| Accounting Changes and Error Corrections [Text Block] |
G. Restatement
Subsequent to issuance, Management has subsequently determined to correct the accounting procedures and has amended the September 30, 2011 financial statements.
|
1. |
The Company corrected the classification of warrants as equity with no derivative liability. |
|
2. |
Error correction for reclassification of loans, and warrants. |
|
3. |
Reclassification of certain loans |
Accordingly, the accompanying balance sheet, statement of operations, and statement of cash flows for the period amended as of September 30, 2011 have been retroactively adjusted as summarized below:
| Effect of Corrections |
|
As Previously
Reported |
|
|
As Restated |
|
|
Adjustment |
|
|
Reference |
|
| BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Accrued liabilities |
|
$ |
82,557 |
|
|
$ |
110,530 |
|
|
$ |
27,973 |
|
|
|
3 |
|
| -Notes payable |
|
$ |
145,000 |
|
|
$ |
199,511 |
|
|
$ |
54,511 |
|
|
|
3 |
|
| -Notes payable – related party |
|
$ |
294,512 |
|
|
$ |
170,001 |
|
|
$ |
(124,511 |
) |
|
|
3 |
|
| -Derivative liability |
|
$ |
483,571 |
|
|
$ |
0 |
|
|
$ |
(483,571 |
) |
|
|
1 |
|
| -Total current liabilities |
|
$ |
1,306,383 |
|
|
$ |
780,785 |
|
|
$ |
(525,598 |
) |
|
|
3 |
|
| -Long-term note payable |
|
$ |
100,000 |
|
|
$ |
170,000 |
|
|
$ |
70,000 |
|
|
|
3 |
|
| -Total long-term liabilities |
|
$ |
100,000 |
|
|
$ |
170,000 |
|
|
$ |
70,000 |
|
|
|
3 |
|
| -Total liabilities |
|
$ |
1,406,385 |
|
|
$ |
980,785 |
|
|
$ |
(455,598 |
) |
|
|
1,3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Additional paid-in capital |
|
$ |
39,706,846 |
|
|
$ |
40,658,670 |
|
|
$ |
74,500 |
|
|
|
2 |
|
| -Accumulated deficit |
|
$ |
(40,134,979 |
) |
|
$ |
(40,631,203 |
) |
|
$ |
381,100 |
|
|
|
1,2,3 |
|
| -Total stockholders’ equity (deficit) |
|
$ |
(403,510 |
) |
|
$ |
52,090 |
|
|
$ |
455,600 |
|
|
|
1,2,3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three month period ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Selling, general and administrative |
|
$ |
2,184,080 |
|
|
$ |
1,478,242 |
|
|
$ |
(705,656 |
) |
|
|
2 |
|
| - Total operating expenses |
|
$ |
2,199,063 |
|
|
$ |
1,493,407 |
|
|
$ |
(705,656 |
) |
|
|
2 |
|
| - Loss from operations |
|
$ |
(2,195,684 |
) |
|
$ |
(1,490,028 |
) |
|
$ |
705,656 |
|
|
|
2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER (EXPENSES)INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Interest expense |
|
$ |
(5,929 |
) |
|
$ |
(5,324 |
) |
|
$ |
605 |
|
|
|
2 |
|
| - Gain/loss from derivative liability |
|
$ |
266,598 |
|
|
$ |
0 |
|
|
$ |
(266,598 |
) |
|
|
1 |
|
| -Total other income |
|
$ |
260,669 |
|
|
$ |
(5,324 |
) |
|
$ |
(265,993 |
) |
|
|
1,2 |
|
| -Net loss |
|
$ |
(1,935,015 |
) |
|
$ |
(1,495,352 |
) |
|
$ |
(265.993 |
) |
|
|
1,2 |
|
| -Net loss attributed to common Shareholders |
|
$ |
(1,935,015 |
) |
|
$ |
(1,495,352 |
) |
|
$ |
(265.993 |
) |
|
|
1,2 |
|
| Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net loss per common share |
|
$ |
(0.10 |
) |
|
$ |
(0.07 |
) |
|
$ |
0.03 |
|
|
|
1,2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine month period ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OPERATING EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Selling, general and administrative |
|
$ |
3,138,472 |
|
|
$ |
2,621,550 |
|
|
$ |
(516,992 |
) |
|
|
2 |
|
| - Total operating expense |
|
$ |
3,157,611 |
|
|
$ |
2,640,689 |
|
|
$ |
(516,992 |
) |
|
|
2 |
|
| - Loss from operations |
|
$ |
(3,161,0702 |
|
|
$ |
(2,644,780 |
) |
|
$ |
516,992 |
|
|
|
