BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 1 – BUSINESS AND RECAPITALIZATION
BioCorRx Inc. (formerly Fresh Start Private Management, Inc.) through its wholly owned subsidiary Fresh Start Private, Inc. provides an innovative alcoholism treatment program that empowers patients to succeed in their overall recovery. We offer a unique treatment philosophy that combines medical intervention, a singular focus and a comprehensive approach, and a focus on family and friends.
On October 31, 2011 (the “Closing Date”), the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among (i) BioCorRx Inc. (formerly Fresh Start Private Management, Inc.) (the “Company”), (ii) our former principal stockholder, (iii) Fresh Start Private, Inc. (“FSP”), and (iv) the former shareholders of FSP. Pursuant to the terms of the Exchange Agreement, each of the former shareholders of FSP transferred to us all of their shares of FSP in exchange for the issuance of 37,000,000 shares of our common stock, which represented approximately 31.3% of our total shares outstanding immediately following the closing of the transaction (such transaction, the “Share Exchange”). As a result of the Share Exchange, FSP became our wholly-owned subsidiary. We are now a holding company, which through FSP, is now engaged in alcohol treatment. Upon completion of the Share Exchange, Fresh Start Private, Inc. became BioCorRx, Inc.’s wholly-owned subsidiary. As the owners and management of Fresh Start Private, Inc. obtained voting and operating control of Fresh Start Private Management, Inc. after the Share Exchange and Fresh Start Private Management Inc. was non-operating, had no assets or liabilities and did not meet the definition of a business. The transaction has been accounted for as a recapitalization of Fresh Start Private, Inc., accompanied by the issuance of its common stock for outstanding common stock of BioCorRx Inc.(formerly Fresh Start Management Inc.), which was recorded at a nominal value. The accompanying consolidated financial statements and related notes give retroactive effect to the recapitalization as if it had occurred on July 8, 2009 (inception date) and accordingly all share and per share amounts have been adjusted.
On January 7, 2014, the Company changed its name to BioCorRx Inc. In addition, effective February 20, 2014, the Company’s quotation symbol on the Over-the-Counter Bulletin Board was changed from CEYY to BICX.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of BioCorRx Inc (formerly Fresh Start Private Management, Inc.) and its wholly owned subsidiary, Fresh Start Private, Inc. (hereafter referred to as the “Company” or “BioCorRx”). All significant intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
The Company generates revenue from services and product sales. Revenue is recognized in accordance with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the services delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related revenue are recorded. The Company defers any revenue for which the services has not been performed or is subject to refund until such time that the Company and the customer jointly determine that the services has been performed or no refund will be required.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
The Company licenses patented technology to customers under licensing agreements that allow those customers to utilize the technology in services they provide to their customers. The timing and amount of revenue recognized from license agreements depends upon a variety of factors, including the specific terms of each agreement. Such agreements are reviewed for multiple elements. Multiple elements can include amounts related to initial non-refundable license fees for the use of the Company’s patented technology and additional royalties on covered services. Revenue is only recognized after all of the following criteria are met: (1) written agreements have been executed; (2) delivery of technology or intellectual property rights has occurred; (3) fees are fixed or determinable; and (4) collectability of fees is reasonably assured. Under these license agreements, the Company generally receives an initial non-refundable license fee and in some cases, additional running royalties. Revenue from royalties is recognized when earned and when amounts can be reasonably estimated.
Deferred Revenue
The Company from time to time collects initial license fees when license agreements are signed and become effective. License fees collected from Licensees but not yet recognized as income are recorded as deferred revenue and amortized as income earned over the economic life of the related contract.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include assumptions used in the fair value of stock-based compensation and the fair value of other equity and debt instruments.
Accounts Receivable
Accounts receivable are recorded at original invoice amount less an allowance for uncollectible accounts that management believes will be adequate to absorb estimated losses on existing balances. Management estimates the allowance based on collectability of accounts receivable and prior bad debt experience. Accounts receivable balances are written off upon management’s determination that such accounts are uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Management believes that credit risks on accounts receivable will not be material to the financial position of the Company or results of operations. The allowance for doubtful accounts was $659,850 and $866,315 as of December 31, 2013 and 2012, respectively.
Fair Value Of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2013 and 2012. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, stock based compensation and accounts payable. Fair values were assumed to approximate carrying values for cash and payables because they are short term in nature and their carrying amounts approximate fair values or they are payable on demand. See Footnote 8 and 10 for derivative liabilities.
Segment Information
Accounting Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”) establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information disclosed herein materially represents all of the financial information related to the Company’s principal operating segment.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the asset’s estimated useful life, which is five years for furniture and all other equipment. Expenditures for maintenance and repairs are expensed as incurred.
Long-Lived Assets
The Company follows FASB ASC 360-10-15-3, “Impairment or Disposal of Long-lived Assets,” which established a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Net Loss Per Share
The Company accounts for net loss per share in accordance with Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”), which requires presentation of basic and diluted earnings per share (“EPS”) on the face of the statement of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS.
Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. It excludes the dilutive effects of any potentially issuable common shares. Diluted net loss share is calculated by including any potentially dilutive share issuances in the denominator. As of December 31, 2013 and 2012, potentially dilutive shares issuances were comprised of convertible notes payable, warrants and vested stock options.
Derivative Financial Instruments
Accounting Standards Codification subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009. The Company’s convertible debt and reset warrants have variable conversion rates to the exercise price, which prohibit the Company from determining the number of shares needed to settle the conversion of the debt.
Advertising
The Company follows the policy of charging the costs of advertising to expense as incurred. The Company charged to operations $36,053 and $100,629 as advertising costs for the year ended December 31, 2013 and 2012, respectively.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Guarantor-Factoring Agreement
August 1, 2011, Start Fresh Alcohol Recovery Clinic Inc. (the “Clinic”), prior to recapitalization of the Company, entered into an agreement with a factoring company to provide a debt facility secured against the approved insurance clients of the Company. The agreement is for one year, for a maximum facility of $500,000. The facility bears a funding fee equal to the greater of (i) the prime rate of interest plus 6.5% multiplied by the outstanding facility position, calculated monthly and (ii) $4,500 and a Collateral Management Fee equal to 1% of the factored accounts receivable. If both fees are less than $6,000 per month, then the combined fee is $6,000. Up to October 31, 2011, the aforementioned fees were capped at 50% of the greater amount. Additionally the Company was responsible for monthly maintenance fees of $350 per month and an origination fee of 3% of the facility cap or $15,000. The Company was the guarantor for this facility. The security for the facility was provided by way of a security interest against the receivables of the Clinic, a general security assignment over all of the assets of the Clinic and the Company and personal guarantees of two of the Company’s directors. $-0- and $154,990 was due to factor as of December 31, 2013 and 2012, respectively.
On February 26, 2013, BioCorRx Inc. (formerly Fresh Start Private Management, Inc.) (The Company) entered into an agreement with the factoring company to repay the outstanding sum of $140,000 no later than August 30, 2013.
On August 30, 2013, the Company paid off the above described guarantor-factoring agreement including accrued interest.
As of December 31, 2013, the above described guarantor-factoring agreement was no longer effective.
Share Based Compensation
Share-based compensation issued to employees is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period. The Company measures the fair value of the share-based compensation issued to non-employees using the stock price observed in the arms-length private placement transaction nearest the measurement date (for stock transactions) or the fair value of the award (for non-stock transactions), which were considered to be more reliably determinable measures of fair value than the value of the services being rendered. The measurement date is the earlier of (1) the date at which commitment for performance by the counterparty to earn the equity instruments is reached, or (2) the date at which the counterparty’s performance is complete.
As of December 31, 2013, 9,000,000 and 2,750,000 employee and non-employee stock options were outstanding, respectively, with 3,000,000 and 2,750,000 shares vested and exercisable, respectively.
As of December 31, 2012, 9,000,000 employee stock options were outstanding with 9,000,000 shares vested and exercisable.
Income Taxes
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carry forwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will not be realized.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2013 and 2012, the Company has not recorded any unrecognized tax benefits.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Recent Accounting Pronouncements
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
NOTE 3 – GOING CONCERN MATTERS
The Company’s consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has incurred significant recurring losses which have resulted in an accumulated deficit of $5,437,113, total current liabilities in excess of current assets (working capital deficiency) of $834,794 and minimum cash flow from operations at December 31, 2013 which raises substantial doubt about the Company’s ability to continue as a going concern.
Continuation as a going concern is dependent upon obtaining additional capital and upon the Company’s attaining profitable operations. The Company will require a substantial amount of additional funds to build a sales and marketing organization, and to fund additional losses which the Company expects to incur over the next few years. The Company recognizes that, if it is unable to raise additional capital, it may find it necessary to substantially reduce or cease operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
NOTE 4 – PROPERTY AND EQUIPMENT
The Company’s property and equipment at December 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
Office equipment
|
|
$
|
14,649
|
|
|
$
|
10,049
|
|
Computer equipment
|
|
|
2,574
|
|
|
|
509
|
|
Leasehold improvements
|
|
|
20,014
|
|
|
|
20,014
|
|
|
|
|
37,237
|
|
|
|
30,572
|
|
Less accumulated depreciation
|
|
|
(28,392
|
)
|
|
|
(25,230
|
)
|
|
|
$
|
8,845
|
|
|
$
|
5,342
|
|
Depreciation expense charged to operations amounted to approximately $3,162 and $1,988, respectively, for the years ended December 31, 2013 and 2012.
NOTE 5 – LICENSING RIGHTS
On October 28, 2010, prior to the recapitalization of the Company, the Company acquired an exclusive product license, which included the right to use the Naltrexone Implant and any procedures related to the licensed product. The Company paid a onetime license fee of 7.5% of the total common shares outstanding on the date of the agreement, or 5,672,250 common shares at the market value of $0.70 per share as of the date of the agreement. Total value of the license is recorded as $3,970,575. Additionally, the Company will pay $600 for each prescription request of the licensed product. The agreement will remain in force for so long as the Company continues to use the Licensed Product.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
For the purposes of the Asset Purchase Agreement, “Assets” shall mean those assets that are related to the Trademark and the Intellectual Property that are or were used or created by Licensor in its conduct of business, including all assets, rights, interests, and properties of Licensor of whatever nature, tangible or intangible, real or personal, fixed or contingent, except for the Trademark and the Intellectual Property. For all assets received, the Company paid $10 in cash.
