UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

Commission File Number:  0-24635

HYPERTENSION DIAGNOSTICS, INC.

(Exact name of Registrant as Specified in its Charter)

Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

YES x    NO o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( § 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

YES o     NO x 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

                                                                                                                YES o  NO x 

As of May 13, 2013, there were issued and outstanding 52,388,750 shares of the issuer’s common stock and 611,390 shares of the issuer’s Series A convertible preferred stock.

            This report may contain “forward-looking” statements, as such term is defined by the Securities and Exchange Commission’s rules, regulations and releases, which represent the current beliefs of our management as well as assumptions made by and information currently available to management , including but not limited to, statements concerning the operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans of Hypertension Diagnostics, Inc. (referred to as “HDI,” the “Company,” “we,” or “us”).   For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements.  Without limiting the generality of the foregoing, words such as “may,” “expect,” “believe,” “expect,” “can,” “estimate,” “anticipate,” “intend,” “could,” “might,” “plan,” “predict” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements.   We caution readers not to place undue reliance on any forward-looking statements and to recognize that the statements are not predictions of actual future results. 

                    These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company’s control, and actual results may differ materially depending on a variety of important factors, including our ability to generate acceptable levels of revenues; negative effect on our stock price resulting from available securities for sale; our need for additional capital; significant business risks associated with the relocation and re-start of the Company’s HDI Plastics, Inc. subsidiary business; the illiquidity of our securities on the OTC Bulletin Board and the related restrictions on our securities relating to “penny stocks”; uncertainty related to acquisitions; governmental regulation; commercial viability of required raw materials, and any other factors discussed in this and other filings of the Company with the Securities and Exchange commission. We undertake no responsibility to update any forward-looking statement. These forward‑looking statements are only made as of the date of this report.  The following should be read in conjunction with the information presented in our Annual Report on Form 10-K for the year ended June 30, 2012 , as amended.

See accompanying notes.

See accompanying notes.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary (HDI Plastics, Inc.), after elimination of all intercompany accounts, transactions, and profits.

Recent Accounting Pronouncements

In July 2012, the FASB issued ASU No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment. Under this standard, entities testing long-lived intangible assets for impairment now have an option of performing a qualitative assessment to determine whether further impairment testing is necessary. If an entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is more-likely-than-not less than the carrying amount, the existing quantitative impairment test is required. Otherwise, no further impairment testing is required. For HDI, this ASU was effective beginning January 1, 2013. The adoption of this standard did not have a material impact on the Company’s consolidated results of operations or financial condition.

Note 4.   Discontinued Operations

On August 26, 2011, (the “Effective Date”), the Company entered into and closed a definitive Asset Purchase Agreement (the “August 26, 2011 Agreement”) providing for the sale of selected assets of  our medical device business to Cohn Prevention Center, LLC, a Minnesota limited liability company (“CPC”), controlled by Jay Cohn, a director and stockholder of HDI as of the Effective Date. The terms of the Agreement provided for the sale of selected operating assets of the Company’s medical device business (including inventory but excluding cash, accounts receivable, and intellectual property).  The Agreement does not limit the ability of CPC to sell the purchased inventory to any customer or in any market where they can be legally sold.  Additionally, CPC assumed all warranty and on-going product support required by regulatory agencies related to such inventory.

In connection with the Agreement, CPC paid the Company on the Effective Date a cash payment of $125,000 and issued a secured promissory note (non-interest bearing) to the Company in the amount of either $150,000 due in 12 months or $200,000 due in 18 months at the discretion of CPC (See Note 6). We received a letter on July 27, 2012 from CPC indicating the intent to pay $200,000 on February 26, 2013. Nearly all of the proceeds received on the Effective Date were allocated to cover severance and other costs related to the transactions contemplated by the Agreement. Severance costs included an agreement by the Company to pay to Greg Guettler, its former Chief Operating Officer, nine months’ salary and health benefits. The Company paid Mr. Guettler $119,463 to fulfill the agreement on March 1, 2012. Pursuant to the Agreement, CPC agreed to pay to the Company a cash payment of $1,200 upon the sale of each of the first 50 units of inventory sold by CPC within 30 days of receipt of cash from such sale. The Company has agreed to pay Mr. Guettler 10% of the royalty proceeds received by the Company less applicable transaction expenses related to such sales.  The Company has earned royalty income of $0 and $6,000 less 10% due to Greg Guettler for the three and nine months ended March 31, 2013, respectively.

