Note 29 - Restatement of Previously Issued Financial Statements

12 Months Ended

Dec. 31, 2011

Accounting Changes and Error Corrections [Text Block]

29.  Restatement of Previously Issued Financial Statements

In November 2012, the Company identified an error related to the Company’s accounting for an embedded derivative liability associated with the Company’s senior secured convertible notes during the periods ended June 30, 2012 and March 31, 2012 and the years ended December 31, 2011 and 2010 and interim periods therein, as described below, which resulted in the restatement of previously issued financial statements. Specifically, management determined that the Company’s convertible notes contain a conversion reset provision that lowers the stated conversion price under certain circumstances, which requires the conversion feature to be accounted for as an embedded derivative that must be marked to fair value each reporting period.  As a result, the Company should not have reversed the carrying value of the liability for the embedded derivative in the quarter ended June 30, 2010 and should have continued to mark such liability to fair value in its financial statements for the quarterly periods from June 30, 2010 through June 30, 2012.  Additionally, the Company determined that the methodology utilized to determine the fair value of the embedded derivative liability for the quarter ended March 31, 2010 was not appropriate as it did not properly consider a reset feature contained within the related convertible notes and consequently, that the conclusion that the issuance of the senior secured convertible notes in March 2010 represented a troubled debt restructuring was incorrect. As a result of the re-assessment of the transaction, the Company has concluded that the addition of the conversion feature to the notes indicates the new notes are substantially different from the previously issued notes and as a result, the transaction should have been accounted for as a debt extinguishment.

As a result of the restatement, the Company was unable to finalize and file its Form 10-Q for the period ended September 30, 2012 by the SEC’s extended filing deadline of November 21, 2012.  Therefore, the Company gave the VPC Parties notice that an event of default occurred under the Restated Finance Agreement by virtue of the Company’s failure to timely file such Form 10-Q.

As a result of the aforementioned accounting errors, the financial statements presented herein as well as footnotes 8, 9, 20, 24 and 27 have been amended and restated to reflect the following accounting corrections:

· For the quarter ended March 31, 2010: (i) the recordation of the issuance of the notes at fair value; (ii) an adjustment to the value of the embedded derivative liability and initial debt discount recorded associated with such liability upon issuance of the notes; (iii) the reclassification of amounts associated with the transaction previously reflected as debt issuance expense to debt discount; and (iv) the recordation of a loss on extinguishment of debt, including the reclassification of transaction costs and debt discount associated with prior transactions previously reflected within debt discount.

· For the quarter ended June 30, 2010: reversal of the accounting adjustment that was recorded to reverse the embedded derivative liability through additional paid-in capital.

· For each quarterly period from March 31, 2010 through December 31, 2011: (i) the recordation of adjustments to reflect the embedded derivative liability at fair value at the end of each quarter with changes being reflected within the statements of operations; and (ii) the recordation of adjustments to non-cash interest expense based on the revised debt discount and to reflect such interest expense based on the effective interest rate method. 

The following represents a summary of the adjustments by financial statement line item:

	Three months ended
	March 31, 2010			June 30, 2010			September 30, 2010			December 31, 2010			March 31, 2011			June 30, 2011			September 30, 2011			December 31, 2011
Balance sheet data:
Deferred financing costs	$	819,312		$	796,734		$	770,500		$	740,810		$	705,255		$	649,977		$	588,264		$	520,474
Total assets		819,312			796,734			770,500			740,810			705,255			649,977			588,264			520,474
Embedded conversion feature liability		15,937,000			30,290,000			23,160,000			22,860,000			49,300,000			38,630,000			34,980,000			12,470,000
Notes payable - Victory Park, net		512,419			67,451			(346,016	)		(729,733	)		(1,062,964	)		(1,226,400	)		(1,334,442	)		(1,390,170	)
Total liabilities		16,449,419			30,357,451			22,813,984			22,130,267			48,237,036			37,403,600			33,645,558			11,079,830
Additional paid-in capital		-			(16,724,000	)		(16,724,000	)		(16,724,000	)		(16,724,000	)		(16,724,000	)		(16,724,000	)		(16,724,000	)
Accumulated deficit		(15,630,107	)		(12,836,714	)		(5,319,481	)		(4,665,457	)		(30,807,781	)		(20,029,623	)		(16,333,294	)		6,164,644
Stockholders' deficit		(15,630,107	)		(29,560,714	)		(22,043,481	)		(21,389,457	)		(47,531,781	)		(36,753,623	)		(33,057,294	)		(10,559,356	)
Statements of operations data:
Gain (loss) on change in fair value of embedded conversion feature		(3,346,000	)		2,371,000			7,130,000			300,000			(26,440,000	)		10,670,000			3,650,000			22,510,000
Loss on extinguishment of debt		(14,381,239	)		-			-			-			-			-			-			-
Debt issuance costs		2,007,534			-			-			-			-			-			-			-
Interest expense		89,598			422,393			387,233			354,024			297,676			108,158			46,329			(12,062	)
Net income (loss)		(15,630,107	)		2,793,393			7,517,233			654,024			(26,142,324	)		10,778,158			3,696,329			22,497,938

