Restatement of Previously Issued Financial Statements

12 Months Ended

Dec. 31, 2012

Restatement of Previously Issued Financial Statements

Note 3 Restatement of Previously Issued Financial Statements

At September 30, 2012, as a result of the Company's historical and ongoing operating losses, the Company determined that it would not, using the criteria set forth in ASC Topic 740, “Income Taxes”, be able to realize the value of its then recorded deferred tax asset and, therefore, recorded a valuation allowance against the carrying value of said asset and a charge to income tax expense.

On March 5, 2013, the Company's audit committee of its Board of Directors concluded that the Company erred by not reflecting this charge against its 2011 results of operations and restating its prior year financial statements.  Accordingly, on March 5, 2013, the audit committee of the Board of Directors of the Company determined that the Company's consolidated financial statements for the year ended December 31, 2011 and the quarterly periods ended March 31, 2012, June 30, 2012 and September 30, 2012 should no longer be relied upon.

By way of background, at December 31, 2011, the Company had a carrying value of $3,949,819 with respect to its deferred tax asset (of which, $17,085 was included within prepaid expenses and other current assets).  As of the date of those financial statements, the Company mistakenly concluded that sufficient positive evidence existed at such time to conclude that it was more likely than not that this deferred tax asset would be realized.  This conclusion was based on management's review, at the time, of internal projections, as well as a consideration of the cost reduction activities of the Company over the preceding several years, the acquisitions completed and contemplated by the Company at the time and access to capital on a basis accretive to net income.

To address the foregoing matter, the Company has restated its financial statements for the fiscal year ended December 31, 2011 and for the quarterly periods ended March 31, June 30 and September 30, 2012, as follows (all prior to the required reclassification of discontinued operations to conform to current year's presentation.  See Note 11, Discontinued Operations):

As of and for the year ended December 31, 2011

		As of December 31, 2011
		As Reported		As Restated
Prepaid expenses and other assets	$	160,931	$	143,846
Total current assets		1,343,804		1,326,719
Deferred tax assets, net		3,932,734		-
Total other assets		5,206,467		1,273,733
Total assets		12,201,630		8,251,811
Accumulated deficit		(15,266,959)		(19,216,778)
Total stockholders' equity		8,064,695		4,114,876
Total liabilities and stockholders' equity		12,201,630		8,251,811

		For the Year Ended
		December 31, 2011
		As Reported		As Restated
Income tax benefit (expense)	$	1,236,944	$	(2,712,875)
Net loss		(2,448,159)		(6,397,978)
Basic and diluted loss per share		(0.10)		(0.27)

As of and for the three months ended March 31, 2012

				As of March 31, 2012
				As Reported		As Restated
ASSETS
Current Assets
	Cash and cash equivalents		$	245,214	$	245,214
	Accounts receivable trade			703,010		703,010
	Prepaid expenses and other assets			106,681		106,681
		Total current assets		1,054,905		1,054,905
Property and Equipment, at cost
	Gas distribution, transmission and gathering			15,293,005		15,293,005
	Office furniture and other equipment			173,687		173,687
				15,466,692		15,466,692
	Less accumulated depreciation, depletion and amortization			(8,902,081)		(8,902,081)
				6,564,611		6,564,611
Other Assets
	Deferred tax assets, net			3,999,791		-
		Intangible assets, net of accumulated amortization of $799,954 and $771,580 as of March 31, 2012 and December 31, 2011, respectively		1,200,647		1,200,647
	Other			45,208		45,208
				5,245,646		1,245,855
		Total assets	$	12,865,162	$	8,865,371
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable		$	539,806	$	539,806
	Accrued expenses and other liabilities			136,813		136,813
	Asset retirement obligation			347,078		347,078
	Current maturities of long-term debt			531,637		531,637
		Total current liabilities		1,555,334		1,555,334
Asset retirement obligation				713,727		713,727
Long term debt, net of current maturities				2,410,350		2,410,350
Other				200,000		200,000
		Total liabilities		4,879,411		4,879,411
Commitments and contingencies
Stockholders' Equity
		Preferred stock, $1.00 par value, 10,000 shares authorized, no shares issued and outstanding, respectively		-		-
		Common stock, $0.01 par value, 150,000,000 shares authorized, 23,674,602 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively		236,746		236,746
	Additional paid-in capital			23,112,741		23,112,741
	Accumulated deficit			(15,363,736)		(19,363,527)
		Total stockholders' equity		7,985,751		3,985,960
		Total liabilities and stockholders' equity	$	12,865,162	$	8,865,371