The Company and CPC also entered into a Sublicense Agreement on the Effective Date (the “Sublicense Agreement”), pursuant to which the Company granted to CPC a limited license to use the Company’s intellectual property, technology, and technical know-how related to the Company’s arterial elasticity measurement technology exclusively in CPC clinics and research related exclusively to CPC clinics.  All other applications of the Company’s intellectual property, technology and technical know-how will be retained by the Company for the benefit of the Company.  The Sublicense Agreement also provides that any development of a next generation arterial measurement device, however, would be limited exclusively to use and sale within the CPC network of clinics and to research exclusively related to CPC clinics.

CPC and the Company also entered into a Sublease Agreement as of the Effective Date, which permits CPC to lease the Waters II Suite 108, Eagan, Minnesota facility of the Company during the remaining term of the Company’s lease, which expires October 31, 2014, on the same pass-through economic terms as the underlying lease with HDI which remains as an obligation of the Company.

The Company recorded a loss on the sale transaction in the amount of $123,702 in the quarter ended September 30, 2011.

On January 25, 2013, (the “Effective Date”), the Company entered into and closed a second definitive Asset Purchase Agreement (the “Agreement”) modifying the August 26, 2011 Agreement, by selling the remaining medical device business assets to CVC-HD, LLC, a Minnesota limited liability company (“CVC”), controlled by Jay Cohn, for $75,000. This amount is in addition to the $200,000 owed to the Company by CPC as set forth above, which payment terms were modified as set forth below.  The Company has not recorded the revenue from this additional sale due to the collectability is not reasonably assured at this time, since the original $150,000 note from the first sale has not been paid following its original terms. The aggregate $275,000 consists of a cash payment in the amount of $37,500 due on the Effective Date which was received, and a promissory note in the amount of $237,500 payable in installments with the first payment of $37,500 due February 2013 and $50,000 due each subsequent month with the final payment due in June 2013. As of March 31, 2013, a total of $75,000 has been received on this note.

The Company has not included the results of operations of our former medical device business in the results from continuing operations.  The income (loss) from discontinued operations for the three and nine months ended March 31, 2013, and 2012 consists of the following:

The Company does not have any existing assets of discontinued operations at March 31, 2013. The only remaining liabilities of discontinued operations as of March 31, 2013 pertain to the deferred compensation of the former CEO. (See Note 9)

Note 6.   Notes Receivable – Related Parties

In connection with the Asset Purchase Agreement between HDI and CPC on August 26, 2011, CPC paid HDI on the Effective Date a cash payment of $125,000 and issued a non-interest bearing secured promissory note due to HDI in the amount of either $150,000 due in 12 months or $200,000 due in 18 months, at the discretion of CPC. The promissory note was reflected at an imputed discount rate of 15% based upon the amount due 12 months following the Effective Date, and was originally recorded as a net note receivable of $127,500.  The Company received a letter from CPC on July 27, 2012 indicating CPC’s intent to pay the $200,000 due February 26, 2013 instead of the original $150,000. The Company has elected to not recognize the additional income forthcoming on this Note until the cash is collected in the future.

On January 25, 2013, the Company sold the remaining intellectual property for an additional $75,000 (See Note 4). The Company received $37,500 in cash on January 25, 2013 which was applied to the original note, and a promissory note in the amount of $237,500 that replaces the existing note issued by CPC listed above. The Company has not recorded the revenue from this additional sale due to the collectability is not reasonably assured at this time, since the original $150,000 note from the first sale has not been paid following its original terms. The new note is payable in installments with the first payment due February 2013 for $37,500, which was received in March 2013, and $50,000 due per month beginning in March 2013, which was not received, with the final payment due June 2013. As of March 31, 2013 $75,000 has been received on the note. A subsequent payment of $25,000 on the note was received in April 2013.

