Florida
(State
of or Other Jurisdiction of Incorporation
or Organization)
|
20-1167761
(IRS
Employer I.D. No.)
|
Page
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PART
I.
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FINANCIAL
INFORMATION
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Item
1.
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3
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3
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||
4
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||
5
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7
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||
Item
2.
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33
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Item
3.
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39
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PART
II.
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OTHER
INFORMATION
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Item
1.
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40
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Item
2.
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40
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Item
3.
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40
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|
Item
4.
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40
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Item
5.
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40
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|
Item
6.
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40
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41
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June
30,
|
June
30,
|
June
30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||||
ASSETS
|
(Restated)
|
(Restated)
|
(Restated)
|
|||||||||
Current
assets
|
||||||||||||
Cash
and cash equivalents
|
$ | 4,827 | $ | 95,973 | $ | 6,109 | ||||||
Accounts
receivable net of allowance
|
331,038 | 318,299 | 192,151 | |||||||||
Loan
receivable, net of allowance
|
285,000 | - | - | |||||||||
Interest
receivable
|
7,147 | - | - | |||||||||
Other
current assets
|
18,658 | 79,900 | - | |||||||||
Total
current assets
|
646,670 | 494,172 | 198,260 | |||||||||
Property
and equipment, net of accumulated depreciation
|
121,554 | 73,699 | 175,510 | |||||||||
Total
assets
|
$ | 768,224 | $ | 567,871 | $ | 373,770 | ||||||
LIABILITIES
AND (DEFICIENCY IN) STOCKHOLDERS' EQUITY
|
||||||||||||
Current
liabilities
|
||||||||||||
Accounts
payable and accrued liabilities
|
742,500 | 522,119 | 417,979 | |||||||||
Amount
due under bank credit line
|
24,251 | - | 24,335 | |||||||||
Accrued
interest, net of discount
|
84,367 | 3,711 | 66,254 | |||||||||
Accrued
interest - related parties, net of discount
|
73,451 | 20,052 | 2,750 | |||||||||
Note
payable, current portion
|
941,200 | 435,000 | - | |||||||||
Loan
payable, related parties, current portion
|
- | - | 700,256 | |||||||||
Notes
payable - related parties, current portion
|
375,000 | 275,000 | - | |||||||||
Warrant
liability
|
6,577,232 | - | - | |||||||||
Conversion
option liability
|
7,470,856 | - | - | |||||||||
Penalty
for late registration of shares
|
2,154,880 | 537,600 | - | |||||||||
Total
current liabilities
|
18,443,737 | 1,793,482 | 1,211,574 | |||||||||
Notes
payable
|
23,587 | 203,000 | 98,000 | |||||||||
Notes
payable - related parties
|
- | 175,000 | 290,000 | |||||||||
Total
liabilities
|
18,467,324 | 2,171,482 | 388,000 | |||||||||
(Deficiency
in) stockholder's equity
|
||||||||||||
Common
stock, $0.0001 par value; 500,000,000 shares authorized;
135,686,502,
|
||||||||||||
81,542,037,
and 60,142,037 shares issued and outstanding at June 30, 2006,
2005,
|
||||||||||||
and
2004, respectively (post reverse-split)
|
13,569 | 8,154 | 6,015 | |||||||||
Additional
paid-in capital
|
302,636 | 5,317,899 | 3,597,633 | |||||||||
Common
stock subscribed
|
- | 67,000 | - | |||||||||
Accumulated
deficit
|
(18,015,305 | ) | (6,996,664 | ) | (4,829,452 | ) | ||||||
Total
(deficiency in) stockholder's equity
|
(17,699,100 | ) | (1,603,611 | ) | (1,225,804 | ) | ||||||
Total