			For the Three Months Ended March 31, 2012
			As Reported		As Restated
Operating revenues
	Sales of natural gas	$	962,421	$	962,421
	Transportation of natural gas and liquids		398,226		398,226
	Reimbursables		137,131		137,131
			1,497,778		1,497,778
Operating costs and expenses
	Cost of natural gas purchased		786,621		786,621
	Operation and maintenance		109,984		109,984
	Reimbursable costs		128,231		128,231
	General and administrative		388,946		388,946
	Acquisition costs		30,642		30,642
	Asset retirement obligation accretion		25,023		25,023
	Depreciation and amortization		125,386		125,386
			1,594,833		1,594,833
Operating loss			(97,055)		(97,055)
Other expense
	Interest expense, net		(34,339)		(34,339)
	Other, net		(9,632)		(9,632)
	Other expense, net		(43,971)		(43,971)
Loss before income taxes			(141,026)		(141,026)
Income tax benefit (expense)			44,249		(5,723)
Net loss		$	(96,777)	$	(146,749)
Basic and diluted loss per share		$	-	$	(0.01)
	Weighted average number of basic and diluted common shares outstanding		23,674,602		23,674,602

As of and for the three and six months ended June 30, 2012

				As of June 30, 2012
				As Reported		As Restated
ASSETS
Current Assets
	Cash and cash equivalents		$	182,122	$	182,122
	Accounts receivable trade			724,863		724,863
	Prepaid expenses and other assets			264,939		264,939
		Total current assets		1,171,924		1,171,924
Property and Equipment, at cost
	Gas distribution, transmission and gathering			15,305,815		15,305,815
	Office furniture and other equipment			173,687		173,687
				15,479,502		15,479,502
	Less accumulated depreciation, depletion and amortization			(9,006,396)		(9,006,396)
				6,473,106		6,473,106
Other Assets
	Deferred tax assets, net			4,016,054		-
		Intangible assets, net of accumulated amortization of $828,327 and $771,580 as of June 30, 2012 and December 31, 2011, respectively		1,172,273		1,172,273
	Other			36,485		36,485
				5,224,812		1,208,758
		Total assets		$   12,869,842		$ 8,853,788
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable		$	598,644	$	598,644
	Accrued expenses and other liabilities			55,493		55,493
	Notes payable - insurance			148,674		148,674
	Asset retirement obligation			355,447		355,447
	Current maturities of long-term debt			2,811,957		2,811,957
		Total current liabilities		3,970,215		3,970,215
Asset retirement obligation				729,407		729,407
Long term debt, net of current maturities				-		-
Other				200,000		200,000
		Total liabilities		4,899,622		4,899,622
Commitments and contingencies
Stockholders' Equity
		Preferred stock, $1.00 par value, 10,000 shares authorized, no shares issued and outstanding, respectively		-		-
		Common stock, $0.01 par value, 150,000,000 shares authorized, 23,744,047 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively		237,440		237,440
	Additional paid-in capital			23,129,353		23,129,353
	Accumulated deficit			(15,396,573)		(19,412,627)
		Total stockholders' equity		7,970,220		3,954,166
		Total liabilities and stockholders' equity	$	12,869,842	$	8,853,788