Depreciation expense was $44,670 and $37,603 for the three months ended March 31, 2013 and 2012, respectively. For the nine months ended March 31, 2013 and 2012, depreciation expense was $116,659 and $67,560, respectively.

The Company recognized a net loss of $79,973 from the sale of equipment in the nine month period ended March 31, 2013 related to the abandonment of leasehold improvements associated with the property at 5330 Fleming Court, Austin, TX due to the termination of the lease and surrender of the property.

Note 8.   Litigation

The Company is involved in various legal actions in the ordinary course of its business. 

On March 28, 2012, HDIP received a Notice of Violation related to its former processing facility located at 5330 Fleming Court, Austin, Texas, from the City of Austin Code Compliance Department.  The Notice of Violation alleges violations of Austin’s City Code and failures to obtain required permits and a Certificate of Occupancy based upon the current use of the processing facility. The violation primarily relates to the electrical design and capacity of the building. The Notice of Violation required HDIP to vacate the processing facility until such alleged violations are cured.  HDIP unsuccessfully attempted to negotiate temporary permits allowing it to continue operations while it addresses the alleged violations identified in the Notice of Violation.  On March 29, 2012, HDIP ceased processing operations at the processing facility.  On April 2, 2012, HDIP notified approximately 70 of its employees working at the facility of their termination and they were paid their outstanding vacation pay, however, no severance was paid. At this time, the Company has not been assessed any fines or penalties by the City of Austin, but no assurances can be made that they will not do so in the future.

Because the City of Austin required HDIP to vacate the property at 5330 Fleming Court, the landlord, Flemtex Properties (“Flemtex”) denied access to the premises; therefore, the Company did not pay rent and utilities for April and May 2012. On May 30, 2012, the Company received a Notice of Termination of Lease from Flemtex, for failure to pay rent and reimbursable costs. The letter stated that the Lease was terminated effective May 31, 2012, and that HDI was to quit and surrender the Leased Premises to the landlord in accordance with the requirements of the Lease on May 31, 2012, and to remove all of the Tenant’s personal property from the Leased Premises. The Company has accrued as of March 31, 2013, the utility and rent payments due for April and May 2012 totaling $139,493.

On July 12, 2012, a representative from  the Travis County, (Texas) Attorney Office, Texas Parks and Wildlife, and the Texas Commission on Environmental Quality (TEEQ) searched the Company’s Austin offices pursuant to an affidavit signed by a representative of Texas Parks and Wildlife seeking evidence that the Company committed the offense of intentional or knowing unauthorized discharge of a pollutant under Section 7.145 of the Texas Water Code. No charge of illegal discharge has been made against the Company. The Company has not been contacted further relative to alleged discharge and strongly denies any such discharge occurred. As of October 31, 2012, the removal and disposal of the waste water at the Company’s former facility in Austin was completed.

On December 14, 2012, Flemtex Properties filed a lawsuit alleging breach of the commercial lease at the Fleming Court location. The lawsuit seeks damages totaling $412,711 as of November 16, 2012 and future obligations due under the lease which extends to December 2017. The Company intends to vigorously defend itself and may seek compensation for losses resulting from the willful and malicious interference into its Fleming Court operations by the landlord and its agent. Due to the uncertainty regarding the outcome of this matter, the Company does not believe that it is probable that they will owe all of the damages claimed by Flemtex and have only accrued for the costs of the lease up until Flemtex terminated the lease on May 31, 2012, as noted above.

Note 9.   Deferred Compensation Liability

The Company is a party to a Deferred Equity Compensation Agreement with its former CEO, Mark N. Schwartz (the “Agreement”), whereby the Company previously granted phantom shares of its common stock to Mr. Schwartz for every month of employment over the years of his employment. Mr. Schwartz resigned as the Company’s CEO effective September 22, 2011 and as a result, agreed as of October 1, 2011 that no additional phantom shares will be granted to him under the Agreement. Under the Agreement, a cash payment will be made equal to the price per share of the Company’s common stock times the number of phantom shares accrued at the earliest of certain events to occur.

