PRIOR PERIOD ADJUSTMENT

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

NOTE 2 - PRIOR PERIOD ADJUSTMENT

The financial statements of the Company as of and for the year ended December 31, 2010 and for the period from January 1, 1999 (inception) to December 31, 2010 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 decreased the Company’s net loss attributable to common stockholders, as originally reported for the year ended December 31, 2010 by $56,982 ($.01 per basic and diluted share) to a loss attributable to common stockholders of $30,302. The restated balances at January 1, 2010 also include a decrease in preferred stock of $17,078, a decrease in additional paid-in capital of $1,516,060, an increase in deficit accumulated during the development stage of $426,030, and an increase in warrant liabilities and the convertible preferred stock of $277,562 and $1,681,606, respectively. The restatement had no effect on the Company’s cash and loss from operations or net cash used in operating activities for the year ended December 31, 2010. 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 balance sheet as of December 31, 2010 and statements of operations and cash flows for the year then ended is as follows:

BALANCE SHEET AS OF DECEMBER 31, 2010

	As Previously Reported			Effect of Restatement			As restated
Warrant liability	$	-		$	87,240		$	87,240
Redeemable and Convertible Preferred Stock	$	-		$	1,816,643		$	1,816,643
Preferred Stock	$	18,775		$	(18,775	)	$	-
Common stock	$	1,553,628		$	-		$	1,553,628
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	$	(442,749	)	$	(369,048	)	$	(811,797	)
Stockholders' equity (deficit)	$	1,580,601		$	(1,903,883	)	$	(323,282	)

STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2010

	As Previously Reported			Effect of Restatement			As restated
Change in warrant liability (expense) income	$	-		$	190,322		$	190,322
Net (loss) income for the year	$	(87,284	)	$	190,322		$	103,038
Accretion of preferred stock to redemption value	$	-		$	(133,340	)	$	(133,340	)
Net (loss) income attributable to common stockholders	$	(87,284	)	$	56,982		$	(30,302	)
Net (loss) income per share – basic and diluted attributable to common stockholders	$	(0.01	)	$	0.01		$	(0.00	)

STATEMENT OF OPERATIONS FROM JANUARY 1, 1999 (INCEPTION) TO DECEMBER 31, 2010

	As Previously Reported			Effect of Restatement			As restated
Change in warrant liability (expense) income	$	-		$	53,787		$	53,787
Net (loss) income for the year	$	(442,749	)	$	53,787		$	(388,962	)
Accretion of preferred stock to redemption value	$	-		$	(422,835	)	$	(422,835	)
Net loss attributable to common stockholders	$	(442,749	)	$	(369,048	)	$	(811,797	)

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2010

	As Previously Reported			Effect of Restatement			As restated
Net (loss) income for the year	$	(87,284	)	$	190,322		$	103,038
Change in warrant liability	$	-		$	(190,322	)	$	(190,322	)
Net cash used in operating activities	$	(88,405	)	$	-		$	(88,405	)

STATEMENT OF CASH FLOWS FROM JANUARY 1, 1999 (INCEPTION) TO DECEMBER 31, 2010

	As Previously Reported			Effect of Restatement			As restated
Net (loss) income for the year	$	(442,749	)	$	53,787		$	(388,962	)
Change in warrant liability	$	-		$	(53,787	)	$	(53,787	)
Net cash used in operating activities	$	(456,540	)	$	-		$	(456,540	)