During the year ended December 31, 2013, the Company determined that its licensing rights had a definite life based on various economic factors. The Company estimated a useful life of 30 years. Amortization of the year ended December 31, 2013 was $132,353.
The Company follows Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of is reported at the lower of the carrying amount or the fair value less costs to sell.
At December 31, 2013, the Company’s management performed an evaluation of its intangible assets (licensing rights) for purposes of determining the implied fair value of the assets at December 31, 2013. The test indicated that the recorded book value of its licensing rights did not exceed its fair value for the year ended December 31, 2013 as determined by discounted future cash flows. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.
NOTE 6 – DEFERRED REVENUE
On January 27, 2012, the Company granted licensing rights for five years in the state of Florida for $300,000 payable as the licensee performs procedures. The licensing fees are amortized to income over the term on the license agreement. On November 8, 2013, the agreement was terminated. The remaining deferred revenue balance as of December 31, 2013 and 2012 was $-0- and $244,438, respectively.
Effective on April 5, 2013, the Company granted a sub-license agreement for ten years amongst the Company, Kryptonite Investments LLC (“Kryptonite Investments”) and Trinity dated April 8, 2013 for the state of Arizona.
In accordance with the terms and provisions of the license agreement: (i) the license shall be granted by the Company to Kryptonite Investments upon payment of $425,000 to the Company as evidenced by that certain convertible debenture agreement (the “Debenture”); and (ii) the Company shall grant to Kryptonite Investments the exclusive rights to the License to use, sell and offer for sale in the state of Arizona.
Kryptonite Investments shall pay the following amounts to the Company; a license fee of $300,000 (the “License Fee”), which shall be payable as either: (i) an upfront License Fee less 10% discount for total of $270,000 if paid within 30 days of date that all principal and interest is repaid by the Company for the Debenture; or (ii) payable as the licensee performs procedures to begin within 30 days of principal and interest being paid in full for the Debenture by the Company. The remaining unrecognized balance as of December 31, 2013 was $255,640.
On August 2, 2013, the Company granted licensing rights perpetually for the 48 most northern counties in the state of California for an aggregate of $633,000. The licensing fees are amortized to income over the estimated expected useful life of five years. The remaining deferred revenue balance as of December 31, 2013 was $586,319.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
On December 13, 2013, the Company granted licensing rights for ten years in the state of Connecticut for $350,000 payable upfront. The licensing fees are amortized to income over the term on the license agreement. The remaining deferred revenue balance as of December 31, 2013 was $348,275.
In addition, the Company received $18,500 in advance licensing fees as of December 31, 2012, subsequently refunded during the year ended December 31, 2013.
NOTE 7 – ADVANCE FROM LENDERS
During the year ended December 31, 2012, the Company received an aggregate of $885,000 of net proceeds in connection with the expected issuance of convertible debt. As of December 31, 2013, $95,599 of the notes have yet to be executed and finalized or refunded, however, the Company accrued $24,509 and $66,916 as estimated interest as of December 31, 2013 and 2012, respectively.
NOTE 8 – CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES
Asher Note
On December 11, 2012, the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc. (“Asher”), for the sale of an 8% convertible note in the principal amount of $58,000 (the “Note”). The financing closed on December 11, 2012.
The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on September 13, 2013. The Note is convertible into common stock, at Asher’s option, at a 42% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the Note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by (i) 115% if prepaid during the period commencing on the closing date through 30 days thereafter, (ii) 120% if prepaid 31 days following the closing through 60 days following the closing, (iii) 125% if prepaid 61 days following the closing through 90 days following the closing and (iv) 130% if prepaid 91 days following the closing through 120 days following the closing. (v) 135% if prepaid 121 days following the closing through 150 days following the closing, (vi) 150% if prepaid 151 days following the closing through 180 days following the closing. After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
The Company has identified the embedded derivatives related to the above described Note. This embedded derivative included variable conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivative as of the inception date of the Note and to fair value as of each subsequent reporting date.
At the inception of the Note, the Company determined the aggregate fair value of $78,770 of embedded derivatives. The fair value of the embedded derivatives was determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 258.65%, (3) weighted average risk-free interest rate of 0.16%, (4) expected life of 0.76 years, and (5) estimated fair value of the Company’s common stock of $0.011 per share.
The determined fair value of the embedded derivative of $78,770 was charged as a debt discount up to the net proceeds of the note with the remainder, $20,770, charged to current period operations as non-cash interest expense.
On May 10, 2013, the Company paid off the above described note including accrued interest. Any unamortized debt discount and related derivative liability were charged to non-cash interest for the year ended December 31, 2013.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Convertible debenture issued on April 5, 2013, related party
On April 5, 2013, the Company issued a convertible debenture for an aggregate of $425,000 comprised of $400,000 previous advances (see note 7 above) and $25,000 additional proceeds. The financing closed on April 5, 2013.
The Note bears interest at the rate of 15% per annum. Interest is payable quarterly on April 15, July 15, October 15 and January 15 for the prior quarter and principal must be repaid on April 5, 2016. The Note is convertible into common stock, at holder’s option, at a $0.50 per share with certain conversion adjustments in the event the Company issues additional shares of its common stock or securities convertible into the Company’s common stock at a price per share less than the conversion price in effect or without consideration, then the conversion price upon each issuance shall be adjusted to the price equal to the consideration per share paid for such additional shares of the Company’s common stock.
In connection with the issuance of the convertible debenture, the Company issued an aggregate of 1,275,000 shares of its common stock and detachable warrants granting the holder the right to acquire an aggregate of 1,275,000 shares of the Company’s common stock at an initial exercise price of $1.00 per share for five years. The warrant contains exercise price adjustments in the event the Company issues additional shares of its common stock or securities convertible into the Company’s common stock at a price per share less than the exercise price in effect or without consideration, then the exercise price upon each issuance shall be adjusted to the price equal to the consideration per share paid for such additional shares of the Company’s common stock.
The Company has identified the embedded derivatives related to the above described debenture and warrants. This embedded derivative included variable conversion or exercise features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the debenture and to fair value as of each subsequent reporting date.
The Company allocated proceeds based on the relative fair values of the debt, common stock and warrants, measured at an aggregate of $148,134, to the warrant and debt conversion provision liabilities (debt and warrants) and equity (common stock) to discount to convertible debenture. The fair values of the embedded derivatives were determined using the Binominal Option Pricing Model with the following assumptions: contractual terms of 3 to 5 years, an average risk free interest rate of 0.33% to 0.68%, a dividend yield of 0%, and volatility of 256.18%.
The charge of the amortization of debt discounts and costs for the year ended December 31, 2013 was $36,493, which was accounted for as interest expense. At December 31, 2013, the unamortized debt discount was $111,641.
Convertible debentures effective March 31, 2013
In November 2013, effective March 31, 2013, the Company issued four convertible debentures for an aggregate of $385,000 comprised of previous advances (see note 7 above). The financing closed in November 2013.
The Note bears interest at the rate of 15% per annum. Interest is payable quarterly on April 15, July 15, October 15 and January 15 for the prior quarter and principal must be repaid on March 31, 2016. The Notes are convertible into common stock, at holder’s option, at a $0.50 per share with certain conversion adjustments in the event the Company issues additional shares of its common stock or securities convertible into the Company’s common stock at a price per share less than the conversion price in effect or without consideration, then the conversion price upon each issuance shall be adjusted to the price equal to the consideration per share paid for such additional shares of the Company’s common stock.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
In connection with the issuance of the convertible debenture, the Company issued or is obligated to issue an aggregate of 1,155,000 shares of its common stock and detachable warrants granting the holder the right to acquire an aggregate of 1,155,000 shares of the Company’s common stock at an initial exercise price of $1.00 per share for five years. The warrant contains exercise price adjustments in the event the Company issues additional shares of its common stock or securities convertible into the Company’s common stock at a price per share less than the exercise price in effect or without consideration, then the exercise price upon each issuance shall be adjusted to the price equal to the consideration per share paid for such additional shares of the Company’s common stock.
The Company has identified the embedded derivatives related to the above described debenture and warrants. This embedded derivative included variable conversion or exercise features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the debenture and to fair value as of each subsequent reporting date.
The Company allocated proceeds based on the relative fair values of the debt, common stock and warrants, measured at an aggregate of $129,532, to the warrant and debt conversion provision liabilities (debt and warrants) and equity (common stock) to discount to convertible debenture. The fair values of the embedded derivatives were determined using the Binominal Option Pricing Model with the following assumptions: contractual terms of 3 to 5 years, an average risk free interest rate of 0.36% to 0.77%, a dividend yield of 0%, and volatility of 227.18%.
The charge of the amortization of debt discounts and costs for the year ended December 31, 2013 was $32,501, which was accounted for as interest expense. At December 31, 2013, the unamortized debt discount was $97,031.
At December 31, 2013, the Company marked to market the fair value of the embedded derivative and determined a fair value of $1,019,103. The Company recorded a loss from change in fair value of derivative liability of $862,584 for the year ended December 31, 2013. The fair value of the embedded derivatives was determined using Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 239.48%, (3) weighted average risk-free interest rate of 0.78%, (4) expected life of 2.26 years, and (5) estimated fair value of the Company’s common stock of $0.12 per share.
On March 5, 2012, the Company issued an aggregate of four unsecured promissory notes payable for $11,325 each (aggregate of $45,300 due June 5, 2012 with a stated interest rate of 20% per annum, with fixed interest of $2,265 due upon maturity. In connection with the issuance of the above described promissory notes, the Company issued 100,000 of its common stock per note (total of 400,000).
The Company recorded a debt discount of $3,000 per note based on the fair value of the Company’s common stock at the issuance date of the promissory notes. The discount is amortized ratably over the term on the notes. As of December 31, 2012, all four promissory notes were paid in full.
On April 3, 2012, the Company issued a unsecured promissory note payable for $150,000 due April 3, 2013 with a stated interest rate of 20% per annum, with fixed interest of $30,000 due upon maturity. In connection with the issuance of the above described promissory note, the Company issued 1,000,000 shares of its common stock. During the year ended December 31, 2013, the Company repaid the promissory note in full.
The Company recorded a debt discount of $25,100 based on the fair value of the Company’s common stock at the issuance date of the promissory note. The discount is amortized ratably over the term on the notes.