liabilities and (deficiency in) stockholders' equity
|
$ | 768,224 | $ | 567,871 | $ | 373,770 |
For
the Three
|
For
the Three
|
For
the Three
|
For
the Six
|
For
the Six
|
For
the Six
|
|||||||||||||||||||
Months
Ended
|
Months
Ended
|
Months
Ended
|
Months
Ended
|
Months
Ended
|
Months
Ended
|
|||||||||||||||||||
June
30,
|
June
30,
|
June
30,
|
June
30,
|
June
30,
|
June
30,
|
|||||||||||||||||||
2006
|
2005
|
2004
|
2006
|
2005
|
2004
|
|||||||||||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
(Restated)
|
(Restated)
|
(Restated)
|
|||||||||||||||||||
Revenue
|
$ | 1,840,270 | $ | 1,325,486 | $ | 1,121,550 | $ | 3,479,445 | $ | 2,495,739 | $ | 2,065,970 | ||||||||||||
Cost
of goods sold
|
1,398,322 | 1,034,733 | 971,799 | 2,670,228 | 1,961,455 | 1,824,261 | ||||||||||||||||||
Gross
margin
|
441,948 | 290,753 | 149,751 | 809,217 | 534,284 | 241,709 | ||||||||||||||||||
Selling,
General and administrative expenses
|
586,954 | 409,918 | 2,710,035 | 1,036,639 | 788,415 | 3,529,512 | ||||||||||||||||||
Total
operating expenses
|
586,954 | 409,918 | 2,710,035 | 1,036,639 | 788,415 | 3,529,512 | ||||||||||||||||||
Operating
loss
|
(145,006 | ) | (119,165 | ) | (2,560,284 | ) | (227,422 | ) | (254,131 | ) | (3,287,803 | ) | ||||||||||||
Other
(income) expense:
|
||||||||||||||||||||||||
Interest
(income) expense
|
86,880 | 66,815 | 306,756 | 158,647 | 441,185 | 307,262 | ||||||||||||||||||
Cost
of penalty for late registration of shares
|
556,320 | 467,200 | - | 1,221,952 | 467,200 | - | ||||||||||||||||||
Change
in fair value of warrant liability
|
(638,829 | ) | - | - | 532,835 | - | - | |||||||||||||||||
Change
in fair value of conversion option liability
|
(1,270,054 | ) | - | - | 367,581 | - | - | |||||||||||||||||
(gain)
loss from marking to market
|
(141,080 | ) | 70,400 | - | 6,208 | 70,400 | - | |||||||||||||||||
Total
other (income) expense
|
(1,406,763 | ) | 604,415 | 306,756 | 2,287,223 | 978,785 | 307,262 | |||||||||||||||||
Gain
(loss) before income taxes
|
1,261,757 | (723,580 | ) | (2,867,040 | ) | (2,514,645 | ) | (1,232,916 | ) | (3,595,065 | ) | |||||||||||||
Income
tax expense
|
- | - | - | - | - | - | ||||||||||||||||||
Net
income gain (loss)
|
$ | 1,261,757 | $ | (723,580 | ) | $ | (2,867,040 | ) | $ | (2,514,645 | ) | $ | 1,232,916 | ) | $ | (3,595,065 | ) | |||||||
Net
gain (loss) per share - basic (post reverse-splits)
|
$ | 0.01 | $ | (0.01 | ) | $ | (0.11 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.10 | ) | |||||||
Net
gain (loss) per share - diluted (post reverse-splits)
|
$ | 0.01 | $ | (0.01 | ) | $ | (0.11 | ) | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.10 | ) | |||||||
Weighted
average shares outstanding - basic
(post reverse-splits) |
116,952,912 | 81,418,601 | 25,565,714 | 111,913,251 | 78,379,330 | 34,299,894 | ||||||||||||||||||
Weighted
average shares outstanding - diluted
(post reverse-splits) |
157,300,738 | 81,418,601 | 25,545,714 | 114,588,245 | 78,379,330 | 34,299,894 |
For
the Six
|
For
the Six
|
For
the Six
|
||||||||||
Months
Ended
|
Months
Ended
|
Months
Ended
|
||||||||||
June
30,
|
June
30,
|
June
30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
loss
|
$ | (2,514,645 | ) | $ | (1,232,916 | ) | $ | (3,595,065 | ) | |||
Adjustments
to reconcile net loss to net
|
||||||||||||
cash
used in operating activities:
|
||||||||||||
Depreciation
|
25,372 | 32,326 | 28,023 | |||||||||
Value
of warrants issued
|
17,394 | - | - | |||||||||
Stock
issued for services
|
- | - | 2,420,000 | |||||||||
Value
of options issued to officer
|
- | 9,000 | 135,673 | |||||||||
Stock
issued as bonuses to employees and board members
|
49,901 | - | - | |||||||||
Amortization
of discount on NP to interest expense
|
- | 385,000 | 388,000 | |||||||||
Cost
of penalty for late registration
|
1,221,952 | 467,200 | - | |||||||||
Change
in fair value of warrant liability
|
543,586 | - | - | |||||||||
Change
in fair value of option liability
|
- | - | - | |||||||||
Change
in fair value of conversion option liability
|
367,581 | - | - | |||||||||
(gain)
loss from marking to market-penalty
|
6,208 | 70,400 | - | |||||||||
Changes in assets and liabilities:
|
||||||||||||
Accounts
receivable, net
|
108,072 | 7,199 | 72,865 | |||||||||
Prepaid
expenses
|
