Quarterly report pursuant to Section 13 or 15(d)

Warrants

Warrants	3 Months Ended
Mar. 31, 2012
Notes to Financial Statements
Warrants	10. Warrants The January 2012 Warrants On January 11, 2012 and January 25, 2012 the Company sold an aggregate of 1,300,000 units (the “Units”) to accredited investors. Each Unit was sold for a purchase price of $0.50 per Unit and consisted of: (i) one share of Common Stock and (ii) a four-year warrant to purchase .5 shares of Common Stock purchased at an exercise price of $1.00 per share, subject to adjustment upon the occurrence of certain events. The warrants may be exercised on a cashless basis after twelve (12) months from the date of closing if there is no effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrant. These warrants provide the holder with “piggyback registration rights”, which obligate us to register the common shares underlying the warrants in the event that we decide to register any of our common stock either for our own account or the account of a security holder (other than with respect to registration of securities covered by certain employee option plans). The terms of the January 2012 Warrants fail to specify a penalty if we fail to satisfy our obligations under these piggyback registration rights. Presumably, we would be obligated to make a cash payment to the holder to compensate for such failure. Based on authoritative guidance, we have accounted for the January 2012 Warrants as liabilities. As of March 31, 2012, a total of 650,000 January 2012 Warrants remain outstanding, with an exercise price of $0.50 per share. The “Investor Warrants” On March 29, 2011 and September 22, 2011, the Company issued warrants (the “Investor Warrants”) to purchase securities of the Company in the Target Transaction Financing (Note 7). The Warrants are immediately exercisable and expire five years after the date of issue. Each Warrant has an initial exercise price of 120% of the price of the securities sold in the Target Transaction Financing (the “Financing Share Price”). The Warrant entitles the holder to purchase the number of shares of Common Stock and/or other securities, including units of securities, sold in the Target Transaction Financing equal to the Warrant Coverage (as defined herein) (a) multiplied by the principal amount of the Note (the “Purchase Price”) and (b) divided by the Financing Share Price. “Warrant Coverage” means (i) 50% if closed on or prior to 120 days, (ii) 75% if closed after 120 days but before 150 days and (iii) 100%, if closed after 150 days after the closing of the Private Placement. The Warrant is exercisable in cash or by way of a “cashless exercise” during any period that a registration statement covering the shares of Common Stock and/or other securities issuable upon exercise of the Warrant, or an exemption from registration, is not available. The exercise price of the Warrant is subject to a “ratchet” anti-dilution adjustment for a period of one year from the closing of the Private Placement. This adjustment provides that, in the event that the Company issues certain securities at a price lower than the then applicable exercise price, the exercise price of the Warrant will be immediately reduced to equal the price at which the Company issued the securities. On February 28, 2012, each holder of Investor Warrants entered into a Cancellation Agreement, which provides, among other things, for the cancellation of the Investor Warrants. In exchange, the Company issued to the former holders of the Investor Warrants a total of 1,000,000 warrants of the Company’s common stock at an exercise price of $0.60 per share As of March 31, 2012, a total of 1,000,000 New Warrants remain outstanding, which are recorded as derivative liabilities. “The OPKO Warrants” In connection with the sale of the OPKO Notes, we issued warrants (the “OPKO Warrants”) entitling the holders to purchase up to 11,500,000 shares of our common stock. The OPKO Warrants expire ten years from date of issuance and have an exercise price of $0.20 per common share. The OPKO Warrants contain a “cashless exercise” feature. These warrants provide the holder with “piggyback registration rights”, which obligate us to register the common shares underlying the warrants in the event that we decide to register any of our common stock either for our own account or the account of a security holder (other than with respect to registration of securities covered by certain employee option plans). The terms of the OPKO Warrants fail to specify a penalty if we fail to satisfy our obligations under these piggyback registration rights. Presumably, we would be obligated to make a cash payment to the holder to compensate for such failure. Based on authoritative guidance, we have accounted for the Convertible Note Warrants as liabilities. The liability for the OPKO Warrants, measured at fair value, based on a Black-Scholes option pricing model, has been offset by a reduction in the carrying value of the related Notes. As of March 31, 2012, a total of 11,500,000 OPKO Warrants remain outstanding, with an exercise price of $0.20 per share. On April 25, 2012, holders of 3,500,000 OPKO Warrants exercised their Warrants through the cashless exercise feature and received a total of 2,636,804 shares of Company common stock.

