounting Fees and Services.





Audit Fees





Audit fees consist of assurance and related services that are reasonably related to the performance of the audit or review of our financial statements.  This category includes fees related to the performance of audits and attest services not required by statute or regulations, and accounts consultations regarding the application of GAAP to proposed transactions.  The aggregate audit fees billed for the fiscal years ended December 31, 2012 and 2011 were $38,000 and $18,229, respectively.




45





Audit Related Fees





The aggregate fees billed for assurance and related services by our principal accountant that are reasonably related to the performance of the audit or review of our financial statements, other than those previously reported in this Item 14, for the fiscal years ended December 31, 2012 and 2011 were $0 and $0.





Tax Fees





Tax fees consist of the aggregate fees billed for professional services rendered by our principal accountants for tax compliance, tax advice, and tax planning. These services include preparation for federal and state income tax returns. The aggregate tax fees billed for the fiscal years ended December 31, 2012 and 2011 were $0 and $0, respectively.





Audit Committee Pre-Approval Policies and Procedures





Effective May 6, 2003, the SEC adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:





·
approved by our audit committee; or





·
entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular  service,  the  audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.





We do not have an audit committee.  Our entire board of directors pre-approves all services provided by our independent auditors.




46





PART IV





Item 15.  Exhibits, Financial Statement Schedules.





Exhibit No.

Description3.1

Amended and Restated Articles of Incorporation, dated November 24, 2010 (filed as Exhibit 3.1 on Form 10-K for the year ended December 31, 2010, as filed with the SEC on March 30, 2011)3.2

Bylaws (filed as Exhibit 2.2 to our Amended Form 10-SB filed August 15, 2001)4.1

Form of Common Stock Certificate (filed as Exhibit 3.1 to our Form 10-SB filed December 23, 1999)4.2

$1,050,000 Convertible Promissory Note, dated February 24, 2011 (filed as Exhibit 4.2 on Form S-1, as filed with the SEC on April 6, 2011)10.1

Joint Venture Agreement with Globe, dated November 3, 2006 (as filed as Exhibit 10.1 of the Company's Form 10-QSB for the quarter ended September 30, 2006, filed with the SEC on November 17, 2006)10.2

Safety Scalpel Joint Venture agreement with Globe dated August 11, 2006 (as filed as Exhibit 10.2 of the Company's Form 10-QSB for the quarter ended June 30, 2006, filed with the SEC on August 19, 2006)10.3

Employment Agreement with Rondald L. Wheet (as filed as Exhibit 10.3 of the Company's Form 10-KSB for the year ended December 31, 2007)10.4

Employment Agreement with Burt Hodges (as filed as Exhibit 10.1 of the Company’s Form 8-K filed June 7, 2011)10.5

Mutual Release and Settlement Agreement between the Company and Gifford M. Mabie, dated April 14, 2006 (as filed as Exhibit 10.13 of the Company's Form 10-KSB for the year ended December 31, 2004, filed with the SEC on April 15, 2006)10.6

Agreement and Plan of Merger between Cerro Mining Corporation and the Company. dated May 9, 1997 (filed as Exhibit 6.6 to our Form 10-SB filed December 23, 1999)10.7

Agreement and Plan of Merger between Clear Image Acquisition Corporation and the Company dated January 26, 2007 (filed as Exhibit 10.6 to our Form 8-K filed January 26, 2007)10.8

Employment Agreement with Vincent L. Olmo (as filed as Exhibit 10.1 to the Company's Form 8-K filed April 15, 2011)10.9

Drawdown Equity Financing Agreement, dated April 22, 2010, by and between the Company and Auctus Private Equity Fund, LLC (filed as Exhibit 10.1 to our Form 8-K, filed April 26, 2010)10.10

Registration Rights Agreement, dated April 22, 2010, by and between the Company and Auctus Private Equity Fund, LLC (filed as Exhibit 10.2 to our Form 8-K, filed April 26, 2010)10.11

Registration Rights Agreement, dated February 24, 2011, by and between the Company and JMJ Financial, Inc. (filed as Exhibit 10.11 on Form S-1, as filed with the SEC on April 6, 2011)10.12

Committed Equity Facility Agreement, dated December 29, 2011, by and between Revolutions Medical Corporation and TCA Global Credit Master Fund, LP (filed as Exhibit 10.12 to our Form S-1, filed February 14, 2012)10.13

Registration Rights Agreement, dated December 29, 2011, by and between Revolutions Medical Corporation and TCA Global Credit Master Fund, LP (filed as Exhibit 10.13 to our Form S-1, filed February 14, 2012)10.14

Employment Agreement with Rondald L. Wheet (as filed as Exhibit 10.2 of the Company's Form 10-Q for the quarter ended March 31, 2012, filed with the SEC on May 15, 2012)31.1

Certification by the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14 (a)) *31.2

Certification by the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14 (a)) *32.1

Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *32.2

Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *101.INS

XBRL Instance**101.SCH

XBRL Taxonomy Extension Schema**101.CAL

XBRL Taxonomy Extension Calculation**101.DEF

XBRL Taxonomy Extension Definition**101.LAB

XBRL Taxonomy Extension Labels**101.PRE

XBRL Taxonomy Extension Presentation*** filed herewith** furnished with the Company’s Annual Report on Form 10-K, filed with the SEC on May 2, 2013





47


SIGNATURES





Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.








REVOLUTIONS MEDICAL CORPORATIONDate: May 8, 2013

By:
/s/ Rondald L. WheetName: Rondald L. WheetTitle: Chief Executive Officer

(Principal Executive Officer)








Date: May 8, 2013

By:
/s/ Burt HodgesName: Burt HodgesTitle: Chief Financial Officer

(Principal Financial Officer)

(Principal Accounting Officer)








Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.





Name

Position

Date/s/ Rondald L. Wheet

Chief Executive Officer and Chairman

May 8, 2013Rondald L. Wheet/s/ Dr. Thomas Beahm

Director

May 8, 2013Dr. Thomas Beahm/s/ Burt Hodges

Chief Financial Officer

May 8, 2013Burt Hodges/s/ Vincent Olmo

Chief Operating Officer

May 8, 2013Vincent Olmo




48




REVOLUTIONS MEDICAL CORPORATION
 
 INDEX TO FINANCIAL STATEMENTS
 
 
 Reports of Independent Registered Public Accounting Firms

F-2Balance Sheets at December 31, 2012 and 2011

F-4Statements of Operations  for the Years Ended December 31, 2012 and 2011and From Inception (August 16, 1996) Through December 31, 2012

F-5Statements of Shareholders' Equity (Deficit) for the Years Ended December 31,  2012 and 2011 and From Inception (August 16, 1996) Through December 31, 2012

F-6Statements of Cash Flows for the Years Ended December 31, 2012 and 2011 and From Inception (August 16, 1996) Through December 31, 2012

F-7Notes to Financial Statements

F-9
 
 F-1
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Board of Directors and
 Stockholders of Revolutions Medical Corporation
 (A Development Stage Company)
 Charleston, South Carolina
 
 We have audited the accompanying balance sheet of Revolutions Medical Corporation as of December 31, 2012, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the year then ended and for the period from August 16,1996 (inception) to December 31, 2012.  Revolutions Medical Corporation’s management is responsible for these financial statements.  Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements for the period from August 16, 1996 (inception) through December 31, 2011 were audited by other auditors whose report expressed an unqualified opinion on those financial statements. The financial statements for the period from August 16, 1996 (inception) through December 31, 2011 include a net loss of $30,774,410. Our opinion on the financial statements for the period from August 16, 1996 (inception) through December 31, 2012, insofar as it relates to amounts from August 16, 1996 (inception) through December 31, 2011, is based solely on the report of other auditors.
 
 We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Revolutions Medical Corporation as of December 31, 2012, and the results of its operations and its cash flows for the year then ended and for the period from August 16, 1996 (inception) to December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that Revolutions Medical Corporation will continue as a going concern.  As discussed in Note 2 to the financial statements, Revolutions Medical Corporation has suffered recurring losses from operations and has a working capital deficiency.  These factors raise substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 /s/ GBH CPAs, PC
 GBH CPAs,PC
 www.gbhcpas.com
 Houston, Texas
 April 29, 2013
 
 F-2
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the Shareholders of Revolutions Medical Corporation:
 
 We have audited the accompanying consolidated balance sheet of Revolutions Medical Corporation (formerly Maxxon, Inc.) (a development stage company) as of December 31, 2011, and the related statements of operations, shareholders’ equity, and cash flows for the year ended December 31, 2011 and for the period from August 16, 1996 (inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
 
 We conducted our audit in accordance with auditing standards of the Public Company Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Revolutions Medical Corporation as of December 31, 2011, and the results of its operations and its cash flows for the year ended December 31, 2011 and for the period from August 16, 1996 (inception) to December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
 
 The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 As discussed in Note 15, the financial statements as of December 31, 2011 and the year then ended have been restated to correct for certain errors.
 