(17,152 | ) | (79,900 | ) | - | |||||||
Accounts
payable and accrued expenses
|
252,142 | (15,623 | ) | (66,633 | ) | |||||||
- | - | |||||||||||
Net
cash provided by (used in) operating activities
|
60,411 | (357,314 | ) | (617,137 | ) | |||||||
Cash
flows from investing activities:
|
||||||||||||
Loan
to Pasta Italiano
|
(190,000 | ) | - | - | ||||||||
Acquisition
of property and equipment
|
(25,787 | ) | (2,204 | ) | (129,308 | ) | ||||||
Net
cash used in investing activities
|
(215,787 | ) | (2,204 | ) | (129,308 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from issuance of long-term-debt
|
160,000 | 385,000 | 388,000 | |||||||||
Proceeds from (principal payments on) bank credit
line
|
- | (24,520 | ) | 197 | ||||||||
Principal payments on notes payable
|
(10,000 | ) | - | - | ||||||||
Proceeds
from sale of common stock
|
- | 67,000 | 320,225 | |||||||||
Net
cash provided by financing activities
|
150,000 | 427,480 | 708,422 | |||||||||
Increase
in cash and cash equivalents
|
(5,376 | ) | 67,962 | (38,023 | ) | |||||||
Cash
and cash equivalents at beginning of period
|
10,203 | 28,011 | 44,132 | |||||||||
Cash
and cash equivalents at end of period
|
$ | 4,827 | $ | 95,973 | $ | 6,109 | ||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$ | 265 | $ | - | $ | - | ||||||
Taxes
|
$ | - | $ | - | $ | - |
For
the Six
|
For
the Six
|
For
the Six
|
||||||||||
Months
Ended
|
Months
Ended
|
Months
Ended
|
||||||||||
June
30,
|
June
30,
|
June
30,
|
||||||||||
2006
|
2005
|
2004
|
||||||||||
(Restated)
|
(Restated)
|
(Restated)
|
||||||||||
Stock
issued for services
|
$ | 85,901 | $ | 45,400 | $ | 2,420,000 | ||||||
Notes
payable issued for acquisition of computer equipment
|
$ | 25,787 | $ | - | $ | - | ||||||
Common
stock issued for conversion of notes payable
|
$ | - | $ | - | $ | 70,676 | ||||||
Common
stock issued for conversion of liability
|
$ | - | $ | - | $ | 339,750 | ||||||
Common
stock recapitalization during merger
|
$ | - | $ | - | $ | 2,500 | ||||||
Common
stock issued in share exchange to acquire
subsidiary
|
$ | 125,000 | ||||||||||
Value
of warrants and options issued as compensation
|
$ | - | $ | - | $ | - | ||||||
Value
of shares issued as penalty for late registration
|
$ | - | $ | 537,600 | $ | - | ||||||
Revaluation
of conversion option liability
|
$ | 367,581 | $ | - | $ | - | ||||||
Revaluation
of liability for options and warrants
|
$ | 543,586 | $ | - | $ | - | ||||||
Revaluation
of penalty for late registration of shares
|
$ | 6,208 | $ | - | $ | - |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Options
exercisable at December 31, 2003
|
- | $ | - | |||||
Granted
|
500,000 | 0.50 | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 12.31.04
|
500,000 | $ | 0.50 | |||||
Exercisable
|
- | $ | - | |||||
Not
exercisable
|
500,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Options
outstanding at 03.31.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
- | $ | - | |||||
Not
exercisable
|
500,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 06.30.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
100,000 | $ | 0.50 | |||||
Not
exercisable
|
400,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 09.30.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
100,000 | $ | 0.50 | |||||
Not
exercisable
|
400,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 12.31.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
100,000 | $ | 0.50 | |||||
Not
exercisable
|
400,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 03.31.06
|
500,000 | $ | 0.500 | |||||
Exercisable
|
100,000 | $ | 0.500 | |||||
Not
exercisable
|
400,000 | $ | 0.500 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - |
Options
outstanding at 06.30.06
|
500,000 | $ | 0.500 |
Exercisable
|
200,000 | $ | 0.500 | |||||
Not
exercisable
|
300,000 | $ | 0.500 |
2006
|
2005
|
2004
|
||||||||||
Accounts
receivable from customers
|
$ | 336,165 | $ | 383,299 | $ | 192,151 | ||||||
Allowance
for doubtful accounts
|
(5,127 | ) | (65,000 | ) | (0 | ) | ||||||
Accounts
receivable, net
|
$ | 331,038 | $ | 318,299 | $ | 192,151 |
2006
|
2005
|
2004
|
||||||||||
Computer
equipment
|
$ | 228,970 | $ | 163,614 | $ | 218,513 | ||||||
Furniture
and fixtures
|
82,213 | 52,485 | 52,485 | |||||||||