Warrants

3 Months Ended

Mar. 31, 2012

10. Warrants

The January 2012 Warrants

On January 11, 2012 and January 25, 2012 the Company sold an aggregate of 1,300,000 units (the “Units”) to accredited investors. Each Unit was sold for a purchase price of $0.50 per Unit and consisted of: (i) one share of Common Stock and (ii) a four-year warrant to purchase .5 shares of Common Stock purchased at an exercise price of $1.00 per share, subject to adjustment upon the occurrence of certain events. The warrants may be exercised on a cashless basis after twelve (12) months from the date of closing if there is no effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrant. These warrants provide the holder with “piggyback registration rights”, which obligate us to register the common shares underlying the warrants in the event that we decide to register any of our common stock either for our own account or the account of a security holder (other than with respect to registration of securities covered by certain employee option plans). The terms of the January 2012 Warrants fail to specify a penalty if we fail to satisfy our obligations under these piggyback registration rights. Presumably, we would be obligated to make a cash payment to the holder to compensate for such failure. Based on authoritative guidance, we have accounted for the January 2012 Warrants as liabilities.

As of March 31, 2012, a total of 650,000 January 2012 Warrants remain outstanding, with an exercise price of $0.50 per share.

The “Investor Warrants”

On March 29, 2011 and September 22, 2011, the Company issued warrants (the “Investor Warrants”) to purchase securities of the Company in the Target Transaction Financing (Note 7). The Warrants are immediately exercisable and expire five years after the date of issue. Each Warrant has an initial exercise price of 120% of the price of the securities sold in the Target Transaction Financing (the “Financing Share Price”). The Warrant entitles the holder to purchase the number of shares of Common Stock and/or other securities, including units of securities, sold in the Target Transaction Financing equal to the Warrant Coverage (as defined herein) (a) multiplied by the principal amount of the Note (the “Purchase Price”) and (b) divided by the Financing Share Price. “Warrant Coverage” means (i) 50% if closed on or prior to 120 days, (ii) 75% if closed after 120 days but before 150 days and (iii) 100%, if closed after 150 days after the closing of the Private Placement. The Warrant is exercisable in cash or by way of a “cashless exercise” during any period that a registration statement covering the shares of Common Stock and/or other securities issuable upon exercise of the Warrant, or an exemption from registration, is not available. The exercise price of the Warrant is subject to a “ratchet” anti-dilution adjustment for a period of one year from the closing of the Private Placement. This adjustment provides that, in the event that the Company issues certain securities at a price lower than the then applicable exercise price, the exercise price of the Warrant will be immediately reduced to equal the price at which the Company issued the securities.

On February 28, 2012, each holder of Investor Warrants entered into a Cancellation Agreement, which provides, among other things, for the cancellation of the Investor Warrants. In exchange, the Company issued to the former holders of the Investor Warrants a total of 1,000,000 warrants of the Company’s common stock at an exercise price of $0.60 per share

As of March 31, 2012, a total of 1,000,000 New Warrants remain outstanding, which are recorded as derivative liabilities.

“The OPKO Warrants”

In connection with the sale of the OPKO Notes, we issued warrants (the “OPKO Warrants”) entitling the holders to purchase up to 11,500,000 shares of our common stock. The OPKO Warrants expire ten years from date of issuance and have an exercise price of $0.20 per common share. The OPKO Warrants contain a “cashless exercise” feature. These warrants provide the holder with “piggyback registration rights”, which obligate us to register the common shares underlying the warrants in the event that we decide to register any of our common stock either for our own account or the account of a security holder (other than with respect to registration of securities covered by certain employee option plans). The terms of the OPKO Warrants fail to specify a penalty if we fail to satisfy our obligations under these piggyback registration rights. Presumably, we would be obligated to make a cash payment to the holder to compensate for such failure. Based on authoritative guidance, we have accounted for the Convertible Note Warrants as liabilities. The liability for the OPKO Warrants, measured at fair value, based on a Black-Scholes option pricing model, has been offset by a reduction in the carrying value of the related Notes. As of March 31, 2012, a total of 11,500,000 OPKO Warrants remain outstanding, with an exercise price of $0.20 per share.

On April 25, 2012, holders of 3,500,000 OPKO Warrants exercised their Warrants through the cashless exercise feature and received a total of 2,636,804 shares of Company common stock.