On May 9, 2013, the Company issued a unsecured promissory note for $75,000, due July 8, 2013 at 0.0% interest. During the year ended December 31, 2013, the Company repaid the promissory note in full.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
In connection with the issuance of the above described promissory note, the Company is obligated to issue 100,000 of its common stock.
The Company recorded a debt discount of $4,400 based on the fair value of the Company’s common stock at the issuance date of the promissory note. The discount is charged to amortized ratably over the term on the notes.
NOTE 10 – WARRANT LIABILITY
The Company issued warrants in conjunction with the issuance of convertible debentures. These warrants contain certain reset provisions. Therefore, in accordance with ASC 815-40, the Company reclassified the fair value of the warrant from equity to a liability at the date of issuance. Subsequent to the initial issuance date, the Company is required to adjust to fair value the warrant as an adjustment to current period operations.
The Company recorded a loss on change in fair value of warrant liability of $188,670 for the year ended December 31, 2013.
At December 31, 2013, the fair value of the 2,430,000 warrants containing certain reset provisions were determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 234.07%, (3) weighted average risk-free interest rate of 1.75%, (4) expected life of 4.26 years, and (5) estimated fair value of the Company’s common stock of $0.12 per share.
At December 31, 2013, the warrant liability valued at $287,731, the Company believes an event under the contract that would create an obligation to settle in cash or other current assets is remote and has classified the obligation as a long term liability.
NOTE 11 – NOTES PAYABLE-RELATED PARTY
As of December 31, 2013 and 2012, the Company received an advances from Jorge Andrade, director, and Neil Muller, President as loans from related parties. The loans are payable on demand and without interest
On January 22, 2013, the Company issued a unsecured promissory note payable for $200,000 due January 1, 2018, with a stated interest rate of 12% per annum beginning three months from issuance; payable monthly. Principal payments are due starting February 1, 2015 at $6,650 per month. The lender has an option to convert the note to licensing rights for the State of Oregon. The Company currently is in default of the required interest payments initially due starting April 22, 2013.
In connection with the issuance of the above described promissory note, the Company is obligated to issue 750,000 of its common stock.
The Company recorded a debt discount of $11,250 based on the fair value of the Company’s common stock at the issuance date of the promissory note. The discount is amortized ratably over the term on the notes. The note holder subsequently became an officer of the Company.
During the year ended December 31, 2013, the Company received advances and issued notes in aggregate of $38,480, due on demand through July 14, 2014, non-interest bearing. The Balance as of December 31, 2013 was $28,480.
NOTE 12 – STOCKHOLDERS’ EQUITY
Common stock
The Company is authorized to issue 200,000,000 shares of common stock with par value $.001 per share. As of December 31, 2013 and 2012, the Company had 127,343,501 shares and 100,768,501 shares of common stock issued and outstanding.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
On May 7, 2012, the Company re-purchased and canceled 27,000,000 shares of its common stock from a shareholder for $75,000. In connection with the repurchase, the Company issued 3,000,000 shares of its common stock for services related to the re-purchase.
In May 2012, the Company issued an aggregate of 4,500,000 shares of its common stock for services rendered valued at $114,200.
During the months of May and June 2012, the Company issued an aggregate of 720,000 shares of its common stock in settlement of interest valued at $11,820.
During the months of May and June 2012, the Company issued an aggregate of 1,400,000 shares of its common stock in connection with the issuance of notes payable valued at $37,100.
In August 2012, the Company issued 6,563 shares of its common stock for services rendered valued at $131 based on the underlying market value of the common stock at the date of issuance.
In January 2013, the Company issued an aggregate of 14,500,000 shares of its common stock for services valued at $170,347, net of prior year accretion. The fair value of the common stock issued is amortized to operations over the underlying contractual period.
In February 2013, the Company issued 100,000 shares of its common stock in settlement of a past services previously accrued at December 31, 2012.
In April 2013, the Company issued an aggregate of 1,275,000 shares of its common stock in connection with an issued convertible debenture.
In June 2013, the Company issued 100,000 shares of its common stock in settlement of interest relating to an issued notes payable.
In June 2013, the Company issued 1,000,000 shares of its common stock in payment of legal fees incurred valued at $45,000.
In July 2013, the Company issued 125,000 shares of its common stock for services rendered valued at $4,250 based on the underlying market value of the common stock at the date of issuance.
In November 2013, the Company issued 300,000 shares of its common stock in connection with an issued convertible debenture.
In November 2013, the Company issued 9,000,000 shares of its common stock in connection with the exercise of employee stock options exercised at $0.015 per share. The aggregate exercise price of $135,000 was paid to the Company by utilizing amounts due to the employees by the Company.
In December 2013, the Company issued 175,000 shares of its common stock for services valued at $19,250. The fair value of the common stock issued is amortized to operations over the underlying contractual period.
As of December 31, 2013, the Company is obligated to issue an aggregate of 1,705,000 and 3,100,000 shares of its common stock in connection with issuance of convertible notes and approximately $187,600 of past services rendered, respectively. The fair value, determined by the underlying market value of the common stock at the date of obligation, was recorded in the current period operations.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
During the years ended December 31, 2012, the Company entered into consulting contracts obligating the Company to issue shares of its common stock. As of December 31, 2012, the common shares had not been issued. The Company accretes the fair value of the stock based obligation, determined at the inception of the agreements, over the requisite service period. During the year ended December 31, 2012, the Company recorded $37,228 as stock based compensation. During the year ended December 31, 2013, the common shares were issued.
At December 31, 2013 and 2012, the Company has $87,436 and $179,137 remaining unrecognized compensation.
NOTE 13 – STOCK OPTIONS AND WARRANTS
Employee Options
On December 13, 2012, the Company ratified, confirmed and approved the granting of 2012 stock options in aggregate of 9,000,000 to Jorge Andrade, Neil Muller and Lourdes Felix, officers and directors of the Company under the Company’s 2012 Stock Option Plan. The issued options are exercisable immediately at $0.015 per share for five years.
On September 13, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 6,000,000 to Kent Emry, newly appointed CEO of the Company under the Company’s 2013 Stock Option Plan. The issued options are exercisable 50% immediately and 50% December 13, 2013 at $0.015 per share for five years.
On October 16, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 3,000,000 to Brady Granier, newly appointed COO of the Company under the Company’s 2013 Stock Option Plan. The issued options are exercisable immediately at $0.015 per share for five years.
The following table summarizes the changes in employee options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under the 2012 Stock Option Plan:
Options Outstanding
|
|
|
Options Exercisable
|
|
Exercise
Prices
|
|
|
Number
Outstanding
|
|
|
Weighted Average
Remaining Contractual
Life (Years)
|
|
|
Weighted Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.015
|
|
|
|
9,000,000
|
|
|
|
4.73
|
|
|
$
|
0.015
|
|
|
|
9,000,000
|
|
|
$
|
0.015
|
|
The intrinsic value of the vested employee stock options as of December 31, 2013 was $945,000 based on the Company’s stock price of $0.12 per share at December 31, 2013.
Transactions involving stock options issued to employees are summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price Per Share
|
|
Outstanding at January 1, 2012
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
9,000,000
|
|
|
|
0.015
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2012
|
|
|
9,000,000
|
|
|
$
|
0.015
|
|
Granted
|
|
|
9,000,000
|
|
|
|
0.015
|
|
Exercised
|
|
|
(9,000,000
|
)
|
|
|
0.015
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2013
|
|
|
9,000,000
|
|
|
$
|
0.015
|
|
The intrinsic value of the exercised employee stock options was $693,000 based on the Company’s stock price of $0.092 per share at the exercise date.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
As described above, On November 29, 2012, the Company granted an aggregate of 9,000,000 options to purchase the Company’s common stock at an exercise price of $0.015 per share for five years to officers and directors with immediate vesting. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 261.40% and risk free rate of 0.63%.
As described above, on September 13, 2013, the Company granted 6,000,000 options to purchase the Company’s common stock at an exercise price of $0.015 per share for five years to the CEO with 50% immediate vesting and 50% on December 13, 2013. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 240.38% and risk free rate of 1.39%.
As described above, on October 16, 2013, the Company granted 3,000,000 options to purchase the Company’s common stock at an exercise price of $0.015 per share for five years to the COO with immediate vesting on October 16, 2013. The fair value of options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 239.10% and risk free rate of 1.45%.
The Company recorded $307,281 and $107,588 as employee stock compensation expense for the years ended December 31, 2013 and 2012, respectively.
Non-employee options
In October, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 250,000 to the Company’s advisory board representing five individuals under the Company’s 2012 Stock Option Plan. The issued options are exercisable 52% immediately and remainder at 10,000 per month (12 months) at $0.015 per share for five years.
On December 4, 2013, the Company ratified, confirmed and approved the granting of 2013 stock options in aggregate of 2,500,000 to consultant organizations of the Company under the Company’s 2013 Stock Option Plan. The issued options are exercisable immediately at $0.015 per share for five years.
The following table summarizes the changes in non-employee options outstanding and the related prices for the shares of the Company’s common stock issued to employees of the Company under the 2012 Stock Option Plan:
Options Outstanding
|
|
|
Options Exercisable
|
|
Exercise
Prices
|
|
|
Number
Outstanding
|
|
|
Weighted Average
Remaining Contractual
Life (Years)
|
|
|
Weighted Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.015
|
|
|
|
2,750,000
|
|
|
|
4.91
|
|
|
$
|
0.015
|
|
|
|
2,650,000
|
|
|
$
|
0.015
|
|
The intrinsic value of the vested non- employee stock options as of December 31, 2013 was $278,250 based on the Company’s stock price of $0.12 per share at December 31, 2013.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Transactions involving stock options issued to employees are summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price Per Share
|
|
Outstanding at January 1, 2012
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2012
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
2,750,000
|
|
|
|
0.015
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2013
|
|
|
2,750,000
|
|
|
$
|
0.015
|
|
In October 2013, the Company granted an aggregate of 250,000 options to purchase the Company’s common stock at an exercise price of $0.015 per share for five years to the Company’s advisory board with 52% immediately and remainder at 10,000 per month (12 months) for five years. The fair value of vesting options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 234.07% to 240.11% and risk free rate of 1.30% to 1.75%.