 /s/ Hood & Associates CPAs, P.C.
 
 Hood & Associates CPAs, P.C.
 Certified Public Accountants
 
 March 30, 2012 (April 26, 2013 as to the effects of the restatement described in Note 15)
 Tulsa, Oklahoma
  F-3
  REVOLUTIONS MEDICAL CORPORATION
 (A Development Stage Company)
 BALANCE SHEETS
  As of December 31,2012


2011(Restated)ASSETSCurrent assets:Cash and cash equivalent

$
54


$
4,844Inventories


321,791



-Prepaid expenses and other current assets


4,859



279,868Total current assets


326,704



284,712Property and equipment, net


356,656



1,185,664Intangibles


106,687



116,426Goodwill


-



23,276Total assets

$
790,047


$
1,610,078LIABILITIES AND STOCKHOLDERS’ DEFICITCurrent liabilities:Accounts payable and accrued liabilities

$
1,122,371


$
468,468Payable to Yeso-med


1,280,860



352,544Accounts payable and accrued liabilities, related parties


73,957



87,944Payable for indemnification


1,347,806



1,424,019Convertible notes, net of discounts of $187,039 and $307,126, respectively


184,289



80,535Convertible notes, related parties, net of discount of $42,534 and $0, respectively


32,466



-Derivatives, note conversion feature


364,802



442,311Total liabilities


4,406,551



2,855,821Commitments and contingenciesStockholders’ deficit:Series 2006 Preferred stock, $0.001 par value, 5,000,000 shares authorized; 1,000,000 shares issued and outstanding


1,000



1,000Common stock, $0.001 par value; 250,000,000 shares authorized; 72,784,907 and 54,729,606 shares issued and outstanding, respectively.


72,785



54,730Additional paid-in capital


34,319,432



29,497,937Subscriptions receivable


(71,000
)


(25,000
)Deficit accumulated during the development stage


(37,938,721
)


(30,774,410
)Total stockholders' deficit


(3,616,504
)


(1,245,743
)Total liabilities and stockholders’ deficit

$
790,047


$
1,610,078
 
 The accompanying notes are an integral part of the financial statements.
 
 F-4
  REVOLUTIONS MEDICAL CORPORATION
 (A Development Stage Company)
 STATEMENTS OF OPERATIONS
 
 Year Ended

December 31,

2012


Year Ended

December 31,

2011


From Inception

(August 16, 1996)

Through December 31,

2012(Restated)Revenue

$
1,189


$
-


$
1,189Cost of revenue


9,200



-



9,200Loss on firm purchase commitment


783,593



-



783,593Cost of goods sold


792,793



-



792,793Gross loss


(791,604
)


-



(791,604
)Operating expenses:Research and development


35,544



57,000



2,935,949Depreciation and amortization


102,971



17,023



205,111General and administrative expenses


4,046,080



3,781,286



27,298,804Impairment of assets


878,276



-



4,570,007Gain on disposal of assets


-



-



(794
)Total operating expenses


5,062,871



3,855,309



35,009,077Operating loss


(5,854,475
)


(3,855,309
)


(35,800,681
)Other income (expense):Interest income


-



10



17,286Interest expense


(1,727,512
)


(567,081
)


(2,629,705
)Investment income


-



-



170,753Gain (loss) on extinguishment of debt


13,202



-



(139,712
)Gain (loss) on change in fair value of derivative liabilities


131,397



(119,138
)


(45,976
)Other income, net


273,077



-



305,892Total other income (expense)


(1,309,836
)


(686,209
)


(2,321,462
)Net loss


(7,164,311
)


(4,541,518
)


(38,122,143
)Net loss attributable to the non-controlling interest


-



-



(183,422
)Net loss attributable to Revolutions Medical Corporation

$
(7,164,311
)

$
(4,541,518
)

$
(37,938,721
)Weighted average common shares outstanding – basic and diluted


61,779,765



49,149,099Net loss per common share – basic and diluted

$
(0.12
)

$
(0.09
)
  The accompanying notes are an integral part of the financial statements.
 
 F-5
  REVOLUTIONS MEDICAL CORPORATION
 (A Development Stage Company)
 STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
 
 Preferred Stock


Common Stock


Additional Paid-In


Deficit Accumulated during the Development


Subscriptions


Treasury stockShares


Amount


Shares


Amount


Capital


Stage


Receivable


Reserved


TotalBalance at Inception (August 16, 1996)


-


$
-



-


$
-


$
-


$
-


$
-


$
-


$
-Cerro Mining/Maxxon- OK merger:Cerro Mining


-



-



26,550



27



273



-



-



-



300Maxxon-OK:Shares issued to founders


-



-



350,000



350



6,650



-



-



-



7,000Shares sold for cash to third-party investors


-



-



28,900



29



574,448



-



-



-



574,477Ives transactions:Investment in Ives Health Company


-



-



15,562



16



311,246



-



-



-



311,262Investment in The Health Club


-



-



1,750



2



34,998



-



-



-



35,000Conversion of Ives debt


-



-



926



1



26,999



-



-



-



27,000Issuance of common stock for:Cash from third-party investors


-



-



10,928



11



353,709



-



-



-



353,720Cash from related party promissory notes


-



-



3,225



3



128,997



-



-



-



129,000Subscriptions receivable


-



-



2,638



2



69,798



-



(69,800
)


-



-Services rendered


-



-



4,525



4



173,423



-



-



-



173,427Debentures converted


-



-



5,134



5



74,995



-



-



-



75,000Net loss


-



-



-



-



-



(795,376
)


-



-



(795,376
)Balance at December 31, 1997


-



-



450,138



450



1,755,536



(795,376
)


(69,800
)


-



890,810Issuance of common stock for:Conversion of Ives debt


-



-



2,241



2



54,998



-



-



-



55,000Cash from third- party investor


-



-



2,500



3



90,997



-



-



-



91,000Options exercised by third-parties for cash


-



-



27,293



27



359,873



-



-



-



359,900Options exercised by third-parties for services


-



-



1,207



1



18,099



-



-



-



18,100Services rendered by third-parties


-



-



49,400



49



574,499



-



-



-



574,548Debentures converted by third parties


-



-



27,429



27



274,973



-



-



-



275,000Settlement with related party


-



-



17,500



18



332



-



-



-



350Certificates canceled


-



-



(4,579
)


(4
)


(40,261
)


-



-



-



(40,265
)Value of services contributed by officer and employees


-



-



-



-



114,154



-



-



-



114,154Compensation cost for stock options granted to non-employees


-



-



-



-



918,187



-



-



-



918,187Cancellation of subscriptions receivable from related party


-



-



-



-



-



-



69,800



-



69,800Net loss


-



-



-



-



-



(2,584,383
)


-



-



(2,584,383
)Balance at December 31, 1998


-



-



573,129



573



4,121,387



(3,379,759
)


-



-



742,201Issuance of common stock for:Cash from third-party investor


-



-



19,535



20



342,404



-



-



-



342,424Less: issue costs


-



-



-



-



(16,743
)


-



-



-



(16,743
)Options exercised by third-parties for cash


-



-



15,000



15



149,985



-



-



-



150,000Services rendered by third-parties


-



-



8,203



8



166,735



-



-



-



166,743Value of services contributed by officer and employees


-



-



-



-



280,000



-



-



-



280,000Compensation cost for stock options granted to non-employees


-



-



-



-



89,728



-



-



-



89,728Net loss


-



-



-



-



-



(1,014,555
)


-



-



(1,014,555
)Balance at December 31, 1999


-



-



615,867



616



5,133,496



(4,394,314
)


-



-



739,798Issuance of common stock for:Cash from third-party investor


-



-



43,139



43



250,345



-



-



-



250,388Value of services contributed by officer and employees


-



-



-



-



405,000



-



-



-



405,000Net loss


-



-



-



-



-



(1,347,859
)


-



-



(1,347,859
)Balance at December 31, 2000


-



-



659,006



659



5,788,841



(5,742,173
)


-



-



47,327Issuance of common stock for:Cash from third-party investor


-



-



327,917



328



1,604,372



-



-



-



1,604,700Purchased by employees


-



-



182,500



183



547,317



-



(547,500
)


-



-Issued for repayment of debt


-



-



2,500



3



7,497



-



-



-



7,500Less: issue costs


-



-



-



-



(85,575
)


-



-



-



(85,575
)Services rendered by third-parties


-



-



22,500



23



422,427



-



-



-



422,450Compensation cost of stock issued and options granted for services


-



-



10,000



10



1,487,690



-



-



-



1,487,700Compensation cost of stock issued and options granted for services to be amortized


-



-



-



-



(1,048,754
)


-



-



-



(1,048,754
)Net loss


-



-



-



-



-



(2,199,085
)


