Note 15: Quarterly adjustments

On May 10, 2011 our Principal Executive Officer, Principal Financial Officer and the Chairman of our Audit Committee concluded that our previously issued consolidated financial statements for the three months ended March 31, 2010, the six months ended June 30, 2010 and the nine months ended September 30, 2010 should no longer be relied upon. The consolidated financial statements for the three months ended March 31, 2010 and for the six months ended June 30, 2010 were included in amendments to our Current Report on Form 8-K which was originally filed with the Securities and Exchange Commission on August 16, 2010. The amendments were filed with the Securities and Exchange Commission on August 16, 2010 and October 15, 2010, respectively. The consolidated financial statements for the nine months ended September 30, 2010 were included in our Quarterly Report on Form 10-Q, which was filed with the Securities and Exchange Commission on November 22, 2010. The errors in the consolidated quarterly financial statements include the following:

(i)

The notes payable were understated by $359,405;

(ii)

Expenses incurred by related parties on behalf of the “Company” were misstated; and

(iii)

Dividends to Innolog’s former sole stockholder were misstated.

The effects of the adjustments are illustrated below:

	Originally			Adjustment	Restated
	Reported			Required	Amounts
Three months ended
March 31, 2010

Consolidated Balance Sheet
Total Assets	$	4,866,665		(i) Increase in deposit of $19,846	$	4,886,511
Total Liabilities	$	7,995,244		(i) increase in notes payable of $359,405	$	8,354,649
Total Stockholder’s Equity	$	(3,128,579	)	(ii) increase in dividend paid of $77,185	$	(3,468,138	)
				(ii) increase in accumulated deficit of $264,018
Consolidated
Statement of Operations
Net Loss	$	(436,043	)	(ii) increase in other expense of $264,018	$	(700,061	)
				(ii) increase in net loss of $264,018
Consolidated Statement of Stockholder’s Equity
Common Stock	$	20,000		No adjustment	$	20,000
Preferred Stock	$	0		No adjustment	$	0
Additional Paid in Capital	$	520,000		No adjustment	$	520,000
Accumulated Deficit	$	(3,247,317	)	(ii) increase in dividends paid of $77,185	$	(3,586,876	)
				(ii) increase in net loss of $264,018

Six months ended
June 30, 2010

Consolidated Balance Sheet
Total Assets	$	4,365,000		(i) Increase in deposit of $19,846	$	4,384,846
Total Liabilities	$	7,039,209		(i) increase in notes payable of $359,405	$	7,398,614
Total Stockholder’s Equity	$	(2,674,209	)	(ii) increase in dividend paid of $415,150	$	(3,013,769	)
				(ii) decrease in accumulated deficit of $75,590
Consolidated Statement of Operations
Net Loss	$	(553,772	)	(ii) increase in other expense of $151,523	$	(478,182	)
				(ii) decrease in bad debt expense of $227,113
				(ii) decrease in net loss of $75,590
Consolidated Statement of Stockholder’s Equity
Common Stock	$	20,000		No adjustment	$	20,000
Preferred Stock	$	36,965		No adjustment	$	36,965
Additional Paid in Capital	$	852,683		No adjustment	$	852,683
Accumulated Deficit	$	(3,583,857	)	(ii) increase in dividends paid of $415,150	$	(3,923,417	)
				(ii) decrease in net loss of $75,590

Nine Months Ended
September 30, 2010

Consolidated Balance Sheet
Total Assets	$	1,189,321		(i) Increase in deposit of $19,846	$	1,209,167
Total Liabilities	$	7,738,380		(i) increase in notes payable of $359,405	$	8,097,785
Total Stockholder’s Equity	$	(6,549,059	)	(ii) increase in dividend paid of $415,150	$	(6,888,619	)
				(ii) decrease in accumulated deficit of $75,590
Consolidated Statement of Operations
Net Loss	$	(4,432,622	)	(ii) increase in other expense of $7,885	$	(4,357,032	)
				(ii) decrease in bad debt expense of $83,475
				(ii) decrease in net loss of $75,590
Consolidated Statement of Stockholder’s Equity
Common Stock	$	13,630		No adjustment	$	13,630
Preferred Stock	$	37,365		No adjustment	$	37,365
Additional Paid in Capital	$	862,653		No adjustment	$	862,653
Accumulated Deficit	$	(7,462,707	)	(ii) increase in dividends paid of $415,150	$	(7,802,267	)
				(ii) decrease in net loss of $75,590

The Company intends to file an amended Form 8-K and an amended Form 10-Q as soon as practicable. The adjustments disclosed above have been included in our consolidated financial statements for the year ended December 31, 2010 and six months ended June 30, 2011.

On July 6, 2011, the Company borrowed $50,000 from an unrelated trust. The loan carried a flat fee of $4,000 and a maturity date of July 13, 2011. The loan is currently past due.

On July 11, 2011, the Company entered into an advisory agreement with a related party who is also a greater than 5% stockholder. In exchange for services rendered, the Company issued warrants to purchase 10,000,000 common shares with a strike price of $.06 and an expiration date of 5 years.

On July 29, 2011, the Company borrowed $20,000 from an unrelated lender. The loan carried a flat fee of $2,000 and a maturity date of August 27, 2011. In addition, warrants of 10,000 were granted for the purchase of common stock with a strike price of $.075 and an expiration date of 5 years.

During the months of July and August , the Company borrowed a total of $75,000 from a related party for working capital. Maturity dates range from August 15, 2011 to September 1, 2011. The loans carried a flat fee of 10%.

On August 1, 2011, the Company borrowed $200,000 from an unrelated lender. The loan carried a flat fee of $20,000 and a maturity date of September 14, 2011. In addition, warrants of 100,000 were granted for the purchase of common stock with a strike price of $.075 and an expiration date of 5 years.

On August 1, 2011, the Company borrowed $25,000 from an unrelated trust. The loan carried a flat fee of $1,000 and a maturity date of August 3, 2011. The loan is currently past due.

On August 8, 2011, the Company borrowed funds totaling $225,000 from unrelated entities. The loans carried a flat fee ranging from 17.6% to 37.6% and a maturity date of November 8, 2011. In addition, warrants of 450,000 were granted for the purchase of common stock with a strike price of $.07 and an expiration date of 5 years. These loans were also guaranteed by a related party who is a director of the Company.