The Company has restated its financial statements for the three and nine month periods ended September 30, 2012. The Company determined that a derivative liability should have been recognized for the conversion feature and warrants for the $1.0 million senior secured debenture issued to Hillair on June 27, 2012 as an embedded derivative.  All of the issues were non-cash items.  The audited financial statements as of December 31, 2012 correctly recorded and presented the derivative liability.

The impact of the restatements of the Statement of Operations accounts for the periods ended September 30, 2012 are as follows: