Note 10 - Subsequent Events

On September 5, 2013, the Company’s board of directors granted a stock option to purchase a total of 305,000 shares of Common Stock at an exercise price of $.75 per share to the principal of an Austrian investor relations firm the Company has retained to provide investor relations services in Europe. The option, which will terminate on September 4, 2018, vested as to 50,000 shares on the date of issuance and will vest at the monthly rate of 15,000 shares for each month during which the consulting agreement is in place. The consulting agreement, which has a term of 18 months, may be terminated for any reason after six months.

Subsequent to quarter end, the “Company” has thus far completed the private sale of 5,300,773 units (“Units”) at a purchase price of $1.30 per Unit for total gross sale proceeds of $6,911,024 in a private placement to 91 purchasers. The Company will issue two shares of its Common Stock, or a total of 10,601,546 shares, plus a warrant to purchase one additional share of Common Stock, or a total of 5,300,773 shares subject to Unit warrants, for each Unit sold. Unit warrants are exercisable at an exercise price of $.75 per share and will expire five years after issuance.

Subsequent to quarter end, six holders of six-month term convertible notes with principal totaling $850,000 elected to convert the aggregate principal plus accrued interest into Units pursuant to the Company’s ongoing private placement. In addition, one holder in principal amount of 250,000 exercised his right for repayment.

Subsequent to quarter end, two holders of six-month term convertible notes (see Note 4) with principal totaling $380,000 converted the aggregate principal amount, plus accrued but unpaid interest totaling $6,351, into common stock at a conversion price of $.65 per share, resulting in the issuance of a total of 594,384 shares. In addition, such holders received warrants to purchase 292,307 shares of common stock at an exercise price of $.75 per share which will expire five years after issuance.

Subsequent to quarter end, the holder of a three-year term convertible note (see Note 4) with principal totaling $200,000 converted the aggregate principal amount into common stock at a conversion price of $.75 per share, resulting in the issuance of 266,666 shares. At the time of the conversion, there was no accrued but unpaid interest.

Subsequent to quarter end and effective October 4, 2013, the holder of $9,000 in principal amount of Notes converted the aggregate principal amount, plus accrued interest totaling $884, into common stock at a conversion price of $.45 per share, resulting in the issuance of a total of 21,964 shares.