				For the Three Months Ended				For the Six Months Ended
				June 30, 2012				June 30, 2012
				As Reported		As Restated		As Reported		As Restated
Operating revenues
	Sales of natural gas	$		789,762	$	789,762	$	1,752,183	$	1,752,183
	Transportation of natural gas and liquids		405,997			405,997		804,223		804,223
	Reimbursables			155,708		155,708		292,839		292,839
				1,351,467		1,351,467		2,849,245		2,849,245
Operating costs and expenses
	Cost of natural gas purchased			628,147		628,147		1,414,768		1,414,768
	Operation and maintenance			83,601		83,601		188,629		188,629
	Reimbursable costs			164,608		164,608		292,839		292,839
	General and administrative			325,404		325,404		714,350		714,350
	Acquisition costs			(12,654)		(12,654)		17,988		17,988
	Asset retirement obligation accretion			25,632		25,632		50,655		50,655
	Depreciation and amortization			132,688		132,688		258,074		258,074
				1,347,426		1,347,426		2,937,303		2,937,303
Operating income (loss)				4,041		4,041		(88,058)		(88,058)
Other income (expense)
	Interest expense, net			(50,015)		(50,015)		(84,354)		(84,354)
	Other, net			1,866		1,866		(12,722)		(12,722)
	Other expense, net			(48,149)		(48,149)		(97,076)		(97,076)
Loss before income taxes				(44,108)		(44,108)		(185,134)		(185,134)
Income tax benefit				11,271		(4,992)		55,520		(10,715)
Net loss		$		(32,837)	$	(49,100)	$	(129,614)	$	(195,849)
Basic and diluted loss per share		$		-	$	-	$	(0.01)	$	(0.01)
	Weighted average number of basic and diluted common shares outstanding			23,698,259		23,698,259		23,686,431		23,686,431

For the three and nine months ended September 30, 2012

The aforementioned restatements had no impact on the Company's consolidated balance sheet as of September 30, 2012.

			For the Three Months Ended				For the Nine Months Ended
			September 30, 2012				September 30, 2012
			As Reported		As Restated		As Reported		As Restated
Operating revenues
	Sales of natural gas	$	909,891	$	909,891	$	2,662,074	$	2,662,074
	Transportation of natural gas and liquids		366,051		366,051		1,170,274		1,170,274
	Reimbursables		129,941		129,941		422,780		422,780
			1,405,883		1,405,883		4,255,128		4,255,128
Operating costs and expenses
	Cost of natural gas purchased		751,556		751,556		2,166,324		2,166,324
	Operation and maintenance		92,998		92,998		281,627		281,627
	Reimbursable costs		129,941		129,941		422,780		422,780
	General and administrative		310,023		310,023		1,024,373		1,024,373
	Acquisition costs		35,617		35,617		53,605		53,605
	Asset retirement obligation accretion		25,819		25,819		76,474		76,474
	Asset impairments		3,075,803		3,075,803		3,075,803		3,075,803
	Depreciation and amortization		131,244		131,244		389,318		389,318
			4,553,001		4,553,001		7,490,304		7,490,304
Operating income (loss)			(3,147,118)		(3,147,118)		(3,235,176)		(3,235,176)
Other income (expense)
	Interest expense, net		(45,321)		(45,321)		(129,675)		(129,675)
	Other, net		248,351		248,351		235,629		235,629
	Other expense, net		203,030		203,030		105,954		105,954
Loss before income taxes			(2,944,088)		(2,944,088)		(3,129,222)		(3,129,222)
Income tax benefit (expense)			(4,008,653)		7,401		(3,953,133)		(3,314)
Net loss		$	(6,952,741)	$	(2,936,687)	$	(7,082,355)	$	(3,132,536)
Basic and diluted loss per share		$	(0.29)	$	(0.12)	$	(0.30)	$	(0.13)
	Weighted average number of basic and diluted common shares outstanding		23,859,802		23,859,802		23,744,643		23,744,643

The aforementioned restatements had no impact on the Company's reported cash flows from operating activities, investing activities, or financing activities within its consolidated statement of cash flows for either the year ended December 31, 2011, or the three, six or nine month periods ended March 31, 2012, June 30, 2012 or September 30, 2012.