As described above, on December 4, 2013, the Company ratified, confirmed and approved the granting of 2012 stock options in aggregate of 2,500,000 to consultant organizations of the Company under the Company’s 2012 Stock Option Plan. The issued options are exercisable immediately at $0.015 per share for five years. The fair value of vesting options was determined using the Black Scholes Option Pricing Model with the following assumptions: dividend yield $-0-, volatility of 237.24% and risk free rate of 1.45%.
The Company recorded $232,357 and $-0- as non-employee stock compensation expense for the years ended December 31, 2013 and 2012, respectively.
Warrants:
The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock:
Warrants Outstanding
|
|
|
Options Exercisable
|
|
Exercise
Prices
|
|
|
Number
Outstanding
|
|
|
Weighted Average
Remaining Contractual
Life (Years)
|
|
|
Weighted Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.00
|
|
|
|
2,430,000
|
|
|
|
4.26
|
|
|
$
|
1.00
|
|
|
|
2,430,000
|
|
|
$
|
1.00
|
|
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Transactions involving warrants are summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted Average
Exercise Price
Per Share
|
|
Outstanding at January 1, 2012
|
|
|
-
|
|
|
$
|
-
|
|
Issued
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Cancelled or expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2012
|
|
|
-
|
|
|
$
|
-
|
|
Issued
|
|
|
2,430,000
|
|
|
|
1.00
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2013
|
|
|
2,430,000
|
|
|
$
|
1.00
|
|
As described in Note 8, above, the Company issued detachable warrants granting the holder the right to acquire an aggregate of 2,430,000 shares of the Company’s common stock at an initial exercise price of $1.00 per share for five years. The warrant contains exercise price adjustments in the event the Company issues additional shares of its common stock or securities convertible into the Company’s common stock at a price per share less than the exercise price in effect or without consideration, then the exercise price upon each issuance shall be adjusted to the price equal to the consideration per share paid for such additional shares of the Company’s common stock.
NOTE 14 – RELATED PARTY TRANSACTIONS
The Company has an arrangement with Terranautical Global Investments (“TGI”). TGI is a company controlled by Jorge Andrade that provides consulting services to the Company. There is no formal agreement between the parties and the amount of remuneration is $6,250 per month. During the years ended December 31, 2013 and 2012, the Company incurred $227,360 and $52,500 as consulting fees, respectively. As of December 31, 2013 and 2012, there was an unpaid balance of $162,850 and $62,225, respectively.
The Company has an arrangement with Premier Aftercare Recovery Service, (“PARS”). PARS is a Company controlled by Neil Muller that provides consulting services to the Company. There is no formal agreement between the parties and the amount of remuneration is $6,250 per month. During the year ended December 31, 2013, the Company incurred $212,360 and $-0- as consulting fees and expense reimbursements. During the year ended December 31, 2012, the Company incurred $77,794 and $6,379 as consulting fees and expense reimbursements. As of December 31, 2013 and 2012, there was an unpaid balance of $142,459 and $65,774, respectively.
The Company has an arrangement with Felix Financial Enterprises (“FFE”). FFE is a Company controlled by Lourdes Felix that provides consulting services to the Company. There is no formal agreement between the parties and the amount of remuneration is $6,250 per month. During the years ended December 31, 2013 and 2012, the Company incurred $125,000 and $-0- as consulting fees, respectively. As of December 31, 2013 and 2012, there was an unpaid balance of $105,390 and $-0-, respectively.
West Coast Health Consulting, Inc. is a company controlled by Jorge Andrade that previously provided consulting services to the Company. During the years ended December 31, 2013 and 2012, the Company incurred $-0- and $2,026 as consulting fees, respectively. As of December 31, 2013 and 2012, there was an unpaid balance of $-0- and $-0-, respectively.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
The Company has an arrangement with Brady Granier. There is no formal agreement between the parties and the amount of remuneration is $6,250 per month. As of December 31, 2013, $91,140 in consulting fees were incurred and as of December 31, 2012, $-0- in consulting fees was incurred. As of December 31, 2013 and 2012, there was an unpaid balance of 72,640 and $-0-, respectively.
The Company has an arrangement with Kent Emry. There is no formal agreement between the parties and the amount of remuneration is $6,250 per month. As of December 31, 2013, $7,000 in consulting fees were paid and as of December 31, 2012, $-0- in consulting fees was paid. As of December 31, 2013 and 2012, there was an unpaid balance of $26,189 and $-0-, respectively.
As described in Note 6, the Company granted a sub-license agreement for ten years amongst the Company, Kryptonite Investments LLC (“Kryptonite Investments”) and Trinity dated April 8, 2013 for the state of Arizona.
As described in Note 11, the Company has outstanding $316,042 in outstanding advances and notes payable to officers of the Company as of December 31, 2013.
As described in Note 15, the Board of Directors of the Company authorized the execution of a letter of understanding dated December 30, 2013 with Trinity Rx Solutions LLC (“Trinity Rx”) and Sal Amodeo, the sole member of Trinity Rx (“Amodeo”) to acquire substantially all the assets of Trinity Rx. Amodeo owns 1,000,000 shares of the Company’s common stock through a consulting agreement, is an grantee of a sub-licensing agreement as described in Note 6 and the Company acquired our licensing rights from Trinity represented by our intangible asset.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Operating lease
The Company’s lease commenced effective July 1, 2013 for a term of three years. The base rent is $1,440 per month. The lease agreement contains escalation clauses. The Company determined that any related straight line rent is not material.
Aggregate maturities of long-term debt as of December 31, 2013 are as follows:
For the twelve months ended December 31,
|
|
Amount
|
|
2014
|
|
$
|
116,042
|
|
2015
|
|
|
73,150
|
|
2016
|
|
|
889,800
|
|
2017
|
|
|
47,050
|
|
Total
|
|
$
|
1,126,042
|
|
Employment agreements
On September 9, 2013, the Company entered into an employment agreement with Kent Emry for the full time position of Chief Executive Officer of the Company for 12 months with automatic renewals. Compensation at $200,000 per annum with employee stock options to purchase 6,000,000 shares of the Company’s common stock (See Note 13).
Consulting agreements
On April 17, 2012, the Company entered into an agreement with James Wagenbach whereby Mr. Wagenbach is to be appointed as the senior insurance specialist for the Company. The remuneration for the services shall be (i) 750,000 shares of the Company’s common stock; (ii) a fee of $2,500 per month and (iii) the Company to pay 10% of the bonus pool (which percentage may fluctuate). The term of the agreement is an at will, open agreement. The Company charged the fair value of stock obligation of $22,500 to operations in 2012.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
On May 24, 2012, the Company entered into an agreement with Tom Welch whereby Mr. Welch is to be appointed as the senior sales/marketing and placement specialist for the Company. The remuneration for the services shall be (i) 450,000 shares of the Company’s common stock upon the successful placement of two positions; (ii) 300,000 shares of the Company’s common stock for assisting clinic operations; (iii) $1,000 per month and bonus compensation per insurance claim and cash paid and (iv) 10% of the bonus pool (which percentage may fluctuate). The term of the agreement is an at will, open agreement. The Company charged the fair value of stock obligation of $9,960 to operations in 2012.
On November 5, 2012, the Company entered into an agreement with Jeffery Goddard whereby Mr. Goddard will provide certain consulting services relating to marketing. The remuneration for the services shall be 3,000,000 shares of the Company’s common stock. The term of the agreement is for five years. The Company charged the fair value of earned portion of the stock obligation of $1,196 to operations in 2012.
On November 9, 2012, the Company entered into an agreement with Dr. Rudi Puana whereby Dr. Puana will provide certain consulting services relating to clinical analysis and studies, speak at conventions and other meetings on behalf of the Company. The remuneration for the services shall be (i) 500,000 shares of the Company’s common stock; (ii) 250,000 shares of the Company’s common stock upon written acceptance of the paper for publication in a journal; (iii) 1,000,000 shares of the Company’s common stock upon publication of the paper in a journal; (iv) for subsequent papers, the Company shall compensate Dr. Puana in either cash or the Company’s common stock; (v) for appearances as a consultant with multiple peers, the Company shall pay $2,000; for appearances with individuals and radio or television interviews, the Company shall pay $700 and (vi) effective January 1, 2013, 250,000 shares of the Company’s common stock for general medical consulting services.
The term of the agreement is five years. The Company charged the fair value of earned portion of the stock obligation of $214 to operations in 2012.
On December 13, 2012, the Company entered into an agreement with Sal Amodeo whereby Mr. Amodeo will provide general consulting services on any aspects of the Naltorxone implant. The remuneration for the services shall be 1,000,000 shares of the Company’s common stock. The term of the agreement is for one year. The Company charged the fair value of earned portion of the stock obligation of $542 to operations in 2012.
On December 14, 2012, the Company entered into an agreement with Alexander Wilson whereby Mr. Wilson will provide legal advice and services for the Company. The remuneration for the services shall be 750,000 shares of the Company’s common stock. The term of the agreement is for one year. The Company charged the fair value of earned portion of the stock obligation of $416 to operations in 2012.
On December 18, 2012, the Company entered into an agreement with Timothy Jackoboice whereby Mr. Jackoboice will be designated as Chief Licensing Officer of the Company. The remuneration for the services shall be 4,000,000 shares of the Company’s common stock. The term of the agreement is for one year. The Company charged the fair value of earned portion of the stock obligation of $1,710 to operations in 2012.
On December 25, 2012, the Company entered into an agreement with John Carley whereby Mr. Carley will be designated as the Product and License Sales Manager of the Company. The remuneration for the services shall be 3,500,000 shares of the Company’s common stock. The term of the agreement is for one year. The Company charged the fair value of earned portion of the stock obligation of $690 to operations in 2012.
On November 16, 2012 (effective January 1, 2013), the Company entered into an agreement with Academy Funding Group, LLC whereby Academy will advise on a non-exclusive basis to assist the Company with sales, financing, business development and developing strategic partnerships. The remuneration for the services shall be $1,500 per month and 100,000 shares of the Company’s common stock. The term of the agreement is for six months. The Company charged the fair value of earned portion of the stock obligation of $1,200 to operations in 2013.