-



-



(2,199,085
)Balance at December 31, 2001


-



-



1,204,423



1,206



8,723,815



(7,941,258
)


(547,500
)


-



236,263Issuance of common stock for:Cash from third-party investor


-



-



181,250



181



362,319



-



-



-



362,500Exercise of options


-



-



100,341



100



(100
)


-



-



-



-Issued for repayment of debt


-



-



-



-



-



-



102,803



-



102,803Cost of stock issued and options granted for services


-



-



-



-



759,795



-



-



-



759,795Compensation cost of stock issued and options granted for services


-



-



60,000



60



324,440



-



-



-



324,500Net loss


-



-



-



-



-



(1,933,676
)


-



-



(1,933,676
)Balance at December 31, 2002


-



-



1,546,014



1,547



10,170,269



(9,874,934
)


(444,697
)


-



(147,815
)Issuance of common stock for:MPI settlement costs of stock issued and options granted for services


-



-



57,000



57



140,643



-



-



-



140,700Compensation cost of stock issued and options granted for services


-



-



350,000



350



139,650



-



-



-



140,000Amortized compensation cost of stock issued and options granted for services


-



-



-



-



288,959



-



-



-



288,959Indemnification cost of stock issued and options granted for services


-



-



200,000



200



79,800



-



-



-



80,000Payment towards promissory note balances


-



-



-



-



-



-



69,201



-



69,201Net loss


-



-



-



-



-



(1,391,518
)


-



-



(1,391,518
)Balance at December 31, 2003


-



-



2,153,014



2,154



10,819,321



(11,266,452
)


(375,496
)


-



(820,473
)Issuance of common stock for:Cash from third- party investor


-



-



5,000



5



4,995



-



-



-



5,000Exercise of options


-



-



293,300



293



253,807



-



-



-



254,100Exercise of warrants


-



-



73,100



73



73,027



-



(1,000
)


-



72,100Compensation cost of stock issued for services


-



-



1,642,500



1,643



912,357



-



-



-



914,000Payment towards promissory note balances


-



-



-



-



-



-



18,750



-



18,750Net loss


-



-



-



-



-



(1,552,008
)


-



-



(1,552,008
)Balance at December 31, 2004


-



-



4,166,914



4,168



12,063,507



(12,818,460
)


(357,746
)


-



(1,108,531
)Issuance of Common Stock for Cash:From third-party investors


-



-



651,959



652



290,048



-



-



-



290,700From the exercise of options


-



-



90,000



90



44,910



-



-



-



45,000Issuance of common stock for subscription


-



-



260,000



260



33,740



-



(34,000
)


-



-Common stock issued for services


-



-



1,062,500



1,063



475,437



-



-



-



476,500Common stock issued pursuant to joint venture


-



-



291,667



292



137,541



-



-



-



137,833Value of warrants granted pursuant to joint venture


-



-



-



-



499,733



-



-



-



499,733Value of options granted for services


-



-



-



-



130,900



-



-



-



130,900Reclassification of receivables against amounts owed


-



-



-



-



-



-



357,746



-



357,746Net loss


-



-



-



-



-



(1,310,783
)


-



-



(1,310,783
)Balance at December 31, 2005


-



-



6,523,040



6,525



13,675,816



(14,129,243
)


(34,000
)


-



(480,902
)Issuance of common stock:From the exercise of options for services


-



-



50,000



50



950



-



-



-



1,000From the exercise of options for cash


-



-



150,000



150



74,850



-



-



-



75,000From the exercise of warrants


-



-



300,000



300



5,700



-



-



-



6,000Payment of common stock subscription


-



-



-



-



-



-



34,000



-



34,000Common Stock issued for services


-



-



275,000



275



107,225



-



-



-



107,500Preferred Stock issued for services


1,000,000



1,000



-



-



19,000



-



-



-



20,000Capital contributed by shareholder


-



-



-



-



3,000



-



-



-



3,000Cancellation of Joint Venture with Globe


-



-



-



-



(625,066
)


-



-



-



(625,066
)Common stock issued to Globe then returned to treasury


-



-



(25,000
)


(25
)


(12,475
)


-



-



-



(12,500
)Compensation cost for option price reduction


-



-



-



-



50,000



-



-



-



50,000Net loss


-



-



-



-



-



(598,302
)


-



-



(598,302
)Balance at December 31, 2006


1,000,000



1,000



7,273,040



7,275



13,299,000



(14,727,545
)


-



-



(1,420,270
)Sale of common stock for cash


-



-



845,000



845



299,155



-



-



-



300,000Issuance of common stock for Clear Image stock


-



-



8,273,788



8,274



3,301,241



-



-



-



3,309,515Stock compensation


-



-



-



-



223,246



-



-



-



223,246Issuance of common stock:From the exercise of options for cash


-



-



125,000



125



9,875



-



-



-



10,000warrants


-



-



345,662



346



6,568



-



-



-



6,914Common stock issued for services


-



-



1,225,000



1,225



388,775



-



-



-



390,000Issuance of restricted stock


-



-



40,000



40



9,960



-



-



-



10,000Net loss


-



-



-



-



-



(4,475,017
)


-



-



(4,475,017
)Balance at December 31, 2007


1,000,000



1,000



18,127,490



18,130



17,537,820



(19,202,562
)


-



-



(1,645,612
)Sale of common stock for cash


-



-



4,720,978



4,722



300,101



-



-



-



304,823Issuance of common stock from the exercise of options for cash


-



-



2,300,000



2,300



395,317



-



-



-



397,617Common stock issued for services


-



-



1,419,704



1,419



258,501



-



-



-



259,920Common stock issued for repayment of debt


-



-



271,491



271



132,759



-



-



-



133,030Common stock issued to Clear Image investors to participate in the merger


-



-



43,600



43



12,164



-



-



-



12,207Stock compensation


-



-



-



-



342,801



-



-



-



342,801Acquired deficit of former minority interest now owned 100%


-



-



-



-



(209,776
)


-



-



-



(209,776
)Net loss


-



-



-



-



-



(1,335,154
)


-



-



(1,335,154
)Balance at December 31, 2008


1,000,000



1,000



26,883,193



26,885



18,769,687



(20,537,716
)


-



-



(1,740,144
)Sale of common stock for cash


-



-



5,946,446



5,946



1,396,188



-



-



-



1,402,134Issuance of Common Stock from the exercise of options for cash


-



-



171,250



171



13,529



-



-



-



13,700Preferred stock issued for services


500,000



500



-



-



249,500



-



-



-



250,000Common stock issued for services


-



-



1,530,000



1,530



346,770



-



-



-



348,300Common stock issued for repayment of debt


-



-



667,000



667



306,074



-



-



-



306,741Stock compensation


-



-



-



-



1,452,231



-



-



-



1,452,231Acquired deficit of former minority interest now owned 100%


-



-



-



-



(17,998
)


-



-



-



(17,998
)Net loss


-



-



-



-



-



(2,463,751
)


-



-



(2,463,751
)Balance at December 31, 2009


1,500,000



1,500



35,197,959



35,199



22,515,981



(23,001,467
)


-



-



(448,787
)Sale of common stock for cash:


-



-



4,810,287



4,810



1,525,181



-



-



-



1,529,991Issuance of Common Stock from the exercise of options for cash


-



-



150,000



150



37,350



-



-



-



37,500From exercise of warrants for cash


-



-



117,400



117



58,583



-



-



-



58,700Common stock issued for services


-



-



2,194,891



2,194



558,578



-



-



-



560,772Common stock issued for repayment of debt


-



-



399,441



400



530,356



-



-



-



530,756Treasury stock


-



-



-



-



-



-



-



(969
)


(969
)Net loss


-



-



-



-



-



(3,231,425
)


-



-



(3,231,425
)Balance at December 31, 2010 (Restated)


1,500,000



1,500



42,869,978



42,870



25,226,029



(26,232,892
)


-



(969
)


(963,462
)Sale of common stock for cash:


-



-



656,015



656



201,915



-



-



-



202,571Issuance of common stock from the exercise of options for cash


-



-



6,668,000



6,668



1,672,752



-



(25,000
)


-



1,654,420Preferred stock forfeited


(500,000
)


(500
)


-



-



500



-



-



-



-Common stock issued for services


-



-



1,513,874



1,514



479,586



-



-



-



481,100Common stock issued for repayment of debt


-



-



3,191,367



3,191



959,105



-



-



-



962,296From convertible debt beneficial conversion feature


-



-



-



-



94,624



-



-



-



94,624Treasury stock


-



-



(169,628
)


(169
)


-



-



-



969



800Issuance of unexercised options


-



-



-



-



863,426



-



-



-



863,426Net loss


-



-



-



-



-



(4,541,518
)


-



-



(4,541,518
)Balance at December 31, 2011 (Restated)


1,000,000



1,000



54,729,606



54,730



29,497,937



(30,774,410
)


(25,000
)


-



(1,245,743
)Issuance of common stock from the exercise of options and warrants for cash