The following represents a summary of the previously reported and restated balances for each financial statement line item that was restated:

	Three months ended
	March 31, 2011						June 30, 2011						September 30, 2011						December 31, 2011
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
Balance sheet data:
Deferred financing costs	$	160,916		$	866,171		$	140,375		$	790,352		$	119,834		$	708,098		$	99,293		$	619,767
Total assets		23,492,959			24,198,214			21,796,519			22,446,496			17,499,547			18,087,811			17,674,695			18,195,169
Embedded conversion feature liability		-			49,300,000			-			38,630,000			-			34,980,000			-			12,470,000
Notes payable - Victory Park, net		26,606,444			25,543,480			27,422,588			26,196,188			28,238,732			26,904,290			34,073,626			32,683,456
Total liabilities		69,898,650			118,135,686			76,330,010			113,733,610			78,872,684			112,518,242			72,812,503			83,892,333
Additional paid-in capital		129,894,737			113,170,737			130,200,936			113,476,936			130,649,182			113,925,182			132,415,958			115,691,958
Accumulated deficit		(177,225,571	)		(208,033,352	)		(185,661,245	)		(205,690,868	)		(192,952,558	)		(209,285,852	)		(188,505,922	)		(182,341,278	)
Stockholders' deficit		(46,405,691	)		(93,937,472	)		(54,533,491	)		(91,287,114	)		(61,373,137	)		(94,430,431	)		(55,137,808	)		(65,697,164	)
Statements of operations data:
Gain (loss) on change in fair value of embedded conversion feature		-			(26,440,000	)		-			10,670,000			-			3,650,000			-			22,510,000
Interest expense		(2,736,216	)		(2,438,540	)		(2,797,860	)		(2,689,702	)		(2,861,773	)		(2,815,444	)		(2,528,118	)		(2,540,180	)
Net income (loss)		(6,645,308	)		(32,787,632	)		(8,435,674	)		2,342,484			(7,291,313	)		(3,594,984	)		4,446,636			26,944,574
Net income (loss) per share - basic		(0.07	)		(0.35	)		(0.09	)		0.03			(0.08	)		(0.04	)		0.05			0.29
Net income (loss) per share - diluted		(0.07	)		(0.35	)		(0.09	)		0.02			(0.08	)		(0.04	)		0.03			0.18
Statements of cash flows data:
Net income (loss)		(6,645,308	)		(32,787,632	)		#			#			#			#			#			#
Amortization of debt discounts and deferred financing fees		836,691			539,015			#			#			#			#			#			#
(Gain) loss on change in fair value of embedded conversion feature		-			26,440,000			#			#			#			#			#			#

# See year to date cash flow information presented below

	Three months ended
	March 31, 2010						June 30, 2010						September 30, 2010						December 31, 2010
	As Reported			As Restated			As Reported			As Restated			As Reported			As Restated			As Reported			As Restated
Balance sheet data:
Deferred financing costs	$	243,080		$	1,062,392		$	222,539		$	1,019,273		$	201,998		$	972,498		$	181,457		$	922,267
Total assets		31,212,187			32,031,499			27,602,797			28,399,531			25,666,786			26,437,286			28,470,943			29,211,753
Embedded conversion feature liability		18,633,000			34,570,000			-			30,290,000			-			23,160,000			-			22,860,000
Notes payable - Victory Park, net		23,341,868			23,854,287			24,158,012			24,225,463			24,974,156			24,628,140			25,790,300			25,060,567
Total liabilities		77,300,294			93,749,713			60,329,411			90,686,862			62,501,771			85,315,755			68,899,659			91,029,926
Additional paid-in capital		111,649,053			111,649,053			128,653,326			111,929,326			128,927,859			112,203,859			129,227,058			112,503,058
Accumulated deficit		(158,658,488	)		(174,288,595	)		(162,302,276	)		(175,138,990	)		(166,685,833	)		(172,005,314	)		(170,580,263	)		(175,245,720	)
Stockholders' deficit		(46,088,107	)		(61,718,214	)		(32,726,614	)		(62,287,328	)		(36,834,985	)		(58,878,466	)		(40,428,716	)		(61,818,173	)
Statements of operations data:
Gain (loss) on change in fair value of embedded conversion feature		(10,034,000	)		(13,380,000	)		1,909,000			4,280,000			-			7,130,000			-			300,000
Loss on extinguishment of debt		-			(14,381,239	)		-			-			-			-			-			-
Debt issuance costs		(2,007,534	)		-			-			-			-			-			-			-
Interest expense		(1,522,840	)		(1,433,242	)		(2,595,646	)		(2,173,253	)		(2,621,071	)		(2,233,838	)		(2,552,216	)		(2,198,192	)
Net income (loss)		(15,946,719	)		(31,576,826	)		(3,643,788	)		(850,395	)		(4,383,557	)		3,133,676			(3,894,430	)		(3,240,406	)
Net income (loss) per share - basic		(0.17	)		(0.34	)		(0.04	)		(0.01	)		(0.05	)		0.03			(0.04	)		(0.04	)
Net income (loss) per share - diluted		(0.17	)		(0.34	)		(0.04	)		(0.01	)		(0.05	)		0.03			(0.04	)		(0.04	)
Statements of cash flows data:
Net income (loss)		(15,946,719	)		31,576,829			#			#			#			#			#			#
Amortization of debt discounts and deferred financing fees		334,681			245,086			#			#			#			#			#			#
Loss on extinguishment of debt		-			14,381,289			#			#			#			#			#			#
Debt issuance costs		2,007,534			-			#			#			#			#			#			#
(Gain) loss on change in fair value of embedded conversion feature		10,034,000			13,380,000			#			#			#			#			#			#