On November 14, 2012 (effective January 1, 2013), the Company entered into an agreement with Maria Orellana whereby Ms. Orellana will serve on the audit committee of the Company. The remuneration for the services shall be $1,500 per month and 300,000 shares of the Company’s common stock. The term of the agreement is at will. The Company charged the fair value of earned portion of the stock obligation of $3,600 to operations in 2013. This agreement supersedes the May 24, 2012 agreement with Mr. Welch.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
On May 1, 2013, the Company entered into an agreement with Tom Welch whereby Mr. Welch is to be appointed as the senior sales/marketing and placement specialist for the Company. The remuneration for the services shall be 1,250,000 shares of the Company’s common stock. The term of the agreement is at will. The Company charged the fair value of earned portion of the stock obligation of $53,750 to operations in 2013.
In October 2013, the Company entered into an agreements with five individuals to serve as an advisory board to the Company. The remuneration for the services shall be 50,000 each options to purchase the Company’s common stock each. The term of the agreement is at will. See Note 13 above.
On December 1, 2013, the Company entered into an agreement with Jim Markel whereby Markel will advise on a health care and sales. The remuneration for the services shall be 300,000 shares of the Company’s common stock. The term of the agreement is at will. The Company charged the fair value of earned portion of the stock obligation of $31,150 to operations in 2013.
On December 1, 2013, the Company entered into an agreement with George N. Fallieras, MD whereby Fallieras will conduct research in relation to opiate addition, treatments available and provide program recommendations. The remuneration for the services shall be 1,000,000 shares of the Company’s common stock. The term of the agreement is at will. The Company charged the fair value of earned portion of the stock obligation of $89,000 to operations in 2013.
On December 1, 2013, the Company entered into an agreement with Mark Tannaz whereby Tannaz will provide pharmaceutical sales recruiting services. The remuneration for the services shall be 100,000 shares of the Company’s common stock. The term of the agreement is at will. The Company charged the fair value of earned portion of the stock obligation of $8,900 to operations in 2013.
Settlement agreement
In February 2013 a dispute arose between the Company and one of its providers, Dr. Alexandre of Start Fresh Clinic. The dispute was related to matters of fees due Dr. Alexandre for implant procedures performed by Dr. Alexandre. The Company investigated the matter and it was determined by both parties that errors were made by Dr. Alexandre. On or about April 13, 2013, the parties entered into a settlement agreement. Under the terms of the settlement agreement, Dr. Alexandre would (i) transfer his ownership interest in Start Fresh Clinic to Dr. George Fallieras for $10,000 (ii) Dr. Alexandre will provide tail coverage on the existing policy for two years and (iii) Dr. Alexandre agreed to waive any contractual claim to amounts due Dr. Alexandre from pending medical insurance payments and his role as Medical Director of Start Fresh Clinic. The funds in dispute shall be retained by Start Fresh Clinic. As a result of this settlement agreement, the Company recorded a charge of $81,646 at December 31, 2012. This amount is included in the operating expenses in the accompanying statement of operations.
Litigation
On June 13, 2013, Fresh Start Private Florida, LLC (“FSPF”) filed a complaint against the Company alleging breach of a License Agreement whereby FSPF was to receive, implant, use, sell and otherwise commercialize the Naltrexone implant product and the Fresh Start Alcohol Rehabilitation Program throughout the state of Florida. The complaint alleged that the Company made certain misrepresentations and failed to provide certain operational documentation pursuant to the License Agreement. (Fresh Start Private Florida, LLC v. Fresh Start Private Management, Inc., Case No. 13-CA 1850, Circuit Court of the Twentieth Judicial Circuit in and for Collier County, Florida). The Company filed a response and a counterclaim against FSPF and its managing partner, Timothy Jackoboice, for breach of the License Agreement for failure to promote and advertise the services as agreed upon under the Agreement. The Company is seeking relief in the form of damage and attorneys’ fees. The Company intends to vigorously defend the suit and pursue its counterclaims against FSPF. The outcome is uncertain and any amounts related to this litigation are not estimable.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Potential Acquisitions
The Board of Directors of the Company authorized the execution of a letter of understanding dated December 30, 2013 (the “Letter of Understanding”) with Trinity Rx Solutions LLC (“Trinity Rx”) and Sal Amodeo, the sole member of Trinity Rx (“Amodeo”). The Company is involved in establishing alcohol rehabilitation and treatment centers and has created certain alcohol therapeutic and rehabilitation programs (the “Counseling Programs”) consisting of a Naltrexone implant that is placed under the skin in the lower abdomen coupled with life counseling sessions from specialized counselors. The Naltrexone implant formula is owned by Trinity Rx. The Company entered into an exclusive license dated September 7, 2010 (the ‘”License Agreement”) with Trinity Rx. In accordance with the terms and provisions of the License Agreement, Trinity Rx provides to the Company the Naltrexone Implant that has been designed for alcoholism.
In accordance with the terms and provisions of the Letter of Understanding, Trinity Rx shall transfer all of its assets, intellectual property and contractual rights, including the Naltrexone Implant, to the Company. The Company paid an initial refundable deposit of $25,000 as evidence of good faith in moving forward to consummation of a definitive agreement with Trinity Rx. The Letter of Understanding further provides that expressly contingent upon a formal definitive agreement being reached between the Company and Trinity Rx, the Company shall pay to Amodeo an aggregate $500,000 as follows: (i) $200,000 to be paid no later than 90 days after execution of the Letter of Understanding; (ii) $200,000 no later than 180 days after execution of the Letter of Understanding; and (iii) $100,000 no later than 270 days after execution of the Letter of Understanding.
In further accordance with the terms and provisions of the Letter of Understanding, the Company shall: (i) issue 2,000,000 shares of its restricted common stock; (ii) enter into a four-year service agreement with Amodeo pursuant to which Amodeo shall earn compensation in the approximate amount of $75,000, including a bonus plan; and (iii) pay to Amodeo a royalty equal to ten percent (10%) of gross revenues generated by the sale of the Alcohol Rehabilitation Program less hard cost of the Naltrexone Implant until such time as Amodeo has received a total of $500,000, which royalty payment is dependent solely upon actual sales.
Lastly, in accordance with the terms and provisions of the Letter of Understanding and with regards to any other formulas developed or possessed by Trinity Rx, the Company shall have the right of first refusal to obtain exclusive rights consistent with those rights associated with the Naltrexone Implant in exchange for agreeing to pay Trinity Rx $500,000 for each additional formula. The payment of such funds shall be made via royalty payments in the amount of 10% of gross sales once each formula is placed into market until the total fee of $500,000 is paid. In the event that the Company must perform research and development in order to ready a formula for market, then the 10% royalty shall be reduced to 5% until such time as the research and development costs have been recovered by the Company after which time the royalty rate shall return to 10%.
The payment of the $25,000 refundable deposit is reflected in the Company’s balance sheet as short term deposits as of December 31, 2013.
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit.
The Company’s revenues earned from sale of products and services for the year ended December 31, 2013 included an aggregate of 26% from one customer of the Company’s total revenues.
One customer accounted for 17% of the Company’s total accounts receivable at December 31, 2013.
The Company relies on Trinity Rx as its sole supplier of its Naltrexone implant.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
NOTE 17 – LOSS PER COMMON SHARE
The following table presents the computation of basic and diluted loss per share for the years ended December 31, 2013 and 2012:
|
|
2013
|
|
|
2012
|
|
Net loss available for common shareholders
|
|
$
|
(3,838,522
|
)
|
|
$
|
(885,807
|
)
|
Loss per share (basic and assuming dilution)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
|
117,381,720
|
|
|
|
106,153,613
|
|
Fully diluted
|
|
|
117,381,720
|
|
|
|
106,153,613
|
|
Fully-diluted weighted-average common shares outstanding are not utilized in the calculation of loss per common share as the effect would be anti-dilutive, decreasing the reported loss per common share.
The components of the income tax provisions for 2013 and 2012 are as follows:
|
|
2013
|
|
|
2012
|
|
Current provision:
|
|
|
|
|
|
|
Federal
|
|
$ |
- |
|
|
$ |
- |
|
State
|
|
|
1,600 |
|
|
|
1,600 |
|
|
|
|
1,600 |
|
|
|
1,600 |
|
Deferred benefit:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(946,991 |
) |
|
|
(290,248 |
) |
State
|
|
|
(246,076 |
) |
|
|
(75,465 |
) |
|
|
|
(1,193,068 |
) |
|
|
(365,713 |
) |
Change in valuation allowance
|
|
|
1,193,068 |
|
|
|
365,713 |
|
Total Provision
|
|
$ |
1,600 |
|
|
$ |
1,600 |
|
The difference between the income tax provision and income taxes computed using the U. S. federal income tax rate of 34% consisted of the following:
|
|
2013
|
|
|
2012
|
|
Provision at statutory rate
|
|
|
34.0 |
% |
|
|
34.0 |
% |
State taxes, net of federal benefit
|
|
|
5.8 |
% |
|
|
5.8 |
% |
Other
|
|
|
(8.8 |
%) |
|
|
1.3 |
% |
Change in valuation allowance
|
|
|
(31.1 |
%) |
|
|
(41.4 |
%) |
Total
|
|
|
(0.1 |
%) |
|
|
(0.2 |
%) |
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2013 and 2012 are as follows:
|
|
2013
|
|
|
2012
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carry forwards
|
|
$ |
1,239,529 |
|
|
$ |
818,573 |
|
Share-based compensation
|
|
|
86,806 |
|
|
|
62,039 |
|
Accural to cash |
|
|
622,243 |
|
|
|
- |
|
Other
|
|
|
11,297 |
|
|
|
11,298 |
|
Total deferred tax assets
|
|
|
1,959,875 |
|
|
|
891,910 |
|
Valuation allowance
|
|
|
(1,768,722 |
) |
|
|
(664,320 |
) |
|
|
|
191,153 |
|
|
|
227,590 |
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Tax deductible licensing agreement
|
|
|
(187,645 |
) |
|
|
(132,300 |
) |
Accrual to cash
|
|
|
- |
|
|
|
(94,516 |
) |
Other
|
|
|
(3,509 |
) |
|
|
(774 |
) |
|
|
|
|
|
|
|
|
|
Total deferred tax assets (liabilities)
|
|
|
(191,153 |
) |
|
|
(227,590 |
) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$ |
- |
|
|
$ |
- |
|
A full valuation allowance has been provided against the Company’s deferred tax assets at December 31, 2013 as the Company believes it is more likely than not that sufficient taxable income will not be generated to realize these temporary differences.
