Discontinued Operations

9 Months Ended

Sep. 30, 2011

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

2. Discontinued Operations

On July 5, 2011, the Company entered into an agreement with California Capital Equity, LLC (“CCE”) granting CCE an exclusive license (even as to the Company) leaving the Company without any continuing rights in or to its intellectual property.  Additionally, as of July 31, 2011, the Company had defaulted on all of its secured and unsecured notes payable.  On August 1, 2011 all of the Company’s remaining assets were sold during a public foreclosure sale pursuant to remedies available under the terms of the secured notes.  For further details on these transactions, see the disclosures in the Forms 8-K filed by the Company on July 11, 2011 and August 4, 2011.  As a result of the above transactions, the Company classified all of its operations as discontinued operations, except certain general and administrative expenses related to the public shell company, such as EDGAR fees, audit fees and legal expenses related to review of public filings and expenses related to the convertible debt.

Following is a summary of assets and liabilities included in discontinued operations as of:

	September 30, 2011		December 31, 2010
	(Unaudited)
ASSETS
CURRENT ASSETS
Accounts receivable, net of allowance for doubtful accounts of $0	$	-		143,568
Inventories, net		-		515,662
Prepaid interest		-		15,441
Prepaid insurance		30,103		16,133
License fees		-		32,850
Other current assets		-		14,093
Total current assets		30,103		737,747
PROPERTY AND EQUIPMENT, NET		-		40,527
DEPOSITS		-		1,560
TOTAL ASSETS	$	30,103	$	779,834
LIABILITIES
CURRENT LIABILITIES
Accounts payable	$	2,984	$	95,615
Current portion of legal settlement payable		-		100,955
Deferred revenue		-		11,108
Accrued liabilities		-		579,249
Total current liabilities		2,984		786,927
LEGAL SETTLEMENT PAYABLE, NET OF CURRENT PORTION		-		14,931
TOTAL LIABILITIES	$	2,984	$	801,858

Following are operating results included in discontinued operations for the three and nine months ended:

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
REVENUE, NET	$	13,731		$	526,617		$	367,012		$	1,346,305
COST OF SALES		3,799			288,407			222,288			747,657
GROSS PROFIT		9,932			238,210			144,724			598,648
OPERATING EXPENSES
Salary expense and salary related costs		131,751			143,220			353,198			515,465
Research and development		-			2,993			5,537			20,135
Marketing and selling		-			48,945			-			60,808
General and administrative		42,930			60,291			158,435			216,512
Total operating expenses		174,681			255,449			517,170			812,920
Loss from operations		(164,749	)		(17,239	)		(372,446	)		(214,272	)
GAIN (LOSS) ON DISPOSAL OF DISCONTINUED OPERATIONS
Loss on foreclosure		(431,034	)		-			(431,034	)		-
Gain on sale of intellectual property		384,000			-			384,000			-
Loss on sale of property and equipment		-			-			(1,697	)		-
Miscellaneous income		47,646			-			572,711			86,619
Total gain (loss) on disposal of discontinued operations		612			-			523,980			86,619
Income (loss) before income taxes		(164,137	)		(17,239	)		151,534			(127,653	)
Income tax benefit		-			-			-			-
NET INCOME (LOSS)	$	(164,137	)	$	(17,239	)	$	151,534		$	(127,653	)

Loss on Foreclosure

On June 17, 2011, Raptor Acquisition, LLC, a wholly-owned subsidiary of California Capital Equity, LLC (“CCE”) purchased all of the convertible notes payable from the previous note holders in an outside transaction.  On July 6, 2011, CCE provided the Company with notice of default on the notes payable and demanded repayment in full.  They also informed of their intent to exercise their rights and remedies against the Company’s assets.  On August 1, 2011, CCE, in its capacity as a secured lender, held a public foreclosure sale of substantially all of the Company’s assets.  CCE was the only bidder and the assets of the Company were acquired for $100,000.

The following assets were acquired by CCE, resulting in a loss on foreclosure of $431,034 for the three and nine months ended September 30, 2011.

Net proceeds	$	100,000
Net book value of assets acquired:
Inventories		510,083
Property and equipment		20,951
		531,034
Loss on foreclosure	$	(431,034	)

Gain on Sale of Intellectual Property

Effective July 1, 2011, the Company sold an exclusive, worldwide, perpetual, irrevococable, fully paid, transferable and sublicensable right and license in all of the Company’s registered patent and patent applications for $384,000.  The license is exclusive even to the Company, such that the Company no longer has any rights to its intellectual property.  Since the Company’s carrying value of its intellectual property was $0, the Company recorded a gain on the sale of intellectual property of $384,000 for the three and nine months ended September 30, 2011.