-



-



1,235,000



1,235



303,040



-



(46,000
)


-



258,275Common stock issued for services


-



-



2,751,229



2,751



513,360



-



-



-



516,111Options issued for services


-



-



-



-



974,961



-



-



-



974,961Warrants issued with convertible notes payable


-



-



-



-



347,097



-



-



-



347,097Convertible notes payable beneficial conversion feature


-



-



-



-



237,774



-



-



-



237,774Common stock issued for repayment of debt


-



-



13,669,072



13,669



2,305,103



-



-



-



2,318,772Common stock issued for indemnification settlement


-



-



400,000



400



140,160



-



-



-



140,560Net loss


-



-



-



-



-



(7,164,311
)


-



-



(7,164,311
)Balance at December 31, 2012


1,000,000


$
1,000



72,784,907


$
72,785


$
34,319,432


$
(37,938,721
)

$
(71,000
)

$
-


$
(3,616,504
)
 
 The accompanying notes are an integral part of the financial statements.
  F-6
  REVOLUTIONS MEDICAL CORPORATION
 (A Development Stage Company)
 STATEMENTS OF CASH FLOWS
 
 Year Ended December 31,


From Inception

(August 16, 1996)

Through December 31,2012


2011


2012(Restated)Cash flows from operating activities:Net loss

$
(7,164,311
)

$
(4,541,518
)

$
(37,938,721
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization


102,971



17,023



205,111Stock-based compensation expense


1,491,072



1,065,458



12,616,731Stock option modification expense


-



-



50,000Impairment of assets


878,276



-



4,570,007Gain on disposal of assets


-



-



(794
)Amortization of debt discounts


1,428,978



489,080



1,861,218Interest expense incurred on issuance of convertible debt


182,733



165,442



396,474(Gain) loss on change in fair value of derivative liabilities


(131,397
)


(40,030
)


(175,753
)Change in operating assets and liabilities:Inventories


(321,791
)


-



(321,791
)Prepaid expenses and other current assets


275,009



162,181



(4,859
)Accounts payable and accrued liabilities


1,533,758



(11,439
)


3,074,372Accounts payable and accrued liabilities – related parties


(13,987
)


63,659



73,957Payable for indemnification


64,347



67,071



1,805,396Net cash used in operating activities


(1,674,342
)


(2,563,073
)


(13,788,652
)Cash flows from investing activities:Purchase of property and equipment


-



(31,777
)


(992,907
)Proceeds from sale of fixed assets


-



-



794Purchase of license and patents


(39,224
)


(97,314
)


(161,538
)Investment in Ives Health Company and The Health Club


-



-



(261,997
)Net cash used in investing activities


(39,224
)


(129,091
)


(1,415,648
)Cash flows from financing activities:Capital contribution


-



-



802,154Proceeds from issuance of common stock through cash- exercise of stock options and warrants


258,275



1,654,420



3,412,412Proceeds from issuance of notes for cash


1,450,501



770,500



2,976,001Proceeds from loans from shareholders


-



-



15,707Repayment of loans from shareholders


-



-



(8,005
)Repayment of notes


-



-



(157,325
)Proceeds for issuance of common stock for cash


-



202,571



8,163,410Net cash provided by financing activities


1,708,776



2,627,491



15,204,354Net change in cash


(4,790
)


(64,673
)


54Cash at beginning of period


4,844



69,517



-Cash at end of period

$
54


$
4,844


$
54
  The accompanying notes are an integral part of the financial statements.
  F-7
 
 REVOLUTIONS MEDICAL CORPORATION
 (A Development Stage Company)
 STATEMENTS OF CASH FLOWS
 
 
 Year Ended December 31,


From Inception

(August 16, 1996)

Through December 31,2012


2011


2012(Restated)Supplemental disclosure of cash flow information:Interest paid

$
-


$
-


$
-Taxes paid

$
-


$
-


$
-Non-cash financing and investing activities:Common stock issued for conversion of debt

$
2,318,772


$
962,296


$
4,687,415Shares issued for indemnification agreement


140,560



184,000



457,590Debt discount on convertible notes


584,871



769,624



2,405,422Common stock issued in connection with Merger


-



-



300Common stock issued for acquisition of Clear Image


-



-



3,093,948Common stock issued for investment










358,762Preferred stock forfeited


-



500



500Payable recorded for purchase of equipment


-



352,544



289,009
  F-8
 
 REVOLUTIONS MEDICAL CORPORATION
 (A Development Stage Company)
 NOTES TO FINANCIAL STATEMENTS
 
 NOTE 1 –DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Organization and Nature of Operations
 
 Revolutions Medical Corporation, a Nevada corporation, (“the Company” or “RevMed”) has been endeavoring to design, develop and commercialize auto retractable vacuum safety syringes.  Our present product development effort is focused on the RevVacTM 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; RevColorTM, Rev3DTM, and RevDisplayTM.  These tools are designed to enhance general diagnostic confidence through education and research use and in the future the Company believe will have specific commercial applications. The Company’s administrative facilities are located in Charleston, South Carolina. The Company’s primary manufacturing facility is located in Wuxi, China.
 
 Development Stage Company
 
 Since 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.
 
 Accounting Estimates
 
 The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ significantly from those estimates.
 
 Reclassification
 
 Certain prior period amounts have been reclassified to conform to current period presentation.
 
 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.
 
 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 sheets.  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 include only finished goods and are valued at the lower of cost or market, with cost being determined using weighted 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. For the years ended December 31, 2012 and 2011, no allowance for inventory was recorded.
  F-9
 
 Property and Equipment
 
 Property 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.
 
 Depreciation and amortization expense is recorded on a straight-line basis over the estimated useful life of the asset as listed below:
 
 Asset Category

Useful LivesMachinery and equipment (years)

5Furniture and fixtures (years)

7Leasehold improvements

Shorter of leasehold improvement life or remaining term of lease
 
 Intangibles
 
 Intangible assets include patents and trademarks, which are valued at acquisition through independent appraisals and amortized on a straight-line basis over periods varying from 17 to 20 years.
 
 Impairment of Long-lived Assets
 
 The Company reviews the carrying value of the long-lived assets periodically to determine if facts and circumstances exist that would suggest that assets might be impaired or that the useful lives should be modified. Among the factors the Company considers in making the evaluation are changes in market position and profitability. If facts and circumstances exist which may indicate impairment, the Company will prepare a projection of the undiscounted cash flows of the asset group and determine if the long-lived assets are recoverable based on these undiscounted cash flows. If impairment is indicated, an adjustment will be made to reduce the carrying amount of these assets to their fair value.
 
 Research and Development
 
 Research and development costs are expensed as incurred.  The Company incurred $35,544, $57,000 and $2,935,949 of research and development expenses for the years ended December 31, 2012 and 2011, and for the period from August 16, 1996 (inception) through December 31, 2012.
 
 Beneficial Conversion Feature
 
 From time to time, the Company may issue convertible notes that have conversion prices that create an embedded beneficial conversion feature on the issuance date. 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. 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.
 
 Derivative Instruments
 
 Derivatives are measured at their fair value on the balance sheet.  In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula.  Changes in fair value are recorded in the statement of operations.
  F-10
 
 Fair Value of Financial Instruments
 
 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 are classified 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 December 31, 2012, for assets and liabilities measured at fair value on a recurring basis:
 
 Level 1


Level 2


Level 3


TotalCash and cash equivalents

$
54


$
—


$
—


$
54Derivative liability

$
—


$
—


$
364,802


$
364,802
 
 The following table summarizes fair value measurements by level at December 31, 2011, for assets and liabilities measured at fair value on a recurring basis:
 
 Level 1


Level 2


Level 3


TotalCash and cash equivalents

$
4,844


$
—


$
—


$
4,844Derivative liability

$
—


$
—


$
442,311


$
442,311
 
 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; when price is fixed or determinable; and when collection is reasonably assured.
 
 Share-based Compensation
 
 The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model and value of common shares based on the trading price on the date of the share grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest, the Company reduces the expense for estimated forfeitures based on historical forfeiture rates. Previously recognized compensation costs may be adjusted to reflect the actual forfeiture rate for the entire award at the end of the vesting period. Excess tax benefits, if any, are recognized as an addition to paid-in capital.
 
 Income Taxes
 
 The Company uses the liability method of accounting for 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.
 