The Company has federal and California net operating losses (NOLs) of approximately $2,894,630 and $2,888,633, respectively which begin to expire in the years beginning in 2029 and 2029 for federal and state purposes, respectively. Pursuant to Section 382 of the Internal Revenue Code, use of the Company’s NOLs and credit carry forwards may be limited if the Company experiences a cumulative change in ownership of greater than 50% in a moving three-year period.
The Company also has federal credits that begin to expire 2027 and state tax credits that may be carried forward indefinitely.
The Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards as set forth in ASC Topic 740. Income Taxes, regarding accounting for uncertainty in income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. There are no unrecognized benefits related to uncertain tax positions as of December 31, 2013. The Company does not anticipate that there will be material change in the liability for unrecognized tax benefits within the next 12 months.
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
Interest and penalties associated with the unrecognized tax benefits are recorded in nonoperating income and expenses and selling, general and administrative expenses, respectively. As of December 31, 2013, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits. As of December 31, 2013, the Company’s federal tax returns are open to audit under the statute of limitations for the years 2010 and later, and the Company’s state tax returns generally are upon to audit under statues of limitations for the years 2009 and later. However, if NOLs that originated in earlier years are utilized in the future, the amount of such NOLs from those earlier years remain subject to review by tax authorities.
NOTE 19 – FAIR VALUE MEASUREMENT
The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the consolidated financial statements.
The carrying value of the Company’s cash, accounts receivable, accounts payable, short-term borrowings (Including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.
As of December 31, 2013, the Company had a convertible debentures with embedded derivatives that are required to be recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements.
The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2013:
BIOCORRX, INC.
(Formerly Fresh Start Private Management, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2013 AND 2012
|
|
Debt
Derivative
Liability
|
|
|
Warrant
Liability
|
|
Balance, December 31, 2011
|
|
$ |
- |
|
|
$ |
- |
|
Total (gains) losses
|
|
|
|
|
|
|
|
|
Initial fair value of debt derivative at note issuance
|
|
|
78,770 |
|
|
|
|
|
Mark-to-market at December 31, 2012:
|
|
|
|
|
|
|
|
|
Embedded debt derivative
|
|
|
1,269 |
|
|
|
|
|
Balance, December 31, 2012
|
|
|
80,039 |
|
|
|
- |
|
Total (gains) losses
|
|
|
|
|
|
|
|
|
Initial fair value of debt derivative at note issuance
|
|
|
76,480 |
|
|
|
99,061 |
|
Mark-to-market at December 31, 2013:
|
|
|
|
|
|
|
|
|
Embedded derivative
|
|
|
862,584 |
|
|
|
188,670 |
|
Balance, December 31, 2013
|
|
|
1,019,103 |
|
|
|
287,731 |
|
|
|
|
|
|
|
|
|
|
Net Loss for the year included in earnings relating to the liabilities
|
|
$ |
(862,584 |
) |
|
$ |
(188,670 |
) |
NOTE 20 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events from the balance sheet date through April 11, 2014, the date the financial statements were available to be issued, and has determined that there are no other events to disclose other than the following:
On January 1, 2014, the Company issued 100,000 shares of its common stock for services rendered.
Effective January 7, 2014, the board of directors and shareholders adopted an amendment to its Articles of Incorporation changing the Company’s name to BioCorRx Inc.
On February 4, 2014, the Company entered into a binding letter of intent with Fresh Start NoCal, LLC to grant the right to use and distribute certain therapeutic programs for the territory of Washington D.C., Maryland, Virginia, West Virginia and North Carolina.
On March 10, 2014, the Company entered into advisory board agreements with three members of the advisory board: Mark Sorrentino, MD, Gil Price, MD and Richard Haatvedt. The Company will grant each advisory board member 50,000 stock options to purchase 50,000 shares of the Company’s common stock at an exercise price of $0.20 per share.
On March 11, 2014, the Company entered into a binding letter of intent with Fresh Start Private Midwest, LLC to grant the right to use and distribute certain therapeutic programs for the territory of Oklahoma, Missouri and Minnesota.
ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
We have had no changes in or disagreements with our independent accountants since our Board of Directors’ October 31, 2012 appointment, of Kling & Pathak, LLP as the Company’s independent auditors for the fiscal year ended December 31, 2012, replacing Wilson Morgan, LLP as our independent auditors. That change was reported by BioCorRx in a Current Report on Form 8-K dated November 14, 2012, filed with the SEC on November 14, 2012.
ITEM 9A – CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weaknesses described below, as of December 31, 2013, our disclosure controls and procedures are not designed at a reasonable assurance level and are ineffective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:
|
We did not have sufficient personnel in our accounting and financial reporting functions. As a result we were not able to achieve adequate segregation of duties and were not able to provide for adequate reviewing of the financial statements. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the financial statements will not be prevented or detected on a timely basis.
|
Management believes that hiring additional knowledgeable personnel with technical accounting expertise will remedy the following material weaknesses: A lack of sufficient personnel in our accounting and financial reporting functions to achieve adequate segregation of duties.
Management believes that the hiring of additional personnel who have the technical expertise and knowledge with the non-routine or technical issues we have encountered in the past will result in both proper recording of these transactions and a much more knowledgeable finance department as a whole. Due to the fact that our accounting staff consists of a Chief Financial Officer, additional personnel will also ensure the proper segregation of duties and provide more checks and balances within the department. Additional personnel will also provide the cross training needed to support us if personnel turnover issues within the department occur. We believe this will eliminate or greatly decrease any control and procedure issues we may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
(b) Attestation Report of Our Registered Public Accounting Firm
This Annual Report on Form 10-K (“Annual Report”) does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. We are a non-accelerated filer; therefore, management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.
(c) Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended December 31, 2013 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
(d) Management’s report on internal control over financial reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was ineffective as of December 31, 2013 for the reasons discussed above.
This annual report does not include an attestation report by Kling & Pathak, LLP, our independent registered public accounting firm regarding internal control over financial reporting. As a smaller reporting company, our management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.
ITEM 9B – OTHER INFORMATION
None.
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The names of our executive officers and directors and their age, title, and biography as of April 15, 2013 are set forth below:
Name
|
|
Age
|
|
Positions
|
Kent Emry, CEO since September 13, 2013;
|
|
46
|
|
Chief Executive Officer and Director
|
Neil Muller President since November 22, 2010;
|
|
53
|
|
President and Director
|
Lourdes Felix, Chief Financial Officer since October 1, 2012;
|
|
46
|
|
Chief Financial Officer, Treasurer and Director
|
Brady J. Granier, COO since June 16, 2013;
|
|
41
|
|
COO, Secretary and Director
|
Dr. Jorge Andrade Jr.;
|
|
42
|
|
Director
|
Kent Emry, Chief Executive Officer and Director
Mr. Emry has been involved in the healthcare industry during the past twelve years. Mr. Emry has specialized in identifying and securing financing for the acquisition of troubled skilled nursing and rehabilitation facilities, which may have been in violation of federal regulations with a high probability of being closed. Mr. Emry was able to re-structure these facilities both on a clinical and financial level resulting in a profitable facility. Mr. Emry's vast knowledge of operational systems and his creation and development of policies and procedures has been key to his long term success in the healthcare industry. In addition Mr. Emry has extensive experience in contract negotiations with public, private, federal and state healthcare reimbursement entities including HMOs, Medicare, Medicaid, VA and Military contracting and billing.
Preceding Mr. Emry’s focus on the acquisition and restructuring of troubled healthcare facilities, Mr. Emry owned and operated a marketing company which focused on the healthcare industry. He developed creative and concise marketing strategies that were applicable to the target demographic of his clients. Mr. Emry's campaigns and tactics improved corporate revenues and profits by increasing their number of patients and controlling expenses.
Mr. Emry has also realized success in a number of industries outside of healthcare as well, including food processing and brokerage, construction, development, sales, marketing and property management. Mr. Emry has the ability to quickly identify operational and structural inefficiencies and replace them with systems and policies that enhance productivity and growth resulting in a more profitable business. Management of the Company believes that Mr. Emry's experience will be of great benefit to the stabilization and growth of the Company.
Mr. Emry has a Bachelor’s degree in Healthcare Administration from Oregon State University.
Neil Muller, President and Director
Mr. Muller has more than 20 years of experience in the fields of property development, residential /commercial sales and business management.
In 2004, Mr. Muller began his very personal journey with what is now the Start Fresh Program today in the United States after his wife, Deidre, went through a similar program as a patient and recipient of the implant. Dee was an alcoholic for years before having the successful implant procedure in Australia. Prior to his wife receiving the implant, Muller, like many family members around the world suffering from the effects of alcoholism, spent hundreds of thousands of dollars trying to help his wife and family escape the stranglehold of alcohol addiction.
Lourdes Felix, Chief Financial Officer, Treasurer and Director
Ms. Felix is a corporate finance executive offering over fifteen years of combined experience in public accounting and in the private sector in building, leading, and advising corporations through complex restructurings. Ms. Felix has been instrumental in assisting in capital procurement and implementing an audit committee. She is thoroughly experienced in guiding troubled companies to greater efficiency and profitability. Ms. Felix has acquired expertise in securities laws and knowledge of SOX requirements. She has worked with private and public SEC reporting companies. Ms. Felix was previously the controller for a mid-size public accounting firm for over seven years and was responsible for the operations and financial management of regional offices. Her experience includes a wide variety of industries including advertising, marketing, non-profit organizations, medical practices, mortgage banking, manufacturing and SEC reporting companies. She has assisted companies with documented contributions leading to improved financial performance, heightened productivity, and enhanced internal controls.
Ms. Felix is very active in the Hispanic community and speaks fluent Spanish. Ms. Felix holds a Bachelor of Science degree in Business Management and Accounting from University of Phoenix.
Brady J. Granier, Chief Operating Officer, Secretary and Director
During the twelve years prior to joining BioCorRx in June of 2013, Mr. Granier had been involved in sales management, media sales and business development. Mr. Granier was employed at Clear Channel Media & Entertainment (“CCME”), where he had served in several positions from Account Executive to Director of Business Development and Local Sales Manager. Mr. Granier has also served as the Healthcare Category Manager for the Los Angeles division of CCME, the largest media company in the United States. During his tenure at CCME and other media companies, Mr. Granier worked on marketing campaigns for local businesses and physicians, as well as for National brands such as Neutrogena, New Line Cinema, Paramount Pictures, Samsung, AT&T, Coke, Dr Pepper, Hansen’s, Honda, MGM, Universal Studios and more. He also managed endorsements on the radio for Ryan Seacrest. In 2006, Mr. Granier received the coveted Pinnacle Award from CCME for being the top sales executive in the Western region. While serving as Director of Business Development, Mr. Granier grew new business by 49% in his first year in that role.
