11. SUBSEQUENT EVENTS	3 Months Ended
Mar. 31, 2013
Notes to Financial Statements
NOTE 11. SUBSEQUENT EVENTS	*Private Placement* In April, 2013 the Company sold 165 Units of its securities. Each Unit is comprised of (i) one 10% senior secured callable convertible promissory note, par value $25,000 (each, a “Note”) and (ii) one warrant (each, a “Warrant”) to purchase 37,500 shares of the Company’s common stock (the “Common Stock”). The Note shall be secured by the Company’s intellectual property such as the Patents, royalties, receivables of the Company and all equipment except for the new equipment acquired with the proceeds from any future financing that is initially secured by this new equipment. The purchase price of a Unit was $25,000, resulting in gross proceeds to the Company of $4,125,000. The Note also calls for the establishment of a sinking fund. Net proceeds amounted to $3,629,100 after expenses of offering totaling $495,900. In addition, the Placement Agent received 825,000 common stock purchase warrants with an initial exercise price of $.30 per share and expiring July 31, 2018. The Company purchased the L-3 assets (see below) for $3,500,000 out of the net proceeds of this offering. Interest is payable on the Notes at a rate of 10% per annum, compounded annually, and payable in arrears on July 31st and January 31st. The Notes mature and become due and payable on July 31, 2015 (the “Maturity Date”). At the option of each Note holder, the principal amount of the Note (plus accrued but unpaid interest) is convertible into shares of Common Stock (the “Note Shares”) at any time prior to the Maturity Date at an initial conversion price of $0.29 (which may be subject to certain adjustments as set forth in the Notes). The Notes will rank senior to all other unsecured debt of the Company. The Warrants are exercisable into shares of Common Stock (the “Warrant Shares”) at an initial exercise price of $0.30 (which may be subject to certain adjustments as set forth in the Warrants). The Warrants will expire on July 31, 2018. *Asset Acquisition* On April 15, 2013 the Company completed the acquisition of binary ionization technology and related patents and other assets consisting of personal property and inventory related to implementation of the Binary Ionization Technology related to these patents from L-3 Applied Technologies, Inc. (“L-3”), for $3,500,000 in cash. All of these assets are pledged as collateral for the convertible notes issued as described above. *Other* In April 2013 the Company issued 26,250 shares of common stock valued at $4,333 to Harold Paul as payment for legal services rendered.

11. SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2013

Private Placement

In April, 2013 the Company sold 165 Units of its securities. Each Unit is comprised of (i) one 10% senior secured callable convertible promissory note, par value $25,000 (each, a “Note”) and (ii) one warrant (each, a “Warrant”) to purchase 37,500 shares of the Company’s common stock (the “Common Stock”). The Note shall be secured by the Company’s intellectual property such as the Patents, royalties, receivables of the Company and all equipment except for the new equipment acquired with the proceeds from any future financing that is initially secured by this new equipment. The purchase price of a Unit was $25,000, resulting in gross proceeds to the Company of $4,125,000. The Note also calls for the establishment of a sinking fund. Net proceeds amounted to $3,629,100 after expenses of offering totaling $495,900. In addition, the Placement Agent received 825,000 common stock purchase warrants with an initial exercise price of $.30 per share and expiring July 31, 2018. The Company purchased the L-3 assets (see below) for $3,500,000 out of the net proceeds of this offering.

Interest is payable on the Notes at a rate of 10% per annum, compounded annually, and payable in arrears on July 31st and January 31st. The Notes mature and become due and payable on July 31, 2015 (the “Maturity Date”). At the option of each Note holder, the principal amount of the Note (plus accrued but unpaid interest) is convertible into shares of Common Stock (the “Note Shares”) at any time prior to the Maturity Date at an initial conversion price of $0.29 (which may be subject to certain adjustments as set forth in the Notes). The Notes will rank senior to all other unsecured debt of the Company.

The Warrants are exercisable into shares of Common Stock (the “Warrant Shares”) at an initial exercise price of $0.30 (which may be subject to certain adjustments as set forth in the Warrants). The Warrants will expire on July 31, 2018.

Asset Acquisition

On April 15, 2013 the Company completed the acquisition of binary ionization technology and related patents and other assets consisting of personal property and inventory related to implementation of the Binary Ionization Technology related to these patents from L-3 Applied Technologies, Inc. (“L-3”), for $3,500,000 in cash. All of these assets are pledged as collateral for the convertible notes issued as described above.

Other

In April 2013 the Company issued 26,250 shares of common stock valued at $4,333 to Harold Paul as payment for legal services rendered.