 Earnings (Loss) Per Common Share
 
 Basic net income (loss) per common share is calculated by dividing net income (loss) available to common stockholders for the period by the weighted average shares of common stock outstanding during the period. Diluted net income per common 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 common share assumes the dilutive effect of stock options, warrants and any other potentially dilutive securities outstanding. During a loss period, the potentially dilutive securities have an anti-dilutive effect and are not included in the calculation of dilutive net loss per common share. For the year ended December 31, 2011, potentially issuable shares, including options and warrants to purchase 18,845,350 shares of the Company’s common stock and notes payable convertible to 4,637,152 shares of the Company’s common stock, have been excluded from the calculation. For the year ended December 31, 2012, potentially issuable shares, including options and warrants to purchase 14,980,000 shares of the Company’s common stock and notes payable convertible to 6,603,582  shares of the Company’s common stock have been excluded from the calculation.
  F-11
 
 Subsequent Events
 
 The Company has evaluated all transactions occurring between the end of its fiscal year, December 31, 2012, through the date of issuance of the financial statements for subsequent event disclosure consideration.
 
 New Accounting Standards
 
 The Company does not expect that any recently issued accounting pronouncements will have a significant impact on the results of operations, financial position, or cash flows of the Company.
 
 
 NOTE 2 – GOING CONCERN
 
 The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company is in the development stage and has not established sources of revenues to fund the development of its business and pay operating expenses, resulting in a cumulative net loss of $37,938,721 for the period from inception (August 16, 1996) to December 31, 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 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.
 
 
 NOTE 3 – PROPERTY AND EQUIPMENT
 
 The following is a summary of property and equipment at December 31, 2012 and 2011:
 
 December 31, 2012


December 31, 2011Equipment

$
353,235


$
1,113,235Leasehold improvement


44,000



44,000Furniture


49,147



49,147Subtotal


446,382



1,206,382Less: accumulated depreciation


(89,726
)


(20,718
)Property and equipment, net

$
356,656


$
1,185,664
 
 For the years ended December 31, 2012 and 2011, the Company recognized depreciation and amortization expense related to property and equipment of $69,008 and $11,135, respectively.
 
 During 2012, the Company impaired $710,000 of the $760,000 production mold payments made to Medical Investment Group, Inc. (“MIG”) in 2011 and wrote off an $80,000 prepayment to MIG. The impairment charge was based upon the arbitration hearing against MIG in November, 2012. The hearing and the final ruling made clear that all production mold payments made by the Company to MIG for the manufacturing of production molds had instead been used by Mr. Theriault, a representative of MIG, for other non-production related purposes. The American Arbitration Association panel ruled that the only assets in which production was funded by MIG from the Company’s production payments were $50,000 in trial molds. From the time that these payments were made by the Company, the Company believed that each mold payment was being used by MIG for the manufacturing of the final production molds for the 3ml RevVacTM auto-retractable vacuum safety syringe. During the arbitration proceeding, Mr. Theriault disclosed that no such payments, besides $50,000 in trial mold payments, were ever used for the production of the final molds for the RevVacTM auto-retractable vacuum safety syringe. The arbitration panel ruled that a total of $770,000 awarded to the Company.  The Company has not received such payment to date. The gain related to this award will be recorded when collected.
  F-12
 
 During 2012, the Company also impaired $50,000 for a trial mold that is no longer considered useful to the Company.
 
 NOTE 4 – INTANGIBLES AND GOODWILL
 
 Intangibles
 
 The following is a summary of the Company’s intangibles at December 31, 2012 and 2011:
 
 December 31, 2012


December 31, 2011Patent

$
146,538


$
107,314Licensing agreement


-



15,000Subtotal


146,538



122,314Less: accumulated amortization


(39,851
)


(5,888
)Intangibles , net

$
106,687


$
116,426
 
 The Company owns one published patent on its Auto Retractable Vacuum RevVacTM safety syringe issued in January 2005 and one published patent on its safety blood drawing device issued in June 2003.  In January 2009, a second patent for the RevVacTM 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 RevVacTM 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 June 2011 and January 2012, respectively. The Japan patent was issued in the third quarter of 2012.
 
 The Company filed a U.S. provisional patent on May 2, 2011, on its new vacuum design for the pre-filled market.  On May 2, 2012, the Company also 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 4 separate patent applications, filed in June of 2007, each of which received USPTO office actions during 2010, 2011 and 2012.
 
 The licensing agreement provided licensing rights to a Traxis biopsy software product. The Company decided not to pursue this technology and impaired the cost of $15,000 during 2012.
 
 For the years ended December 31, 2012 and 2011, the Company recognized amortization expense of $33,963 and $5,888, respectively.
 
 Goodwill
 
 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.   The Company exchanged approximately 8.2 million of its common shares which were trading between $0.40 and $0.50 per share at the time of the 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 evaluating the amount expended from 1999 until the acquisition date.  The value of the Company’s stock exchanged for the controlling interest exceeded net assets acquired by $23,276 which was recorded as goodwill.  During 2012, all goodwill was impaired.
 
 F-13
 
 NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
 
 The following is a summary of the Company’s accounts payable and accrued liabilities at December 31, 2012 and 2011:
 
 December 31, 2012


December 31, 2011Accounts payable

$
432,436


$
99,342Accrued payroll liabilities and related penalties


411,670



125,239Accrued salary


143,167



120,000Accrued interest


134,559



64,670Other accruals


539



59,217Total accounts payable and accrued liabilities

$
1,122,371


$
468,468
 
 As of December 31, 2012 and 2011, the Company had accrued $411,670 and $125,239, respectively, pursuant to employment state and federal payroll tax liabilities and related penalties.  Although the Company plans to settle these amounts, there is no assurance that its efforts to settle will be successful.  A tax lien in the amount of $1,227 was filed against the Company on June 18, 2012 by the South Carolina Department of Revenue due to 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.
 
 During the year ended December 31, 2012, the Company wrote off $199,336 of accrued salary to and advances from Rhonda Vincent, former CFO, and $79,890 of payables to various vendors as such claims have passed the statute of limitations in Oklahoma, where the Company formerly conducted operations.  Other income of $279,226 was recorded in the statement of operations.
 
 NOTE 6 – PAYABLE TO YESO-MED
 
 On December 1, 2011, the Company entered into a 5-year agreement with Wuxi Yushou Medical Appliance Co., Ltd (“Yeso-med”). Pursuant to the agreement, commencing from the date that Yeso-med demonstrates to the Company’s satisfaction that it has the capacity to commence regular production of the syringes in the 3ml size in the minimum amount of at least 2,500,000 units per month, the Company will place orders of at least 2,500,000 units per month for the term of this agreement. If the Company does not place with Yeso-med the minimum order for a single month, Yeso-med shall have the right to receive payments from the Company equal to 50% of the supply price of each unit below the minimum order amount required for that month.  The Company has the right to have the amount paid under this requirement to serve as payment against future orders provided the quantity ordered exceeds the minimum quantity for that month. In July 2012, Yeso-med met the capacity requirement. However, the Company has not yet placed any order after July 2012.  As of December 31, 2012, a payable was recorded to Yeso-med related to this minimum purchase requirement of $783,593. During the year ended December 31, 2012, $783,593 was recorded as a loss on firm purchase commitments.
 
 The payable to Yeso-med also included amounts due for product purchased of $208,258 as of December 31, 2012 and amounts due for equipment purchased of $289,009 and $352,544 as of December 31, 2012 and 2011, respectively.
  F-14
 
 NOTE 7 – CONVERTIBLE NOTES PAYABLE
 
 At December 31, 2012 and 2011, notes payable consisted of the following:
 
 December 31,

2012


December 31,

2011Convertible Promissory Note Payable to JMJ Financial, unsecured, one time interest charge of 8%, due on February 22, 2014

$
191,663


$
207,161Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0% per annum, with payment due on April 26, 2012


-



40,000Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0% per annum, with payment due on June 1, 2012


-



45,000Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0% per annum, with payment due on August 7, 2012


-



42,500Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0%  per annum, with payment due on September 19, 2012


-



53,000Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0% per annum, with payment due on March 21, 2013, fully converted in January 2013


7,500



-Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0%  per annum, with payment due on May 10, 2013


42,500



-Convertible Promissory Note Payable to Asher Enterprises, unsecured, interest rate of 8.0%  per annum, with payment due on August 27, 2013


42,500



-Convertible Promissory Note Payable to TCA Global Credit Master Fund, LP, secured by all of the Company’s assets, interest rate of 12.0%  per annum, with payment due on January 3, 2013


62,165



-Convertible Promissory Note Payable issued in the course of a private placement to individuals, unsecured,  interest rate of 8.0%  per annum, with payment due on June 26, 2013


100,000



-Total


446,328



387,661Less: debt discount


(229,573
)


(307,126
)$
216,755


$
80,535
 
 Asher Enterprises
 
 During the year ended December 31, 2012, the Company issued 6 convertible promissory notes to Asher Enterprises for total proceeds of $269,000 in cash (“2012 Asher Notes”). All of the notes were convertible to the Company’s common stock at a conversion price equal to the greater of (1) 55% multiplied by the average of the lowest 3 trading prices for the Company’s common stock during the 10 trading day period ending on the latest complete trading day prior to the conversion date market price and (2) a fixed conversion price of $0.00009 per share. The Company analyzed the conversion feature of the 2012 Asher Notes for derivative accounting consideration and determined that the conversion feature for the 2012 Asher Notes does not qualify for accounting treatment as a financial derivative. The 2012 Asher Notes have a beneficial conversion feature discount of $237,774, within which $170,844 has been amortized. During the year ended December 31, 2012, the Company also recorded interest expense of $118,268 related to the amortization of debt discount on notes issued in 2011 to Asher Enterprises. At December 31, 2012, there was $66,930 of unamortized discount related to the 2012 Asher Notes.
 