Mr. Granier was born and raised in the heart of Cajun Country in Southeast Louisiana where he starting working at the age of eleven to help support his single mother and younger brother. After graduating with honors from high school, Mr. Granier attended college at Nicholls State University in Thibodaux, LA. Mr. Granier earned his Bachelor of Science Degree in Nursing in 1995 and was a member of Sigma Theta Tau Honor Society and Phi Kappa Theta. During his nursing career, Mr. Granier specialized in the critical care areas of ER/ICU/CCU and CICU. He also moonlighted as a home health nurse, critical care air transport nurse, and TV studio set medic. In 1996, Mr. Granier moved to California as a travel nurse and spent most of his remaining years in healthcare as the charge nurse in the emergency room at White Memorial Hospital in downtown Los Angeles. Mr. Granier continues to reside in the Los Angeles area with his family. Mr. Granier has also been a volunteer with Big Brothers of America.
Dr, Jorge Andrade Jr., Director
Dr. Andrade is the founder, chief executive officer and president of Terrinautical Global Investments since 2004. Dr. Andrade is a licensed medical interpreter and co-founder of TM Cube Medical LLC. Dr. Andrade has exceptional knowledge of starting, building and managing small businesses. He is a recognized specialist in implementing systems for small businesses day to day. Dr. Andrade is bilingual and fluent in both Spanish and English; he served on a health advisory board for the Long Beach Head Start Program. As a president of West Consulting Inc., he supervises and manages the interpreting department for Core Medical Management Inc., Pro-Legal Services Inc., and manages the day to day operations of Colgate's BSBF.
Employment Agreements
We currently do not have employment agreement with any our directors and executive officers.
Family Relationships
There are no family relationships between any of our directors or executive officers and any other directors or executive officers.
Board Committees and Independence
We are not required to have any independent members of the Board of Directors. As we do not have any board committees, the board as a whole carries out the functions of nominating and compensation committees, and such “independent director” determination has been made pursuant to the committee independence standards.
Involvement in Certain Legal Proceedings
Our Directors and Executive Officers have not been involved in any of the following events during the past ten years:
1.
|
any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time (a);
|
2.
|
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
|
3.
|
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;
|
4.
|
being found by a court of competent jurisdiction in a civil action, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
|
5.
|
being subject of, or a party to, any federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
6.
|
being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
(a)
|
On February 29, 2012 one member of the Board of Directors, Jorge Andrade Jr., filed for bankruptcy protection in the United States Bankruptcy Court for the Central District of California under Chapter 7 of the United State Bankruptcy Code, as amended, case no. 8:12-bk-12653-TA (“Chapter 7 Bankruptcy”). Under the Chapter 7 Bankruptcy, Dr. Andrade was seeking discharge of most of his debts. On June 18, 2012, the U.S. Bankruptcy court issued a Discharge of Debtor Order declaring that Dr. Andrade was granted a discharge under Section 727 of Title 11 of the U.S. Bankruptcy Code.
|
Section 16(a) Beneficial Owner Reporting Compliance
Since we are governed under Section 15(d) of the Exchange Act, we are not required to file reports of executive officers and directors and persons who own more than 10% of a registered class of our equity securities pursuant to Section 16(a) of the Exchange Act.
Code of Ethics
We have not adopted a Code of Ethics but expect to adopt a Code of Ethics and will require that each employee abide by the terms of such Code of Ethics.
ITEM 11 – EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides certain summary information concerning compensation awarded to, earned by or paid to our Chief Executive Officer, the two highest paid executive officers and up to two other highest paid individuals whose total annual salary and bonus exceeded $100,000 for fiscal years 2013 and 2012.
Name and principal position
|
|
Fiscal
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock Awards
($)(1)
|
|
Option Awards
($)
|
|
Non-equity incentive plan compensation
($)
|
|
Non-qualified deferred compensation
($)
|
|
All other
compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Muller,
President since November 22, 2010; Treasurer
|
|
2013 |
|
|
0 |
|
|
0 |
|
|
89,731 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
215,485 |
|
|
305,216 |
|
of Fresh Start Private since July 9, 2009
|
|
2012 |
|
|
0 |
|
|
0 |
|
|
47,817 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
77,794 |
|
|
125,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Jorge Andrade,
prior CEO, Treasurer, Principal Executive Officer, Secretary since November 22, 2010
CEO, CEO, President and Secretary of
|
|
2013 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
138,333 |
|
|
138,333 |
|
Fresh Start Private since July 9, 2009
|
|
2012 |
|
|
0 |
|
|
0 |
|
|
47,817 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
52,500 |
|
|
100,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kent Emry, CEO,
Principal Executive Officer since
|
|
2013 |
|
|
0 |
|
|
0 |
|
|
192,294 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
33,189 |
|
|
225,483 |
|
September 13, 2013
|
|
2012 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lourdes Felix, CFO,
|
|
2013 |
|
|
0 |
|
|
0 |
|
|
134,597 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
173,640 |
|
|
308,237 |
|
Treasurer since October 1, 2012 |
|
2012 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brady Granier, COO,
|
|
2013 |
|
|
0 |
|
|
0 |
|
|
114,987 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
143,223 |
|
|
258,210 |
|
Secretary since June 17, 2013 |
|
2012 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
There has been no cash payment paid to the named executive officers for services rendered in all capacities to us for the period ended December 31, 2013.
(1)
|
On September 13, 2013, the Company granted 6,000,000 options to purchase the Company’s common stock at $0.015 per share, vesting immediately for five years to Mr. Kent Emry.
|
(2)
|
On October 16, 2013, the Company granted 3,000,000 options to purchase the Company’s common stock at $0.015 per share, vesting immediately for five years to Mr. Brady Granier.
|
(3)
|
On December 4, 2013, the Company granted 1,000,000 options to purchase the Company’s common stock at $0.015 per share, vesting immediately for five years to Mr. Neil Muller.
|
(4)
|
On December 4, 2013, the Company granted 1,500,000 options to purchase the Company’s common stock at $0.015 per share, vesting immediately for five years to Ms. Lourdes Felix.
|
Option/SAR Grants in Fiscal Year Ended December 31, 2013
Name
|
|
Grant Date
|
|
All Other Option Awards: Number of Securities Underlying Options (#)
|
|
|
Exercise or Base Price of Option Awards ($/Share)
|
|
|
Grant Date Fair Value of Stock and Option Awards ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kent Emry
|
|
09/13/2013
|
|
|
6,000,000 |
|
|
$ |
0.015 |
|
|
$ |
192,294.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Muller
|
|
12/04/2013
|
|
|
1,000,000 |
|
|
$ |
0.015 |
|
|
$ |
89,730.93 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lourdes Felix
|
|
12/04/2013
|
|
|
1,500,000 |
|
|
$ |
0.015 |
|
|
$ |
134,597.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brady Granier
|
|
10/16/2013
|
|
|
3,000,000 |
|
|
$ |
0.015 |
|
|
$ |
114,986.50 |
|
Outstanding Equity Awards at Fiscal Year-End Table
The following table sets forth information for the named executive officers regarding the number of shares subject to both exercisable and unexercisable stock options, as well as the exercise prices and expiration dates thereof, as of December 31, 2013.
Name
|
|
Number of Securities underlying Unexercised Options (#) Exercisable
|
|
|
Number of Securities underlying Unexercised Options (#) Unexercisable
|
|
|
Option Exercise Price ($/Sh)
|
|
Option Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
Kent Emry
|
|
|
6,000,000
|
|
|
|
-
|
|
|
$
|
0.015
|
|
09/13/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Muller
|
|
|
1,000,000
|
|
|
|
-
|
|
|
$
|
0.015
|
|
12/04/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lourdes Felix
|
|
|
1,500,000
|
|
|
|
-
|
|
|
$
|
0.015
|
|
12/04/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brady Granier
|
|
|
3,000,000
|
|
|
|
-
|
|
|
$
|
0.015
|
|
10/16/2018
|
Option Exercises and Fiscal Year-End Option Value Table.
|
|
OPTION AWARDS
|
|
|
STOCK AWARDS
|
|
Name
|
|
Number of
Shares
Aquired
on Exercise
|
|
|
Value
Realized
on Exercise (1)
|
|
|
Number of
Shares
Aquired
on
Vesting
|
|
|
Value
Realized
on
Vesting
|
|
|
|
|
(#) |
|
|
($)
|
|
|
|
(#) |
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neil Muller
|
|
|
4,000,000 |
|
|
$ |
340,000 |
|
|
|
n/a |
|
|
|
n/a |
|
Jorge Andrade
|
|
|
4,000,000 |
|
|
$ |
340,000 |
|
|
|
n/a |
|
|
|
n/a |
|
Lourdes Felix
|
|
|
1,000,000 |
|
|
$ |
85,000 |
|
|
|
n/a |
|
|
|
n/a |
|
______________
(1)
|
Amount represents the difference between the exercise price of the option and the market price of our common stock upon exercise of such option.
|
Long-Term Incentive Plans and Awards
There were no awards made to a named executive officer in fiscal 2013 under any long-term incentive plan.
Employment/Consulting Contracts, Termination of Employment, Change-in-Control Arrangements
On February 15, 2013, the Company adopted an Executive Management Bonus plan, which includes corporate revenue, license revenue and royalty revenue from which the bonus shall be calculated.
On February 28, 2013, we entered into one year Executive Service Agreement with Felix Financial Enterprise, LLC controlled by our Chief Financial Officer, Lourdes Felix pursuant to which the parties agreed to (i) Felix to provide certain executive services commensurate with his position as Chief Financial Officer; (ii) the Company shall pay Felix an annual salary of $150,000 and grant 1,000,000 stock options and (iii) Felix shall be eligible to participate in the Executive Management Bonus Plan as adopted by the Board of Directors effective February 15, 2013. Effective October 16, 2013 the annual salary for Ms. Felix was reduced to $75,000.
