12.  SUBSEQUENT EVENTS:

Effective October 28, 2014, Alexander Kramer resigned as the Company’s Chief Financial Officer. In such capacity Mr. Kramer had served as the Company’s principal financial officer and principal accounting officer. Mr. Kramer advised the Company that he has no material disagreement with the Company on any matter relating to the Company’s operations, policies or practices, and Mr. Kramer has made himself available to support the Company by assisting with its transition needs.  In connection with his resignation, Mr. Kramer entered into a Separation and Severance Agreement and Release of Claims with the Company on October 28, 2014. The Separation Agreement terminates and supersedes the terms of Mr. Kramer’s letter agreement with the Company, April 28th, 2014, regarding his terms of employment. 

Equity Offering

On October 1, 2014 the Company commenced a non-public equity offering of up to 3,650,807 units at $1.75 per unit, each unit consists of one common share and one-half warrant, with each whole warrant exercisable at $2.00 per share. The purchase price for the Units is payable in either cash, conversion of outstanding Series D Preferred Shares or certain outstanding promissory notes. The Company estimates $2,200,000 in potential cash proceeds from the private equity offering, after the conversion of Series D Preferred Shares and certain outstanding promissory notes.  Subsequent to the quarter-end the Company raised $308,825 and issued 176,469 shares of our common stock and warrants to purchase 88,232 shares of common stock as part of the private equity offering, as of November 13, 2014.  The Company issued 546,620 shares of our common stock and warrants to purchase 273,310 shares of common stock as part of the conversion of 318,860 Series D Preferred Shares as of November 13, 2014.

Loan proceeds

On October 9, 2014 the Company received a short- term unsecured loan in the amount of $75,000. The short-term loan bears interest at a rate of 12% per annum.  The principal amount and all then-accrued interest is payable on November 15, 2014; the Company does have the option to extend the loan. 

Distribution Agreement

On October 23, 2014, the Company entered into an Exclusive Distribution Agreement with Beijing Enhanced Solutions, Inc. (“BES”). The Company appointed BES as the exclusive distributor and sales representative of its products in the Macau Special Administrative Region and the Hong Kong Special Administrative Region of China.  This Agreement is for an initial term of five years.  After the initial term the Agreement will automatically renew for two additional terms of two years each, unless the Agreement is terminated for cause.  The Agreement grants BES the exclusive right to distribute and sell Heatwurx products during the term, in the territory.  BES can appoint sub-distributors of its choice in furtherance of this goal. The Distributor agreed to use its best efforts to design sales channels, methods, and campaigns which maintain the Company’s ethos of being a safe, eco-friendly, high quality provider.