 During the year ended December 31, 2012, Asher Enterprises converted principal of $357,000 with accrued interest into 4,952,916 shares of the Company’s common stock.
 
 The 2012 Asher Notes are currently in default as a result of the Company’s failure to timely file its periodically report with the SEC.
  F-15
 
 TCA Global Credit Master Fund, LP
 
 On January 3, 2012, the Company entered into a securities purchase agreement with TCA Global Credit Master Fund, LP (“TCA”), pursuant to which, TCA would purchase up to $2,000,000 of the Company’s common stock. The Company agreed to pay a $100,000 facility fee by issuing to TCA a number of the Company’s common shares (“facility shares”). To determine the number of shares issuable to TCA for the facility fee, the Company’s common stock was valued at a volume weighted average price at January 2, 2012. The facility shares should be adjusted 9 months after January 2, 2012 by the volume weighted average prices of the Company’s common stock 5 trading days prior to the revaluation date. On August 13, 2012, the Company and TCA agreed to terminate the committed equity financing agreement based on the Company’s failure to achieve bulletin board listing as required under the agreement. The Company has issued 559,268 common shares in 2012 to TCA which only satisfied $51,924 of the facility fee upon revaluation. As of December 31, 2012, accounts payable included $48,076 for the remaining payable to TCA related to the facility fee.
 
 In connection with the securities purchase agreement with TCA, the Company issued a convertible promissory note to TCA for a principal amount of $225,000 (“TCA Note”).  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.  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 during the 5 business days immediately preceding the date of conversion.    The Company analyzed the TCA Note for derivative accounting consideration and determined that the TCA Note qualifies for accounting treatment as a financial derivative. The conversion feature of the TCA note was valued at $174,448 on the issuance date and recorded as debt discount. During the year ended December 31, 2011, the Company recognized $174,448 of interest expense related to the amortization of the debt discount.
 
 TCA converted principal of $162,835 into 1,601,255 shares of the Company’s common stock during 2012 and principal of $27,840 into 300,000 shares of the Company’s common stock on January 3, 2013.
 
 JMJ Financial
 
 On February 22, 2011, the Company issued a $1,050,000 convertible promissory note to JMJ Financial, Inc. (“JMJ”). The note bears interest in the form of a onetime interest charge of 8%, payable with the note’s principal amount on the maturity date, February 22, 2014. The note is convertible to the Company’s common stock at a price equal to 70% of the average of the 3 lowest closing prices of the Company’s common stock in the 20 trading days prior to the conversion date. In connection with the note, the Company entered into a registration rights agreement with JMJ to provide JMJ registration rights for common shares underlying this note. The note will only be funded when the conversion price calculated on each payment date is equal to or greater than $0.015 per share and there are sufficient shares remaining in the registration statement. During 2012, JMJ converted $15,498 under this agreement into 180,000 shares of the Company’s common stock. The principal amount owed to JMJ at December 31, 2012 and 2011, is $191,663 and $207,161, respectively, from the $1,050,000 convertible promissory note. The Company analyzed the JMJ note for derivative accounting consideration and determined that the note qualifies for accounting treatment as a financial derivative and recorded an initial discount of $450,000 on the issuance date. During the year ended December 31, 2012 and 2011, the Company recorded $80,000 and $263,309 of interest expense related to the amortization of the debt discount. At December 31, 2012 and 2011, there was $106,691 and $186,691, respectively, of unamortized debt discount related to the JMJ notes.
 
 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. No amount is owed to JMJ from the $500,000 convertible promissory note at December 31, 2012 and 2011.
 
 The Company is currently in litigation with JMJ. See Note 11.
 
 Individual Convertible Notes Payable
 
 During 2012, the Company issued 22 convertible notes payable to individuals for proceeds of $956,501 in cash (“Individual Convertible Notes”). The Individual Convertible Notes mature one year from the date of issuance. Interest accrues at the rate of 8% per year on the outstanding principal amount to be paid at maturity.
  F-16
 
 The principal amount of the Individual Convertible Notes and accrued interest are convertible into the Company’s common stock at a conversion price equal to 75% of the average of the daily volume weighted average prices of the Company's Common Stock during the 5 trading days immediately prior to the conversion date, provided that in no event, shall the note holders convert any portion of the Individual Convertible Notes when the sum of 1) the number of shares of common stock beneficially owned by the holder and its affiliates and 2) the number of shares of common stock issuable upon conversion would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the Company’s outstanding common shares. During 2012, $856,501 of the Individual Convertible Notes with accrued interest were converted into 6,934,901 shares of the Company’s common stock. As of December 31, 2012, Individual Convertible Notes includes principal of $75,000 payable to Vincent Olmo, the Company’s COO, with a debt discount of $42,534.
 
 In connection with the issuance of the Individual Convertible Notes, warrants to purchase 3,826,005 shares of the Company’s common stock at $0.25 per share and warrants to purchase 1,913,003 shares of the Company’s common stock at $0.50 per share were issued to investors. The warrants have a term of less than one year and expire on December 31, 2012, March 31, 2013, or June 30, 2013. $347,097 of the proceeds received from the Individual Convertible Notes was allocated to the warrants based on a grant date fair value of $589,416 calculated using a Black Scholes Model with the following assumptions: (1) 3.9% risk-free discount rate, (2) expected volatility of 155.60 ~218.64%, (3) $0 expected dividends, and (4) an expected term of 0.3~1 years based on the term of warrant.
 
 The Company analyzed the Individual Convertible Notes for derivative accounting consideration and determined that the conversion feature of the Individual Convertible Notes qualify for accounting treatment as a financial derivative. The conversion feature of Individual Convertible Notes was valued at $777,766 on the issuance date. As a result, some of the Individual Convertible Notes were fully discounted and the fair value of the conversion feature in excess of the principal amount allocated to the Individual Convertible Notes of $182,733 was expensed immediately as additional interest expense. During the year ended December 31, 2012, the Company recognized $885,418 of interest expense related to the amortization of the debt discount. At December 31, 2012, there was $55,952 of unamortized discount related to the Individual Convertible Notes.
 
 
 NOTE 8 – PAYABLE FOR INDEMNIFICATION
 
 On February 5, 2009, the Company entered into an Indemnification Settlement Agreement with Gifford M. Mabie, founder and former Chief Executive Officer of the Company. Pursuant to the agreement, the Company agreed to indemnify Mr. Mabie for the payment of penalties, prejudgment interest and post-judgment interest to the United States Securities and Exchange Commission (“SEC”) that is part of the Final Judgment, dated March 11, 2005, in SEC v. Maxxon, Inc., Gifford M. Mabie, Jr., Thomas R. Coughlin, Jr. 02-CV-975-H(J) which resulted from actions taken in good faith by Mabie and Coughlin in the performance of duties as an officer and directors of the Company.  The payment amount stated in the Final Judgment is $1,088,067.
 
 The agreement specifies that the Company is to periodically issue shares to a special account for Gifford Mabie in order that shares can be sold each day the market is open until the liability is satisfied.  The special account was initially funded by the Company’s common stock owned by Mr. Mabie. Total amount of stock traded by the special account is limited to 5% of the total trading volume each day. A percentage equal to Mr. Mabie’s federal and state tax liabilities to a maximum of 40% will be retained by the brokerage firm and remitted to the Internal Revenue Service and to the Oklahoma Tax Commission or the Tax Commission where Mr. Mabie resides. If Mr. Mabie receives a tax refund, that refund will be forwarded to the SEC.
 
 On December 14, 2010, the Company issued 400,000 shares of the Company’s common stock, initially valued at $184,000, to the special account. An additional 400,000 shares were issued to the special account on March 15, 2012 with an initial value of $140,560 determined based upon the 10-day average share price prior to the date of issuance.  At each reporting date, the Company revalues the shares held in the special account and adjusts the outstanding balance. Net increases and decreases in the value of the Company’s common shares held in the special account are recorded in the current period statement of operations. As of December 31, 2012, the remaining principal balance, including the estimated taxes, to be paid was $1,347,806 based upon the Company’s valuation of the stock. For the years ended December 31, 2012 and 2011, net loss related to the stock held in the special account was $63,347 and $67,071, respectively.
 