2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER (EXPENSES)INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Interest expense |
|
$ |
(41,349 |
) |
|
$ |
(40,744 |
) |
|
$ |
605 |
|
|
|
2 |
|
| - Gain/loss from derivative liability |
|
$ |
103,421 |
|
|
$ |
0 |
|
|
$ |
(103,421 |
) |
|
|
1 |
|
| - Financing cost including debt discount |
|
$ |
0 |
|
|
$ |
(183,566 |
) |
|
$ |
(183,566 |
) |
|
|
3 |
|
| - Beneficial conversion feature |
|
$ |
0 |
|
|
$ |
(211,730 |
) |
|
|
(211,730 |
) |
|
|
3 |
|
| - Accretion of debt discount |
|
$ |
0 |
|
|
$ |
(83,304 |
) |
|
|
(83,304 |
) |
|
|
3 |
|
| -Total other income |
|
$ |
63,535 |
|
|
$ |
(517,881 |
) |
|
$ |
(581,416 |
) |
|
|
1,3 |
|
| -Net loss |
|
$ |
(3,098,167 |
) |
|
$ |
(3,162,661 |
) |
|
$ |
(64,494 |
) |
|
|
1,3 |
|
| -Deemed dividend of preferred stock |
|
$ |
0 |
|
|
$ |
(327,794 |
) |
|
$ |
(327,794 |
) |
|
|
3 |
|
| -Net loss attributed to common shareholders |
|
$ |
(3,098,167 |
) |
|
$ |
(3,520,455 |
) |
|
$ |
(422,288 |
) |
|
|
1,3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net loss per common share |
|
$ |
(0.16 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.01 |
) |
|
|
1,3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine month period ended September 30, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net loss at September 30, 2011 |
|
$ |
(3,098,167 |
) |
|
$ |
(3,162,661 |
) |
|
$ |
(64,494 |
) |
|
|
1,3 |
|
| -Common stock and warrants issued for compensation and services |
|
$ |
1,848,950 |
|
|
$ |
1,159,515 |
|
|
$ |
(689,435 |
) |
|
|
3 |
|
| -Derivative liability |
|
$ |
(103,421 |
) |
|
$ |
0 |
|
|
$ |
103,421 |
|
|
|
1 |
|
| -Financing costs related to debt discount |
|
$ |
0 |
|
|
$ |
183,566 |
|
|
$ |
183,566 |
|
|
|
3 |
|
| - Beneficial conversion feature on loan |
|
$ |
0 |
|
|
$ |
211,730 |
|
|
$ |
211,730 |
|
|
|
3 |
|
| - Accretion of debt discount |
|
$ |
0 |
|
|
$ |
83,304 |
|
|
$ |
83,304 |
|
|
|
3 |
|
| -Increase (decrease) in accounts payable |
|
$ |
(102,773 |
) |
|
$ |
68,231 |
|
|
$ |
171,004 |
|
|
|
4 |
|
| -Increase (decrease) in accrued liabilities |
|
$ |
(98,768 |
) |
|
$ |
(70,795 |
) |
|
$ |
27,973 |
|
|
|
4 |
|
| Net cash flows used in operating activities |
|
$ |
(1,525,917 |
) |
|
$ |
(1,498,848 |
) |
|
$ |
27,069 |
|
|
|
1,3 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net proceeds from sale of preferred share |
|
$ |
525,007 |
|
|
$ |
599,849 |
|
|
$ |
74,842 |
|
|
|
2 |
|
| -Net proceeds from sale of common shares |
|
$ |
624,199 |
|
|
$ |
510,543 |
|
|
$ |
(113,656 |
) |
|
|
2 |
|
| -Net proceeds from notes payable |
|
$ |
600,000 |
|
|
$ |
690,000 |
|
|
$ |
90,000 |
|
|
|
2 |
|
| -Proceeds from stockholders loans |
|
$ |
75,000 |
|
|
$ |
50,000 |
|
|
$ |
(25,000 |
) |
|
|
3 |
|
| -Payment on notes payable |
|
$ |
(76,078 |
) |
|
$ |
(74,000 |
) |
|
$ |
2,078 |
|
|
|
3 |
|
| - Payment on loan costs |
|
$ |
0 |
|
|
$ |
(55,333 |
) |
|
$ |
(55,333 |
) |
|
|
2 |
|
| Net cash flows from financing activities |
|
$ |
1,748,128 |
|
|
$ |
1,721,059 |
|
|
$ |
(27,069 |
) |
|
|
2 |
|
REFERENCE
1 Correct a classification of warrants as equity with no derivative liability
2 Use of relative fair value of the warrants as a result of change for debt to equity of warrant classification, prior periods
3 Error correction for reclassification of loans, and warrant
4 Prior period posting errors relating to accounts payable related to changes to December 31, 2010 balances
Subsequent to issuance, Management has subsequently determined to correct the accounting procedures and has amended the September 30, 2010 financial statements.