The Company has accrued a total deferred compensation liability of $280,643 at March 31, 2013, which is the fair market value of 13,125,000 phantom shares outstanding as of March 31, 2013, $262,500 plus $18,143 of accrued payroll taxes and vacation pay related to the agreement.  Due to the fluctuations in the price of the Company’s common stock during the nine months ended March 31, 2013, the Company recorded a net compensation expense of $135,994 and $0 for the three and nine months ended March 31, 2013, respectively. For the three and nine months ended March 31, 2012, the Company recorded a net compensation expense (benefit) of ($393,750) and $165,000, respectively. An increase in the Company’s common stock price would cause an increase in the deferred compensation liability, while a decrease in the Company’s stock price would cause a decrease in the deferred compensation liability. Expenses related to the Deferred Compensation arrangement with its former CEO are accounted for as part of Discontinued Operations.

Under the original terms of Mr. Schwartz’s deferred equity compensation agreement, payment of the deferred compensation benefit would occur upon one of the following events: i) execution of a definitive agreement resulting in a change of control of the Company’s common stock; ii) termination of employment; iii) death of the CEO; or iv) no later than January 1, 2012. Upon one of these events, a cash payment over 24 months was to be made to the CEO equal to the trading price per share of the Company’s common stock times the number of phantom stock shares accrued to date.  Mr. Schwartz and the Company modified the original Agreement on March 31, 2012, whereby Mr. Schwartz agreed to eliminate the requirement for a cash payment as of a date certain pursuant to the Agreement. This deferred compensation is classified as a long-term liability with no definitive payout date specified. The Company and Mr. Schwartz are negotiating a permanent settlement to satisfy both parties.

Note 10.  Factoring Line of Credit

On October 10, 2011, HDI Plastics, Inc. entered into an Accounts Receivable Discount line facility with Charter Capital Holdings, L.P.  (“Charter”). Under the terms of the full-recourse financing agreement, which is guaranteed by HDI, Charter advances to HDIP an amount equal to 80% of eligible pledged receivables up to a total advance of $1 million. Charter retains a priority and perfected security interest in all accounts receivable and inventory of HDI Plastics, Inc.  The financing cost under the agreement is 0.59% for each 10-day period or an approximate annualized interest cost of approximately 21.25%. HDIP began borrowing under this facility in November 2011.  The outstanding balance as of March 31, 2013 is $0 and $0 as of June 30, 2012. As of the date of this filing, the outstanding balance is $63,383.

Note 11. Notes Payable-short term

Asher-Convertible Debt

On January 2, 2013, HDI closed on a Securities Purchase Agreement entered into December 3, 2012 with Asher Enterprises, Inc., pursuant to which we issued to Asher an 8% Convertible Promissory Note in the original principal amount of $42,500 (the “Note”). The Note has a maturity date of September 12, 2013 and is convertible into our common stock at the Variable Conversion Price of 58% multiplied by the Market Price (representing a discount rate of 42%). “Market Price” means the average of the lowest three (3) Trading Prices for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. Asher has the right to convert 180 days after the initial advance date. The shares of common stock issuable upon conversion of the Note are not registered shares under the Securities Act of 1933.  The Company has the right to prepay the outstanding Note for an amount equal to 115%, multiplied by the sum of the then outstanding principal amount of this Note plus accrued and unpaid interest on the unpaid principal amount of this Note.

On March 1, 2013, HDI closed on a second Securities Purchase Agreement with Asher, pursuant to which we issued to Asher an 8% Convertible Promissory Note in the original principal amount of $32,500 with a maturity date of December 15, 2013.

Due to the discounted conversion price on the date of issuance of the notes, the Company recorded a discount to the notes in the amount of $54,310 for the beneficial conversion future. The discount is being amortized over the term of the debt using the effective interest method. Additionally, Asher held back $5,000 of the proceeds to cover its legal expenses.