 NOTE 9 – DERIVATIVES – NOTE CONVERSION FEATURE
 
 Due to the conversion feature contained in some of the notes the Company issued, the actual number of shares of common stock that would be required if a conversion of the notes was made through the issuance of the Company’s common stock cannot be predicted, and the Company could be required to issue an amount of shares that may cause it to exceed its authorized share amount. As a result, the conversion feature requires derivative accounting treatment and will be bifurcated from the note and “marked to market” each reporting period through the income statement. The fair value of the conversion future of these notes was recognized as a derivative liability instrument and will be measured at fair value at each reporting period. In determining the fair value, the Company uses the Black-Scholes option-pricing model. In addition, the fair value of freestanding derivative instruments such as warrants, are also valued using the Black-Scholes option-pricing model.
  F-17
 
 The following is a reconciliation of the derivative liability:
 
 Fair value at December 31, 2010

$
160,659Issuance of instruments


840,442Decrease in value


(40,030
)Reclassification from liability to equity as a result of note conversions


(518,760
)Fair value at December 31, 2011


442,311Issuance of instruments


952,214Decrease in value


(131,397
)Reclassification from liability to equity as a result of note conversions


(898,326
)Fair value at December 31, 2012

$
364,802
 
 The derivative liability was valued under the Black-Scholes model with the following assumptions:
 
 2012

2011Risk free interest rate
0.11%
to
0.16%

0.17%
to
0.19%Expected life (years)
0.01
to
2.1

0
to
3Dividend Yield

0%



0%Volatility
130%
to
219%

0%
to
205%
 
 NOTE 10 - MAXXON/GLOBE JOINT VENTURE AGREEMENT
 
 In September 2005, the Company filed a patent on its RevVacTM safety syringe with Globe Med Tech which gives a 50% ownership of this patent to the Company and 50% to Globe Med Tech. On November 3, 2005, the Company (f.k.a. Maxxon, Inc.,) 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.  The Company and Globe each own 50% of the joint venture.  The Company 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, the Company 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.  This patent was issued January 13, 2009.
 
 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 in the District Court of Harris County, Texas, a lawsuit for fraud and contempt of court for Globe and Andy Hu, individually.  On October 21, 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 United States patent issued for the RevVacTM auto-retractable vacuum safety syringe.  Globe is prohibited from claiming any interest or ownership in the Company’s safety vacuum syringes going forward in the future.
 
 On December 13, 2011, the Supreme Court of Oklahoma denied Globe’s appeal. On January 30, 2013, the court ordered a Nunc Pro Tunc decision denying all counterclaims and third party claims by Globe. Globe filed another appeal on March 1, 2013. The Company has hired legal counsel in Texas to assist in efforts to collect these damages and execute on the court order.
  F-18
 
 NOTE 11 – COMMITMENTS AND CONTINGENCIES
 
 MIG and SPD
 
 On January 2, 2013, the Company won its arbitration proceeding concerning its counter claims against Richard Theriault, former manufacturer MIG and former consultant, Strategic Product Development ("SPD").  The monetary award included $770,000 in recoupment of production costs plus interest, legal fees and other arbitration costs, which will total close to $1 million. In other claims, Theriault was found guilty of fraud in the inducement and breach of contract and was found to have no rights to any of the Company's proprietary technology, files, drawings, designs, patents or products. The ruling determined that all production mold payments made by the Company to MIG for the manufacturing of production molds had instead been used by Mr. Theriault for other non-production related purposes. The panel of American Arbitration Association ruled that the only assets in which production was funded by MIG from the Company’s production payments were $50,000 in trial molds. The equipment asset on the balance sheet has been reduced by $710,000 and charged to impairment for the payments no longer associated with a production or trial mold. The $770,000 award is for the recovery of damages related to these production payments.  The gain related to this award will be recorded when collected. The Company has hired legal counsel in Massachusetts and South Carolina to assist in efforts to collect these damages.
 
 On September 26, 2012, the Company filed suit in South Carolina Federal District Court against SPD, Richard H. Theriault, Vita S. Theriault, Darius R. Theriault, Raminta Theriault, Goddard Technologies, Inc. ("GTI") and others, claiming that the defendants purposely and materially misled and misrepresented capabilities and progress on a variety of initiatives related to the development and manufacture of the Company's RevVacTM Auto-Retractable Vacuum safety syringe to officers and directors of Revolutions Medical, which caused a delay in its production of approximately one year. The suit further alleges that Richard H. Theriault and other defendants defrauded the Company and misappropriated funds in violation of the United States' Racketeer Influenced and Corrupt Organizations ("RICO") Act and that GTI improperly assigned certain rights to the Company's new provisional patents to SPD without authorization. On February 2, 2013, Richard H. Theriault filed for bankruptcy in Massachusetts under Chapter 11.  The South Carolina lawsuit has been temporarily stayed until such time when the arbitration award against Richard H. Theriault and MIG can be ruled on in United States Federal District Court in Massachusetts, seeking judgment outside the bankruptcy court. On March 13, 2013, United States Federal District Court in Massachusetts granted an injunction against Richard H. Theriault and MIG, enjoining and restraining them from transferring or alienating any assets in their possession without approval from the Court and a hearing has been scheduled for May 7, 2013.
 
 JMJ Financial, Inc.
 
 On March 12, 2012, the Company filed a lawsuit against Justin Keener and JMJ 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, described below.
 
 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 amount based upon the default provision of the contract.
 
 A lawsuit was filed against the Company by JMJ 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 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 raises and harm its current shareholders but would solely benefit Keener and JMJ under the default clauses in this agreement.
  F-19
 
 SEC
 
 The SEC filed a civil complaint in Federal District Court in Georgia against the Company, alleging that the Company issued four misleading press releases during the period from August 2010 through October 2010 and one misleading press release in July 2011, related to the Company’s production schedule of its auto retractable safety syringe. The SEC names the Company’s current Chief Executive Officer, Rondald L. Wheet, as a co-defendant. Among other relief, the SEC seeks an order requiring the defendants to disgorge money received from its equity line financing from August 2010 through May 2011, in addition to other civil penalty amounts.  The Company believes that these claims are unfounded and is vigorously defending against them; however, should the Company not prevail in such defense the amount of damages owed to the SEC could be substantial and could adversely affect the Company’s financial condition or cause the Company to cease operations.
 
 Employment Agreements
 
 Effective May 15, 2012, the Company and Mr. Wheet, Chief Executive Officer, entered into a 2-year employment agreement.  The agreement provides for an annual salary of $247,500 and other reasonable and customary fringe benefits.
 
 Effective April 11, 2011, the Company and Mr. Olmo, Chief Operating Officer, entered into a 3-year employment agreement. The agreement provides for an annual salary of $165,000 modified with a cost of living adjustment annually and other reasonable and customary fringe benefits.
 
 Effective June 1, 2011, the Company and Mr. Hodges, Chief Financial Officer, entered into a 3-year employment agreement. The agreement provides for an annual salary of $165,000 modified with a cost of living adjustment annually and other reasonable and customary fringe benefits.
 
 Lease Agreement
 
 On September 1, 2009, the Company entered into a 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.  Pursuant to the lease agreement, the Company was to pay Osprey $4,500 per month.  On July 1, 2011, the Company amended the lease agreement to include the office space adjacent to the existing office space. According to the amended lease agreement, the lease ends on July 1, 2016, and the Company is to pay Osprey $10,000 per month.  Rondald L. Wheet, our Chairman and Chief Executive Officer, is the sole member of Osprey.
 
 
 NOTE 12 - PREFERRED STOCK AND COMMON STOCK TRANSACTIONS
 
 PREFERRED STOCK
 
 Shares Outstanding: Currently, 1,000,000 shares of preferred stock (“Preferred Stock”) are outstanding. Rondald L. Wheet, our Chief Executive Officer, owns 1,000,000 shares of Series 2006 Preferred Stock. Tom O’Brien, our former President, returned 500,000 shares of Series 2009 Preferred Stock upon his resignation in 2011.
 
 Dividends: The holder of the 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 Preferred Stock at the same time and on the same terms and conditions, so that each holder of Preferred Stock will receive the same dividend or distribution such holder would have received if the holder had converted his 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 Preferred Stock are entitled to receive a liquidation preference of $0.001 for each share of Preferred Stock prior to payment being made to any junior stock.
  F-20
 
 Conversion: The holders of Preferred Stock may convert each share into 1 share of common stock.
 
 Preemption: The holders of Preferred Stock have no preemptive rights and they are not subject to further calls or assessments.
 
 Voting Rights: The holders of Preferred Stock are entitled to 125 votes for each share of common stock into which their 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 share of Preferred Stock, each share of common stock issued upon the conversion will be entitled to only one vote per share.
 
 Redemption: There are no redemption or sinking fund provisions applicable to the Preferred Stock.
 
 2012 COMMON STOCK TRANSACTIONS
 
 During the year ended December 31, 2012, 400,000 shares were issued under the terms of the SEC settlement agreement with Gifford Mabie.  The initial value of these shares totaled $140,560.
 