|
1. |
The Company corrected the classification of warrants as equity with no derivative liability. |
|
2. |
Accounts Payables restatement – In reviewing beginning balances of Accounts Payable, the Company discovered that errors were recorded during the prior years. The Company is making a prior period adjustment to retained earnings to correct these entries. |
Accordingly, the accompanying balance sheet, statement of operations, and statement of cash flows for the period amended as September 30, 2010 have been retroactively adjusted as summarized below:
| Effect of Corrections |
|
As Previously
Reported |
|
|
As Restated |
|
|
Adjustment |
|
|
Reference |
|
| BALANCE SHEET |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Prepaid expenses and other |
|
$ |
189,844 |
|
|
$ |
105,973 |
|
|
$ |
83,871 |
|
|
|
1 |
|
| -Current assets |
|
$ |
1,256,447 |
|
|
$ |
1,172,576 |
|
|
$ |
83,871 |
|
|
|
1 |
|
| -Total assets |
|
$ |
1,364,904 |
|
|
$ |
1,281,033 |
|
|
$ |
83,871 |
|
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Accounts payable |
|
$ |
471,699 |
|
|
$ |
375,432 |
|
|
$ |
(100,099 |
) |
|
|
2 |
|
| -Short-term notes payable |
|
$ |
1,184,690 |
|
|
$ |
1,118,759 |
|
|
$ |
(65,931 |
) |
|
|
2 |
|
| -Total current liabilities |
|
$ |
2,301,040 |
|
|
$ |
2,135,010 |
|
|
$ |
(166,030 |
) |
|
|
2 |
|
| -Derivative liabilities |
|
$ |
182,356 |
|
|
$ |
0 |
|
|
$ |
(182,356 |
) |
|
|
2 |
|
| -Total long-term liabilities |
|
$ |
212,277 |
|
|
$ |
2,135,010 |
|
|
$ |
(166,030 |
) |
|
|
2 |
|
| -Total liabilities |
|
$ |
2,513,317 |
|
|
$ |
2,164,931 |
|
|
$ |
(166,030 |
) |
|
|
2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STOCKHOLDERS’ EQUITY(DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
|
| -Additional paid-in capital |
|
$ |
33,646,849 |
|
|
$ |
33,807,186 |
|
|
$ |
160,337 |
|
|
|
1,2 |
|
| -Accumulated deficit |
|
$ |
(34,809,606 |
) |
|
$ |
(34,705,428 |
) |
|
$ |
104,178 |
|
|
|
1,2 |
|
| -Total stockholders’ equity (deficit) |
|
$ |
(1,148,413 |
) |
|
$ |
(883,898 |
) |
|
$ |
264,515 |
|
|
|
1,2 |
|
| -Total liability and stockholder’s equity (deficit) |
|
$ |
1,364,904 |
|
|
$ |
1,281,033 |
|
|
$ |
83,871 |
|
|
|
1,2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three month period ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER (EXPENSES)INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Selling, general and administrative |
|
$ |
373,885 |
|
|
$ |
380,367 |
|
|
$ |
6,482 |
|
|
|
2 |
|
| - Total operating expense |
|
$ |
392,495 |
|
|
$ |
398,977 |
|
|
$ |
6,482 |
|
|
|
2 |
|
| - Loss from operations |
|
$ |
(389,235 |
) |
|
$ |
(395,717 |
) |
|
$ |
(6,482 |
) |
|
|
2 |
|
| -Loss from derivative liability |
|
$ |
(78,297 |
) |
|
$ |
0 |
|
|
$ |
78,297 |
|
|
|
1 |
|
| -Total other income |
|
$ |
(254,770 |
) |
|
$ |
(176,473 |
) |
|
$ |
78,297 |
|
|
|
1 |
|
| -Net loss |
|
$ |
(664,005 |
) |
|
$ |
(644,005 |
) |
|
$ |
71,815 |
|
|
|
1,2 |
|
| Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net loss per common share |
|
$ |
(0.05 |
) |
|
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
|