# See year to date cash flow information presented below

	Six months ended
	June 30, 2011						June 30, 2010
	As Reported			As Restated			As Reported			As Restated
Statements of operations data:
Gain (loss) on change in fair value of embedded conversion feature	$	-		$	(15,770,000	)	$	(8,125,000	)	$	(9,100,000	)
Loss on extinguishment of debt		-			-			-			(14,381,239	)
Debt issuance costs		-			-			(2,007,534	)		-
Interest expense		(5,534,076	)		(5,128,242	)		(4,118,486	)		(3,606,495	)
Net income (loss)		(15,080,982	)		(30,445,148	)		(19,590,507	)		(32,427,221	)
Net income (loss) per share - basic and diluted		(0.16	)		(0.33	)		(0.21	)		(0.35	)
Statements of cash flows data:
Net income (loss)		(15,080,982	)		(30,445,148	)		(19,590,507	)		(32,427,221	)
Amortization of debt discounts and deferred financing fees		1,673,379			1,267,545			1,171,366			659,375
Loss on extinguishment of debt		-			-			-			14,381,239
Debt issuance costs		-			-			2,007,534			-
(Gain) loss on change in fair value of embedded conversion feature		-			15,770,000			8,125,000			9,100,000

	Nine months ended
	September 30, 2011						September 30, 2010
	As Reported			As Restated			As Reported			As Restated
Statements of operations data:
Gain (loss) on change in fair value of embedded conversion feature	$	-		$	(12,120,000	)	$	(8,125,000	)	$	(1,970,000	)
Loss on extinguishment of debt		-			-			-			(14,381,239	)
Debt issuance costs		-			-			(2,007,534	)		-
Interest expense		(8,395,849	)		(7,943,686	)		(6,739,557	)		(5,840,333	)
Net income (loss)		(22,372,295	)		(34,040,132	)		(23,974,064	)		(29,293,545	)
Net income (loss) per share - basic and diluted		(0.24	)		(0.37	)		(0.26	)		(0.32	)
Statements of cash flows data:
Net income (loss)		(22,372,295	)		(34,040,132	)		(23,574,064	)		(29,293,548	)
Amortization of debt discounts and deferred financing fees		2,510,055			2,057,892			2,008,051			1,108,827
Loss on extinguishment of debt		-			-			-			14,381,239
Debt issuance costs		-			-			2,007,534			-
(Gain) loss on change in fair value of embedded conversion feature		-			12,120,000			8,125,000			1,970,000

	Twelve months ended
	December 31, 2011						December 31, 2010
	As Reported			As Restated			As Reported			As Restated
Statements of operations data:
Gain (loss) on change in fair value of embedded conversion feature	$	-		$	10,390,000		$	(8,125,000	)	$	(1,670,000	)
Loss on extinguishment of debt		-			-			-			(14,381,239	)
Debt issuance costs		-			-			(2,007,534	)		-
Interest expense		(10,923,967	)		(10,483,866	)		(9,291,773	)		(8,038,525	)
Net income (loss)		(17,925,659	)		(7,095,558	)		(27,868,494	)		(32,533,951	)
Net income (loss) per share - basic and diluted		(0.19	)		(0.08	)		(0.30	)		(0.35	)
Statements of cash flows data:
Net income (loss)		(17,925,659	)		(7,095,558	)		(27,868,494	)		(32,533,951	)
Amortization of debt discounts and deferred financing fees		3,346,749			2,906,648			2,844,736			1,591,485
Loss on extinguishment of debt		-			-			-			14,381,239
Debt issuance costs		-			-			2,007,534			-
(Gain) loss on change in fair value of embedded conversion feature		-			(10,390,000	)		8,125,000			1,670,000