The following tables show the effects of the restatement on our consolidated balance sheet as of December 31, 2011 and consolidated statements of operations and cash flows for the three and six months ended June 30, 2011:

Effect on Consolidated Balance Sheet
December 31, 2011

	As Previously
	Reported on
	Form 10-K/A			Adjusments			Restated

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable	$	1,175,462					$	1,175,462
Accrued liabilities		359,715						359,715
Convertible revolving credit facility, net of discounts		160,794						160,794
Derivative liability - conversion option		113,271						113,271
Derivative liability - warrants		1,875,463						1,875,463

Derivative liability - bonus warrants		-			797,185	(e)		70,343
					(492,111	) (f)
					(234,731	) (g)

Convertible debt		566,785			600,000	(a)		772,500
					(394,285	) (b)

Total current liabilities		4,251,490			276,058			4,527,548

Convertible debt, net of discount		-						-
Fair value of 10% convertible preferred stock warrants		487,555						487,555
Total liabilities		4,739,045			276,058			5,015,103

Commitments and contingencies

10% Convertible preferred stock, no par value; authorized 880,000 shares; 752,273 issued and outstanding at December 31, 2011, net of discount		5,520,256						5,520,256
Redeemable common stock, no par value; 250,000 shares issued and outstanding at December 31, 2011		242,500						242,500

Stockholders' deficit:
Common stock, no par value; authorized, 100,000,000 shares; 25,007,261 and 23,305,704 shares issued and outstanding at December 31, 2011 and 2010, respectively		23,660,071			1,350,000	(d)		24,410,071
					(600,000	) (a)
					(234,731	) (h)
					234,731	(g)

Accumulated deficit		(28,619,876	)		(1,350,000	) (d)		(29,645,934	)
					394,285	(b)
					(797,185	) (e)
					492,111	(f)
					234,731	(h)

Total stockholders' deficit		(4,959,805	)		(276,058	)		(5,235,863	)
Total liabilities and stockholders' deficit	$	5,541,996		$	-		$	5,541,996

(a) - to reverse the improper recording of debt discount.

(b) - to reverse the improper recording of and amortization of debt discount.

(d) - to record the difference between the reacquisition price of the new debt and the net carrying amount of the extinguished debt at the amendment date.

(e) - to record the fair value of the bonus warrants as of the amendment date as a component of the reacquisition price of the new debt.

(f) - to recognize the gain on the change in the fair value of the derivative liability associated with the bonus warrants for the six months ended June 30, 2011.

(g) - to record the fair value of bonus warrants at date of issuance.

(h) - to reverse incorrect recording of the fair value of bonus warrants at issuance.

Effect on Consolidated Statement of Operations

for the Three Months Ended June 30, 2011

	As Previously
	Reported			Adjustments			Restated

Loss from operations	$	(2,412,954	)	$	-		$	(2,412,954	)

Other expenses:
Interest expense		67,024			-			67,024
Amortization of debt discounts		465,909			(102,858	)(a)		249,002
					(114,049	)(b)

Change in fair value of derivative liabilities		-			(48,187	)(c)		(48,187	)
Total other expenses		532,933			(265,094	)		267,839

Loss before provision for income taxes		(2,945,887	)		265,094			(2,680,793	)
Provision for income taxes		-			-			-
Net loss		(2,945,887	)		265,094			(2,680,793	)
Accretion of preferred dividends and beneficial conversion feature		(203,697	)		-			(203,697	)
Net loss attributable to common shareholders	$	(3,149,584	)	$	265,094		$	(2,884,490	)

Weighted average common shares - basic and diluted		24,082,234			24,082,234			24,082,234
Basic and diluted net loss per share	$	(0.13	)	$	0.01		$	(0.12	)

(a) -

to reverse the improper amortization of debt discount.

(b) -

to reverse the impact of the improper recording of the fair value of the bonus warrants upon issuance.

to recognize the gain on the change in the fair value of the derivative liability associated with the bonus warrants for the period.

for the Six Months Ended June 30, 2011

	As Previously
	Reported			Adjustments			Restated

Loss from operations	$	(4,108,625	)	$	-		$	(4,108,625	)

Other expenses:
Interest expense		97,104			-			97,104
Amortization of debt discounts		670,049			(188,572	)(a)		367,428
					(114,049	)(b)

Loss on debt extinguishment		-			1,350,000	(c)		1,350,000
Fair value of bonus warrants at debt extinguishment		-			797,185	(d)		797,185
Change in fair value of derivative liabilities		-			(359,561	)(e)		(359,561	)
Total other expenses		767,153			1,485,003			2,252,156

Loss before provision for income taxes		(4,875,778	)		(1,485,003	)		(6,360,781	)
Provision for income taxes		-			-			-
Net loss		(4,875,778	)		(1,485,003	)		(6,360,781	)
Accretion of preferred dividends and beneficial conversion feature		(207,556	)		-			(207,556	)
Net loss attributable to common shareholders	$	(5,083,334	)	$	(1,485,003	)	$	(6,568,337	)

Weighted average common shares - basic and diluted		23,773,725			23,773,725			23,773,725
Basic and diluted net loss per share	$	(0.21	)	$	(0.06	)	$	(0.28	)

(a) -

to reverse the improper amortization of debt discount.

(b) -

to reverse the impact of the improper recording of the fair value of the bonus warrants upon issuance.

to record the difference between the reacquisition price of the new debt and the net carrying amount of the extinguished debt at the amendment date.

(d) -

to record the fair value of the bonus warrants as of the amendment date as a component of the reacquisition price of the new debt.

(e) -

to recognize the gain on the change in the fair value of the derivative liability associated with the bonus warrants for the six months ended June 30, 2011.

Effect on Consolidated Statement of Cash Flows

for the Six Months Ended June 30, 2011

	As Previously
	Reported			Adjustments			Restated

Cash flow from operating activities:
Net loss	$	(4,875,778	)	$	(1,485,003	)	$	(6,360,781	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of convertible debt discount		486,972			(188,572	)(a)		298,400
Loss on debt extinguishment		-			1,350,000	(c)		1,350,000
Fair value of bonus warrants at debt extinguishment		-			797,185	(d)		797,185
Fair value of bonus warrants at grant date		-			(114,049	)(b)		(114,049	)
Change in fair value of derivative liabilities - Bonus Warrants		-			(359,561	)(e)		(359,561	)

Net cash used in operating activities	$	(3,435,727	)	$	-		$	(3,435,727	)

(a) -

to reverse the improper amortization of debt discount.

(b) -

to reverse the impact of the improper recording of the fair value of the bonus warrants upon issuance.

to record the difference between the reacquisition price of the new debt and the net carrying amount of the extinguished debt at the amendment date.

(d) -

to record the fair value of the bonus warrants as of the amendment date as a component of the reacquisition price of the new debt.

(e) -

to recognize the gain on the change in the fair value of the derivative liability associated with the bonus warrants for the six months ended June 30, 2011.