1,2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STATEMENT OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine month period ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| OTHER (EXPENSES)INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - Selling, general and administrative |
|
$ |
1,211,909 |
|
|
$ |
1,101,228 |
|
|
$ |
110,681 |
|
|
|
2 |
|
| - Total operating expense |
|
$ |
1,744,169 |
|
|
$ |
1,633,488 |
|
|
$ |
110,681 |
|
|
|
2 |
|
| - Loss from operations |
|
$ |
(1,734,868 |
) |
|
$ |
(1,627,187 |
) |
|
$ |
(110,681 |
) |
|
|
2 |
|
| - Gain/loss from derivative liability |
|
$ |
(182,356 |
) |
|
|
0 |
|
|
|
182,356 |
|
|
|
1 |
|
| -Accretion of debt discount |
|
$ |
(229,141 |
) |
|
$ |
(263,830 |
) |
|
$ |
34,689 |
|
|
|
1 |
|
| -Financing costs related to debt discount |
|
$ |
0 |
|
|
$ |
(147,770 |
) |
|
$ |
(147,770 |
) |
|
|
1 |
|
| - Beneficial conversion feature on loan |
|
$ |
(268,000 |
) |
|
$ |
(374,439 |
) |
|
$ |
106,439 |
|
|
|
1 |
|
| -Total other income |
|
$ |
(799,606 |
) |
|
$ |
(906,148 |
) |
|
$ |
106,542 |
|
|
|
1 |
|
| -Net loss |
|
$ |
(2,537,474 |
) |
|
$ |
(2,533,335 |
) |
|
$ |
4,139 |
|
|
|
1,2 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| STATEMENT OF CASH FLOWS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine month period ended September 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net loss at September 30, 2010 |
|
$ |
(2,537,474 |
) |
|
$ |
(2,533,335 |
) |
|
$ |
4,139 |
|
|
|
1,2 |
|
| -Derivative liability |
|
$ |
182,356 |
|
|
$ |
0 |
|
|
$ |
(182,356 |
) |
|
|
1 |
|
| -Accretion of debt discount |
|
$ |
229,141 |
|
|
$ |
263,830 |
|
|
$ |
34,689 |
|
|
|
1 |
|
| -Financing costs related to debt discount |
|
$ |
0 |
|
|
$ |
147,770 |
|
|
$ |
147,770 |
|
|
|
1 |
|
| - Beneficial conversion feature on loan |
|
$ |
268,000 |
|
|
$ |
374,439 |
|
|
$ |
106,439 |
|
|
|
1 |
|
| -Increase (decrease) in accrued Interest |
|
$ |
21,323 |
|
|
$ |
0 |
|
|
$ |
(34,686 |
) |
|
|
3 |
|
| -Increase (decrease) in accrued liabilities |
|
$ |
34,686 |
|
|
$ |
56,009 |
|
|
$ |
34,686 |
|
|
|
3 |
|
| -Net cash flows used in operating activities |
|
$ |
(1,861,470 |
) |
|
$ |
(1,750,789 |
) |
|
$ |
110,681 |
|
|
|
1 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| -Net proceeds from stock sales |
|
$ |
469,443 |
|
|
$ |
658,040 |
|
|
$ |
110,681 |
|
|
|
3 |
|
| -Net proceeds from warrants issued with stock |
|
$ |
188,597 |
|
|
$ |
0 |
|
|
$ |
(188,597 |
) |
|
|
3 |
|
| -Proceeds from shareholder loans |
|
$ |
146,000 |
|
|
$ |
0 |
|
|
$ |
(111,000 |
) |
|
|
3 |
|
| -Payments on shareholders loan |
|
$ |
(201,375 |
) |
|
$ |
(22,354 |
) |
|
$ |
113,206 |
|
|
|
3 |
|
| -Payments on capital leases |
|
$ |
0 |
|
|
$ |
(2,706 |
) |
|
$ |
(2,706 |
) |
|
|
3 |
|
| -Payment of loan costs |
|
$ |
0 |
|
|
$ |
(126,000 |
) |
|
$ |
(126,000 |
) |
|
|
1 |
|
| Net cash flows from financing activities |
|
$ |
1,777,665 |
|
|
$ |
1,666,984 |
|
|
$ |
(110,681 |
) |
|
|
1 |
|
REFERENCE
1 Correct a classification of warrants as equity with no derivative liability
2 Prior period posting errors relating to accounts payable
3 Correct classification error |