HDI closed on a third Note dated April 8, 2013 in the amount of $32,500 that matures on January 15, 2014. The other terms of the notes are the same as the note described above.

The following table summarizes the Asher – Convertible Debt at March 31, 2013:

Senior Debt

On February 4, 2013, HDI Plastics, Inc. executed a Secured Promissory Note (the “Note”) in a principal amount of $200,000 in favor of Mark Schwartz and Alan Stern, directors of the Company.  The Note bears interest at an annual rate of 18%, payable monthly, and is guaranteed by the Company.  The Note matures on February 1, 2014, at which time all principal and accrued and unpaid interest on the Note is due.  The Note is secured by certain equipment of HDI Plastics. In connection with the issuance of the Note, the Company issued to each of Messrs. Schwartz and Stern a warrant to purchase 3,333,333 shares of common stock of the Company for an exercise price of $0.03 per share, subject to appropriate adjustment for stock splits, combinations and similar recapitalization events.  The warrants expire on February 4, 2018. Pursuant to the terms of the Note and Security Agreement, HDI Plastics may borrow an additional $300,000 on the same terms and conditions as those set forth in the Note, Security Agreement and Warrants. The accrued interest on the Notes was $3,000 as of March 31, 2013.

The total estimated value of the warrants using the Black-Scholes Option Pricing Model, with a volatility of 209%, had an estimated fair value of $0.01 per warrant.  After calculating the relative fair value of the debt and warrants, $48,388 was recorded as a debt discount to the debt for the warrants.  This discount is being amortized over the term of the debt using the effective interest method.

The following table summarizes the Senior Debt at March 31, 2013:

Note 12. Notes Payable-long term

Taylor Economic Development

On December 24, 2012, HDIP entered into a Letter of Agreement with the Taylor Economic Development Corporation (“TEDCO”).  Under the terms of the TEDCO Agreement, TEDCO agreed to advance up to $140,000 for improvements and upgrades to the Company’s new facility located in Taylor, Texas. The advances are in the form of a forgivable loan which will convert to a grant in 10 years provided among other conditions, HDIP continues to operate in Taylor and maintain at least 50 full-time jobs at the Taylor facility.  Should HDIP default under its agreement with TEDCO, the Company may be required to repay the advances with interest at the prime rate plus 3%.  As of March 31, 2013, $140,000 had been advanced under the TEDCO Agreement.

Subordinated Debt

In December 2011, the Company commenced a private placement offering of 14.5% Five Year Subordinated Notes (the “Notes”) with Warrants to its existing preferred shareholders, directors of the Company and certain other accredited investors. Interest is payable monthly in cash. The offering was completed February 10, 2012 and resulted in the issuance of $833,600 in notes and five-year warrants to purchase an aggregate of 11,908,572 shares of the Company’s common stock with an exercise price of $0.07 per share. The notes are due   five years from the closing date at 105% of face value. The total estimated value of the warrants using the Black-Scholes Option Pricing Model, with a volatility rate of 153%, had an estimated fair value of $0.03 per warrant. After calculating the relative fair value of the debt and warrants, $252,393 was recorded as a debt discount to the notes for the warrants. The discount is being amortized over the term of the debt using the effective interest method.

The Notes may be prepaid by the Company in accordance with the following schedule below at the redemption prices (expressed in percentages of principal amount to be repaid), plus unpaid accrued interest to the date of payment:

In August 2012, the Company initiated a second private placement of Subordinated Notes due October 31, 2014 (Series II Subordinated Notes) with terms otherwise similar to the offering in December 2011. Terms for the Series II Subordinated Notes also include the issuance of five-year warrants to purchase shares of the Company’s common stock with an exercise price of $0.035 per share. As of March 31, 2013, the Company had issued to directors and other accredited investors of the Company, $360,000 in Series II Subordinated Notes which included warrants to purchase 10,285,714 shares of Company stock. The notes are due   two years from the closing date at 105% of face value. The total estimated value of the warrants using the Black-Scholes Option Pricing Model, with a volatility rate of 178%, had an estimated fair value from $0.01 to $0.05 per warrant. After calculating the relative fair value of the debt and warrants, $158,131 was recorded as a debt discount to the notes for the warrants. The discount is being amortized over the term of the debt using the effective interest method. Subsequent to March 31, 2013, on April 22, 2013, the Company received an additional $54,000 for private placement Series II Subordinated Notes.

