Prior Period Adjustment

9 Months Ended

Sep. 30, 2012

Notes to Financial Statements

Note 2 - PRIOR PERIOD ADJUSTMENT

The financial statements of the Company as of and for the three and nine months ended September 30, 2011 and for the period from January 1, 1999 (inception) to September 30, 2011 have been restated as a result of management’s determination that the Company had misclassified warrants and convertible preferred stock issued to investors in the private placement offering occurring on September 7, 2007. The warrants and convertible preferred stock were previously reported as equity. Upon further review of the terms of the respective private placement agreements, management concluded that the warrants should have been classified as a liability and the preferred stock should have been classified as mezzanine equity at inception. The warrants should be reported at fair value at the balance sheet date. The convertible preferred stock should be adjusted to its maximum redemption amount at each balance sheet date.

The restatement of these errors increased the Company’s net loss attributable to common stockholders, as originally reported for the three months ended September 30, 2011 by $45,225 ($0.01 per basic and diluted share) to a loss of $60,962 and for the nine months ended September 30, 2011 by $79,450 ($0.01 per basic and diluted share) to a loss of $165,209. The restated balances at January 1, 2011 also include a reduction of additional paid-in capital of $1,516,060, an increase in deficit accumulated during the development stage of $369,048, and an increase in warrant liabilities and the convertible preferred stock of $87,240 and $1,816,643, respectively. The restatement had no effect on the Company’s cash and loss from operations or net cash used in operating activities for the three months and nine months ended September 30, 2011. After reviewing the circumstances leading up to the restatement, management believes that the errors were inadvertent and unintentional. In addition, following the discovery of these errors, the Company began implementing procedures intending to strengthen its internal control processes and prevent a recurrence of these errors.

The effects of the restatement on the Company’s financial statements as of and for the three and nine months ended September 30, 2011 and for the period from January 1, 1999 (inception) to September 30, 2011 are as follows:

BALANCE SHEET AS OF SEPTEMBER 30, 2011

	As Previously Reported			Effect of Restatement			As restated
Warrant liability	$	-		$	66,685		$	66,685
Redeemable and Convertible Preferred Stock (under mezzanine)	$	-		$	1,916,648		$	1,916,648
Preferred Stock	$	18,775		$	(18,775	)	$	-
Common stock	$	1,553,627		$	-		$	1,553,627
Additional paid-in capital	$	4,077,068		$	(1,516,060	)	$	2,561,008
Accumulated deficit	$	(3,626,121	)	$	-		$	(3,626,121	)
Deficit accumulated during the development stage	$	(528,508	)	$	(448,498	)	$	(977,006	)
Stockholders' equity (deficit)	$	1,494,841		$	(1,983,333	)	$	(488,492	)

STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011

	As Previously Reported			Effect of Restatement			As restated
Change in warrant liability expense	$	-		$	(11,890	)	$	(11,890	)
Net loss for the period	$	(15,737	)	$	(11,890	)	$	(27,627	)
Accretion of preferred stock to redemption value	$	-		$	(33,335	)	$	(33,335	)
Net loss attributable to common stockholders	$	(15,737	)	$	(45,225	)	$	(60,962	)
Net loss per share – basic and diluted attributable to common stockholders	$	-		$	(0.00	)	$	(0.00	)
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
	As Previously Reported			Effect of Restatement			As restated
Change in warrant liability expense	$	-		$	20,555		$	20,555
Net (loss) incomefor the period	$	(85,759	)	$	20,555		$	(65,204	)
Accretion of preferred stock to redemption value	$	-		$	(100,005	)	$	(100,005	)
Net loss attributable to common stockholders	$	(85,759	)	$	(79,450	)	$	(165,209	)
Net lossper share – basic and diluted attributable to common stockholders	$	-		$	(0.01	)	$	(0.01	)
STATEMENT OF OPERATIONS FROM JANUARY 1, 1999 (INCEPTION) TO SEPTEMBER 30, 2011
	As Previously Reported			Effect of Restatement			As restated
Change in warrant liability expense	$	-		$	74,342		$	74,342
Net (loss) income for the period	$	(528,508	)	$	74,342		$	(454,166	)
Accretion of preferred stock to redemption value	$	-		$	(522,840	)	$	(522,840	)
Net loss attributable to common stockholders	$	(528,508	)	$	(448,498	)	$	(977,006	)
STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011
	As Previously Reported			Effect of Restatement			As restated
Net (loss) income	$	(85,759	)	$	20,555		$	(65,204	)
Change in warrant liability	$	-		$	(20,555	)	$	(20,555	)
Net cash used in operating activities	$	(81,063	)	$	-		$	(81,063	)
STATEMENT OF CASH FLOWS FROM JANUARY 1, 1999 (INCEPTION) TO SEPTEMBER 30, 2011
	As Previously Reported			Effect of Restatement			As restated
Net (loss) income	$	(528,508	)	$	74,342		$	(454,166	)
Change in warrant liability	$	-		$	(74,342	)	$	(74,342	)
Net cash used in operating activities	$	(537,603	)	$	-		$	(537,603	)