On February 28, 2013, we entered into one year Executive Service Agreement with PARS controlled by our President, Neil Muller pursuant to which the parties agreed to (i) Muller to provide certain executive services commensurate with his position as President; (ii) the Company shall pay Muller annual salary of $200,000 and grant 4,000,000 stock options and (iii) Muller shall be eligible to participate in the Executive Management Bonus Plan as adopted by the Board of Directors effective February 15, 2013. Effective October 16, 2013 the annual salary for Mr. Muller was reduced to $75,000.
On October 16, 2013, we entered into a one year Executive Service Agreement with Brady Granier pursuant to which the parties agreed to i) Granier to provide certain executive services commensurate with his position as Chief Operating Officer; (ii) the Company shall pay Granier annual salary of $75,000 and grant 3,000,000 stock options and (iii) Granier shall be eligible to participate in the Executive Management Bonus Plan as adopted by the Board of Directors effective February 15, 2013.
On September 13, 2013, we entered into a one year consulting agreement with Kent Emry pursuant to which the parties agreed to i) Emry to provide certain executive services commensurate with his position as Chief Executive Officer, (ii) the Company shall pay Emry annual salary of $75,000 and grant 6,000,000 stock options.
Director Compensation
We have not compensated our Directors during fiscal 2013.
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of the date hereof with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our common stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of: 601 North Parkcenter Drive, Suite 103, Santa Ana, California 92705.
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of Beneficial Ownership
|
|
|
Percent of
Common Stock (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Dr. Jorge Andrade Jr.
|
|
|
10,752,685 |
|
|
|
8.28 |
% |
Common Stock
|
|
Neil Muller
|
|
|
10,000,000 |
|
|
|
7.70 |
% |
All directors and executive officers as a group (5 persons)
|
|
|
|
|
28,624,585 |
|
|
|
22.05 |
% |
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Scott Carley
|
|
|
6,750,000 |
|
|
|
5.2 |
% |
______________
(1)
|
As of April 11, 2014, we have 129,843,501 shares of common stock outstanding.
|
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
On November 22, 2010, the Company entered into an intellectual property license and asset purchase agreement with Fresh Start Private, Inc. a Nevada corporation (the “Transaction”) which has subsequently been terminated. In consideration of the license the Company agreed to issue 16,000,000 shares of common stock at the market value of $0.77 per share as of the date of the agreement. Total value of the license is recorded as $12,320,000. Dr. Jorge Andrade Jr., the Company’s CEO and Director, and Mr. Neil Muller, the Company’s President and Director are directors of and shareholders of Fresh Start Private, Inc. Mr. Muller owns 2,000,000 common shares of Fresh Start Private, Inc., therefore Mr. Muller’s interest in the Transaction is approximately $1,540,000. Dr. Andrade owns 1,000,000 common shares of Fresh Start Private, Inc. therefore Dr. Andrade’s interest in the Transaction is approximately $770,000. None of the 16,000,000 shares were issued. On October 31, 2011, we entered into the Termination Agreement pursuant to which such license agreement shall be deemed null and void.
As of December 31, 2013 and 2012, we have received an advance from Jorge Andrade, President, and Neil Muller, director as loans from related parties. The loans are payable on demand and without interest.
|
|
2013
|
|
|
2012
|
|
Jorge Andrade
|
|
$ |
39,842 |
|
|
$ |
92,695 |
|
Neil Muller
|
|
|
31,407 |
|
|
|
35,807 |
|
|
|
$ |
71,249 |
|
|
$ |
128,502 |
|
Consulting agreement with Terranautical Global Investments (“TGI”).
The Company has a consulting agreement with Terranautical Global Investments (“TGI”). TGI is a company controlled by Jorge Andrade that provides consulting services to the Company. The amount of remuneration is $6,250 per month. During the years ended December 31, 2013 and 2012, the Company incurred $227,360 and $52,500 as consulting fees, respectively. As of December 31, 2013 and 2012, there was an unpaid balance of $162,850 and $62,225, respectively.
Consulting agreement with Premier Aftercare Recovery Services, (“PARS”).
The Company has a consulting agreement with Premier Aftercare Recovery Service, (“PARS”). PARS is a Company controlled by Neil Muller that provides consulting services to the Company. The amount of remuneration is $6,250 per month. During the year ended December 31, 2013, the Company incurred $212,360 and $nil as consulting fees and expense reimbursements. During the year ended December 31, 2012, the Company incurred $77,794 and $6,379 as consulting fees and expense reimbursements. As of December 31, 2013 and 2012, there was an unpaid balance of $142,459 and $65,774, respectively.
Consulting agreement with Felix Financial Enterprises, (“FFE”)
The Company has a consulting contract with Felix Financial Enterprises (“FFE”). FFE is a Company controlled by Lourdes Felix that provides consulting services to the Company. The amount of remuneration is $6,250 per month. During the years ended December 31, 2013 and 2012, the Company incurred $125,000 and $nil as consulting fees, respectively. As of December 31, 2013 and 2012, there was an unpaid balance of $105,390 and $nil, respectively.
Consulting agreement with West Coast Health Consulting, Inc.
West Coast Health Consulting, Inc. is a company controlled by Jorge Andrade that previously provided consulting services to the Company. As of December 31, 2013 and December 31, 2012, $nil and $2,026 were paid in consulting fees.
Consulting agreement with Brady Granier.
The Company has a consulting agreement with Brady Granier. The amount of remuneration is 6,250 per month. As of December 31, 2013, $91,140 in consulting fees were incurred and as of December 31, 2012, $nil in consulting fees was incurred. As of December 31, 2013 and 2012, there was an unpaid balance of 72,640 and $nil, respectively.
Consulting agreement with Kent Emry.
The Company has a consulting agreement with Kent Emry. The amount of remuneration is 6,250 per month. As of December 31, 2013, $7,000 in consulting fees were paid and as of December 31, 2012, $nil in consulting fees was paid. As of December 31, 2013 and 2012, there was an unpaid balance of 26,189 and $nil respectively.
Jorge Andrade was paid a consulting fee of $2,500 for the year ended December 31, 2011 for work on the merger of FSP and FSPM.
During Fiscal Year 2013, there were no other material transactions between the Company and any Officer, Director or related party and the Company other than as described herein. With the exception of the transactions with Dr. Andrade, Mr. Muller, Mr. Granier, Mr. Emry and Ms. Felix, no other of the following parties has, since the date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:
- Any person proposed as a nominee for election as a director;
- Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to the outstanding shares of common stock;
- Any relative or spouse of any of the foregoing persons who have the same house as such person.
ITEM 14 – PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees. The aggregate fees billed by our independent auditors, for professional services rendered for the audit of our annual financial statements for the year ended December 31, 2013, including review of our interim financial statements were $50,000 Audit fees in respect of 2012 financial statements were $39,000.
Audit Related Fees. We incurred fees to our independent auditors of $0 for audit related fees during the fiscal years ended December 31, 2013, which relates to filings with the SEC related to our recent reverse merger, and $-0- for 2012.
Tax and Other Fees. We incurred fees to our independent auditors of $-0- for tax and fees during the fiscal years ended December 31, 2013 and 2012.
The Audit Committee pre-approves all auditing services and all permitted non-auditing services (including the fees and terms thereof) to be performed by our independent registered public accounting firm.
ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following exhibits are included herein or incorporated by reference:
Exhibit No.
|
|
Description
|
2.1
|
|
Share Exchange Agreement, dated October 31, 2011, by and among the Company, the Company’s former principal stockholder, FSP and the former principal shareholders of FSP.(2)
|
3.1
|
|
Articles of Incorporation. (1)
|
3.2
|
|
Certificate of Amendment to Articles of Incorporation. (1)
|
3.2
|
|
Certificate of Amendment to Articles of Incorporation (5)
|
3.3
|
|
By Laws (1)
|
5.0
|
|
Registration Statement Pursuant to 2012 Stock Option Plan (3)
|
5.0
|
|
Registration Statement Pursuant to 2013 Stock Option Plan (4)
|
10.1
|
|
Termination Agreement, dated October 31, 2011, by and among the Company, FSP and Muller.(2)
|
10.2
|
|
Agreement for Service, dated June 1, 2011, by and between FSP and Start Fresh Alcohol Recovery Clinic, Inc.
|
10.3
|
|
License Agreement, dated September 7, 2010, by and between FSP and Trinity Rx Solutions, LLC.
|
10.4
|
|
Agreement for Service, dated January 1, 2010, by and between FSP and New Ways, Inc. (6)
|
10.5
|
|
Advertising Agreement, dated February 1, 2011, by and between FSP and Clear Channel Broadcasting.
|
10.6
|
|
Promissory Note dated August 5, 2010
|
10.7
|
|
Purchase Agreement, dated August 1, 2011 between FSP and Harborcove Fund I, LP
|
10.8
|
|
Asher Note Payable dated December 11, 2012, incorporated herein
|
31.1
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Kent Emry
|
31.2
|
|
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Lourdes Felix
|
32.1
|
|
Certification of Kent Emry pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
|
Certification of Lourdes Felix pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
99.1
|
|
2012 Employee Stock Option Plan (3)
|
99.1
|
|
2013 Employee Stock Option Plan (4)
|
101.INS **
|
|
XBRL Instance Document
|
101.SCH **
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL **
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF **
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB **
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE **
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
_________________
(1) Incorporated herein by reference to the Company’s Registration Statement on Form S-1 filed with the Commission on September 9, 2008.
(2) Incorporated herein by reference to the Company's Form 8K/A filed on November 4, 2011.
(3) Incorporated herein by reference to the Company’s Form S-8 filed on December 18, 2012.
(4) Incorporated herein by reference to the Company’s Form S-8 filed on January 10, 2014.
(5) Incorporated herein by reference to the Company’s Form 8-K filed on February 20, 2014.
(6) Incorporated herein by reference to the Company’s Form 8-K filed on January 4, 2010.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
BioCorRx, Inc.
|
|
|
Date: April 11, 2014
|
By:
|
/s/ Kent Emry
|
|
|
|
Kent Emry
Chief Executive Officer
|
|
|
|
|
|
Date: April 11, 2014
|
By:
|
/s/ Lourdes Felix
|
|
|
|
Lourdes Felix
Chief Financial Officer and Director
|
|