RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

9 Months Ended

Sep. 30, 2013

Notes to Financial Statements

RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1A: RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

We have restated our consolidated financial statements as of and for the year ended December 31, 2012 relating to the Company’s accounting for derivative liabilities and certain other accounts. We had recorded the derivative liabilities without accurately reflecting the effect of conversion of certain convertible notes and proper classification of some of the liabilities.

The impact of the restatement on the consolidated financial statements as of and for the year ended December 31, 2012, is shown in the following table:

As reported				Adjustment			As restated
Balance sheet data — December 31, 2012
Cash	$	50,679		$	(16,840	)	$	33,839
Total Assets		104,212			(16,840	)		87,372
Accounts payable and accrued liabilities		2,058,556			(116,840	)		1,941,716
Derivative liability – conversion option		798,300			69,275			867,575
Derivative liability - warrants		677,086			300,000			977,086
Convertible notes payable		1,376,230			100,000			1,476,230
Due to related parties		366,697			6,649			373,346
Total liabilities		5,770,809			359,084			6,129,893
Additional paid-in capital		43,545,947			(62,000	)		43,483,947
Deficit accumulated during the development stage		(49,580,159	)		(313,924	)		(49,894,083	)
Stockholders’ deficiency	$	(5,666,597	)	$	(375,924	)	$	(6,042,521	)

As reported				Adjustment			As restated
Consolidated Statement of Operations data For the year ended December 31, 2012
Management fees	$	295,600		$	6,649		$	302,249
Net Loss Before Other Items		(6,222,798	)		(6,649	)		(6,229,447	)
Changes in fair value of derivative liabilities		536,527			(307,375	)		229,252
NET LOSS	$	(5,857,943	)	$	(313,924	)	$	(6,171,867	)

As reported				Adjustment			As restated
Consolidated Statement of Operations data From July 27, 1999 (inception) to December 31, 2012
Management fees	$	3,067,654		$	6,649		$	3,074,303
Net Loss Before Other Items		(41,491,894	)		(6,649	)		(41,498,543	)
Changes in fair value of derivative liabilities		4,611,667			(307,375	)		4,304,392
NET LOSS	$	(49,580,159	)	$	(313,924	)	$	(49,894,083	)