The following table summarizes the entire subordinated debt balance at March 31, 2013:

On January 1, 2013, the Company’s board of directors approved a 4-month “Payment-in-Kind” or “PIK” interest plan on the Company’s currently outstanding Subordinated Debt Notes. The plan suspended the monthly cash payments of interest to the note holders for four months through April 1, 2013. The monthly interest will be added to the principal of the notes. We currently plan to resume monthly cash interest payments on such notes commencing May 1, 2013.  As of March 31, 2013, the accrued interest payable for the Notes was $56,913.

Note 13.   Related Party Transactions

On February 4, 2013, HDI Plastics, Inc. executed a Secured Promissory Note (the “Note”) in a principal amount of $200,000 in favor of Mark Schwartz and Alan Stern, directors of the Company.  The Note bears interest at an annual rate of 18%, payable monthly, and is guaranteed by the Company.  The Note matures on February 1, 2014, at which time all principal and accrued and unpaid interest on the Note is due.  The Note is secured by certain equipment of HDI Plastics. In connection with the issuance of the Note, the Company issued to each of Messrs. Schwartz and Stern a warrant to purchase 3,333,333 shares of common stock, par value $0.01 per share, of the Company for an exercise price of $0.03 per share, subject to appropriate adjustment for stock splits, combinations and similar recapitalization events.  The warrants expire on February 4, 2018. Pursuant to the terms of the Note and Security Agreement, HDI Plastics may borrow an additional $300,000 on the same terms and conditions as those set forth in the Note, Security Agreement and Warrants. The accrued interest on the notes was $3,000 as of March 31, 2013.

The total estimated value of the warrants using the Black-Scholes Option Pricing Model, with a volatility of 209%, had an estimated fair value of $0.01 per warrant.  After calculating the relative fair value of the debt and warrants, $48,388 was recorded as a debt discount to the debt for the warrants.  This discount is being amortized over the term of the debt using the effective interest method.  See Note 11 for more information.

As of March 31, 2013, the Company has issued the following Subordinated Notes to the following directors of the Company, subject to the terms set forth in Note 12:

On April 22, 2013, the Company received an additional $54,000 from Kenneth Brimmer, the Company’s CEO as part of the private placement of Series II Subordinated Notes (See Note 12).

The Company has agreed to pay $500 per month for executive office space from STEN Corporation. Mr. Brimmer is also CEO of STEN Corporation. As of March 31, 2013, $4,500 is unpaid under the arrangement.

Note 14.   Net Income (Loss) Per Share

Basic net income (loss) per share is computed using the weighted average number of common shares outstanding during each period.  Diluted net income (loss) per share includes the dilutive effect of common shares potentially issuable upon the exercise of stock options, warrants, or the conversion of preferred stock and convertible debt. 

The following table provides a reconciliation of the numerators and denominators used in calculating basic and diluted earnings (loss) per share at March 31, 2013 and 2012.

Note 15. Operating Lease

On December 28, 2012, as part of the Company’s plan to relocate its plastic recycling business and resume operations, HDIP entered into a four-year lease and purchase option agreement with Southern Mattress Company of Texas, Inc. for approximately 65,000 square feet of main building space, including an additional approximate 15,000 square feet of storage space in Taylor, Texas (“Taylor Lease”).  The Taylor Lease calls for minimum monthly rents as follows:

In addition to rent, HDIP shall pay for insurance and property taxes effective March 1, 2013.  HDIP has the right to purchase the property for $700,000 at any time after February 28, 2016.