 In the year ended December 31, 2012, the Company issued 2,751,229 shares of common stock with a total value of $516,111 for outside services.
 
 Also, in the year ended December 31, 2012, the Company issued 1,235,000 shares of common stock for the exercise of warrants and options. The Company received cash of $258,275 and recorded a subscription receivable of $46,000.
 
 Also, in the year ended December 31, 2012, the Company issued 13,669,072 shares of common stock for the conversions of convertible notes and accrued interest totaling $1,420,446. The derivative fair value of $898,326 for the conversion feature of these notes was reclassified on the date of conversion to additional paid-in capital.
 
 2011 COMMON STOCK TRANSACTIONS
 
 During the year ended December 31, 2011, 6,668,000 shares of common stock were issued as option holders exercised their options to purchase common stock receiving proceeds of $1,654,420.  Of these options exercised, 2,000,000 options were exercised by our former President, Tom O’Brien at $0.08 per share. The remainder of the options exercised was due from consultants according to the terms of their consulting agreements. 656,015 shares were issued to third party investors and investors under the terms of a Drawdown Equity Financing Agreement. The Company received net proceeds of $202,571 in connection with these share issuances.
 
 Also during the year ended December 31, 2011, the Company issued 1,513,874 shares of common stock with a total value of $481,100 in lieu of cash as payment for outside services.
 
 During the year ended December 31, 2011, the Company issued 3,021,738 shares of common stock for conversions of notes and accrued interest. In connection with the conversions, the reclassification of the derivative fair value related to note conversion feature totaled $963,096.
 
 NOTE 13 - STOCK OPTIONS AND WARRANTS OUTSTANDING
 
 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.
 
 During the year ended December 31, 2012, under the terms of the Company’s 2007 Stock Option Plan, 75,000 options were issued for consulting services exercisable at $0.25 per share, 300,000 options were issued for consulting services exercisable at $0.40 per share, and 2.5 million shares were issued to directors and an employee for service provided. The options have a term of 1~2 years and vest upon issuance. Fair value of $429,824 was calculated using the Black-Scholes Model with the following assumptions: (1) discount rate of 0.12% to 0.21% (2) expected life of 0.7 to 2.0 years (3) expected volatility of 159% to 161% and (4) zero expected dividends.
  F-21
 
 During the course of 2012 and 2011, the Company entered into several consulting agreements to perform marketing services for the Company as it begins to enter into the production stage for the RevVacTM safety syringe. Consultants are obligated under the contract to promote the product 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 issued options at a discount to the market price at the date of issuance. These options must be exercised within a 10 day window from the time of issuance. The consultants therefore are committed to purchasing these options in order to enter into the consultant agreement and are obligated to adhere to the terms of the agreement. The agreements are recorded as a prepaid consulting expense upon the commencement of the agreement and expensed each quarter for the duration of the agreement. The amount to be determined for the consulting expense is determined based upon the options issued using the Black-Scholes model. Since the exercise window for these options is so short, the amount of the consulting expense is recorded as the difference between the exercise price and the market price as of the date of issuance. The Company also issued options with a term of 6 months to 1 year. Value for options with such term was calculated using Black-Scholes model.
 
 The following tables summarize information about the stock options for the years ended December 31, 2012 and 2011:
 
 Number of Units


Weighted

Average

Exercise Price


Weighted

Average

Remaining

Contractual

Term (in years)


Aggregate

Intrinsic ValueOutstanding, December 31, 2010


12,834,750


$
0.20



1.62


$
2,708,463Granted


9,307,000



0.34



1.02Exercised


(6,668,000
)


0.25Expired/ Forfeited


-Outstanding, December 31, 2011


15,473,750



0.39



2.45



869,825Granted


2,875,000



0.18



0.98Exercised


(575,000
)


0.25Expired/ Forfeited


(5,673,750
)Outstanding, December 31, 2012


12,100,000



0.20



1.18



150,000
 
 The following tables summarize information about the warrants for the years ended  December 31, 2012 and 2011:
 
 Number of Units


Weighted

Average

Exercise Price


Weighted

Average

Remaining

Contractual

Term (in years)


Aggregate

Intrinsic ValueOutstanding, December 31, 2010


1,871,600


$
0.50



3.45


$
-Granted


1,500,000



0.50



1.00Exercised


-Expired/ Forfeited


-Outstanding, December 31, 2011


3,371,600



0.39



2.45



-Granted


5,739,008



0.33



0.15Exercised


(660,000
)


0.50Expired/ Forfeited


(5,570,608
)Outstanding, December 31, 2012


2,880,000



0.33



0.30



-
 
 NOTE 14 - RELATED PARTY TRANSACTIONS
 
 In connection with the acquisition of Clear Image Acquisition Corp. by the Company, Rondald L. Wheet, Chairman and Chief Executive Officer, received 2,286,000 shares of restricted Company common stock.  Dr. Beahm, a Director, received 1,599,125 shares of restricted RevMed common stock, and Mr. O’Brien, a former Director, received 1,645,625 shares of restricted Company common stock.  Mr. Wheet and Mr. O’Brien were directors and shareholders and Dr. Beahm was a shareholder of Clear Image Acquisition Corp. prior to its acquisition by the Company.
  F-22
 
 The Company rents its office space from Osprey South, LLC. Rondald L. Wheet, Chief Executive Officer, is the sole member of Osprey.  Rent expense to Osprey was $120,000 and $99,608 for the years ended December 31, 2012 and 2011, respectively.  Rent payable to Osprey was $19,761 and $8,608 as of December 31, 2012 and 2011, respectively.
 
 As of December 31, 2012, the Company had advances from Vincent Olmo, Chief Operating Officer, and Mr. Wheet of $9,194 and $32,502, respectively, for expenses paid on behalf of the Company. The Company also had a convertible note payable to Mr. Olmo with principal amount of $75,000 and debt discount of $42,534 at December 31, 2012.
 
 At December 31, 2011, the Company had advances from Rhonda Vincent, former CFO, of $79,336 for expenses paid on behalf of the Company. Such payable has passed the statute of limitations and has been written off as of December 31, 2012.
 
 NOTE 15 – RESTATEMENT
 
 The Company restated its December 31, 2011 balance sheet and the statements of operations, changes in equity, and cash flows for the year ended December 31, 2011 to reflect the following adjustments:
 
 ·
The reclassification of subscription receivable from shareholder of $25,000 to contra equity (originally reported as other current assets).
  ·
The elimination of $311,000 gain from litigation and the corresponding amount reflected as due from litigation as the collectability of the gain is not certain.
   ·
The decrease of $32,633 prepaid consulting expense which represents the difference between the valuation of warrants  based on the Black-Scholes Model and the original valuation improperly determined using intrinsic value.
   ·
The increase in payable for indemnification of $616,379 which represents Gifford Mabie’s federal and state tax liability retained by the brokerage firm and remitted to the Internal Revenue Service and the increase of indemnification expenses of $67,072 for the change in the value of stock issued to the special brokerage for the benefit of Gifford Mabie.
   ·
To decrease a payable to SON Medical for $54,832 for services never performed.
 
 The impact of the reclassifications and prior period adjustments on the accompanying balance sheet at December 31, 2011 is as follows:
 
 As Originally

Reported


Change


As RestatedTotal current assets

$
1,978,711


$
(368,633
)

$
1,610,078Total current liabilities


2,294,274



561,547



2,855,821Total equity


(315,563
)


(930,180
)


(1,245,743
)
 
 
 The impact of the reclassifications and prior period adjustments on the accompanying statement of operations for the year ended December 31, 2011 are as follows:
 
 As Originally

Reported


Change


As RestatedResearch and development

$
111,832


$
(54,832
)

$
57,000General and administrative expenses


3,714,214



67,072



3,781,286Gain from litigation


311,000



(311,000
)


-Net income available to common shareholders


(4,218,278
)


(323,240
)


(4,541,518
)Income per common share – basic and diluted


(0.09
)






(0.09
)
  F-23
  The impact of the reclassifications and prior period adjustments on the accompanying statement of cash flows for the year ended December 31, 2011 is as follows:
 
 As Originally

Reported


Change


As RestatedNet cash used in operating activities

$
(3,010,275
)

$
447,202


$
(2,563,073
)Net cash used in investing activities


(471,347
)


342,256



(129,091
)Net cash provided by financing activities


3,416,949



(789,458
)


2,627,491
 
 NOTE 16 – SUBSEQUENT EVENTS
 
 Subsequent to December 31, 2012, the Company issued 1,466,657 common shares for the conversion of notes payable of $79,540; 789,700 common shares to officers for settlement of  $71,073 of accrued salaries based on the grant date fair value of the shares; 102,500 common shares valued at  $5,466 to service providers for settlement of accounts payable; 262,500 common shares valued at $26,250, for investor relation services; 1,453,750 shares valued at $130,838 for director fees;  and 750,000 common shares for net cash proceeds of $75,000 related to warrants and options exercised.