311,183 | 216,099 | 270,998 | ||||||||||
Less
accumulated depreciation and amortization
|
(189,629 | ) | (142,400 | ) | (95,488 | ) | ||||||
Total
|
$ | 121,554 | $ | 73,699 | $ | 175,510 |
2006
|
2005
|
2004
|
||||||||||
Accounts
payable and accrued expenses
|
$ | 731,474 | $ | 525,227 | $ | 420,729 | ||||||
Accrued
commissions
|
11,026 | 3,108 | 2,750 | |||||||||
Total
|
$ | 742,500 | $ | 522,119 | $ | 417,979 |
Gross
|
Discount
|
Net
|
||||||||||
Non-related
parties
|
$ | 130,051 | $ | 45,684 | $ | 84,367 | ||||||
Related
parties
|
86,751 | 13,300 | 73,451 | |||||||||
Total
|
$ | 216,802 | $ | 58,984 | $ | 157,818 |
Gross
|
Discount
|
Net
|
||||||||||
Non-related
parties
|
$ | 24,490 | $ | 20,779 | $ | 3,711 | ||||||
Related
parties
|
44,607 | 24,555 | 20,052 | |||||||||
Total
|
$ | 69,097 | $ | 45,334 | $ | 23,763 |
Gross
|
Discount
|
Net
|
||||||||||
Non-related
parties
|
$ | 71,393 | $ | 2,139 | $ | 69,254 | ||||||
Related
parties
|
9,075 | 6,325 | 2,750 | |||||||||
Total
|
$ | 80,468 | $ | 8,464 | $ | 72,004 |
2006
|
2005
|
2004
|
||||||||||
Convertible
note payable in the original amount of $350,000 to Alpha Capital
Aktiengesselschaft (“Alpha Capital”), dated February 25, 2005. This note
consists of $100,000 outstanding under a previous note payable which was
cancelled on February 25, 2005, and $250,000 of new borrowings. We did not
meet certain of our obligations under the loan documents relating to this
issuance. These lapses include not reserving the requisite
number of treasury shares, selling subsequent securities without offering
a right of first refusal, not complying with reporting obligations, not
having our common shares quoted on the OTC:BB and not timely registering
certain securities. This note is entered technical default
status on May 16, 2005. The note originally
carried interest at the rate of 8% per annum, and is due in
full on February 24, 2007. Upon default, the note’s interest
rate increased to 15% per annum, and the note became immediately due. The note is
convertible into common stock of the Company at a conversion price of
$0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $250,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a conversion
price of $0.005 per share (post-reverse
split). Interest in the amount of $2,901, $10,001, and $0 was accrued on
this note during the three months ended June 30,
2006, 2005, and 2004 respectively. During the twelve
months ended December 31, 2006 the note holder converted $5,000 into
shares of common stock. During the twelve months ended December 31, 2006
the holder of the note converted $27,865 of accrued interest into common
stock. This note is in default at June 30, 2006 and
2005.
|
$ | 345,000 | $ | 350,000 | $ | - |
Convertible
note payable in the amount of $160,000 to Michael Ferrone, a board member
and related party, dated March 11, 2004. The note bears interest at the
rate of 8% per annum, and was originally due in full on March 11, 2006. On
February 25, 2005, an amendment to the convertible notes was signed which
extended the term, which resulted in a new maturity date of October 12,
2006. The note is convertible by the holder into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $160,000 was
recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2004. Accrued
interest is convertible by the holder into common stock of the Company at
maturity of the note at a price of $0.005 per share (post-reverse
split) Interest in the amount of $3,191 was accrued on this
note during each of the three months ended June 30,
2006, 2005, and 2004.
|
$ | 160,000 | $ | 160,000 | $ | 160,000 |
Convertible
note payable in the original amount of $100,000 to Joel Gold, a board
member and related party, dated October 12, 2004. The note bears interest
at the rate of 8% per annum, and was due in full on October 12, 2006. The
note is convertible by the holder into common stock of the Company at a
conversion price of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of
$100,000 was recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2004. Accrued
interest is convertible by the holder into common stock of the Company at
maturity of the note at a price of $0.005 per share (post-reverse
split) Interest in the amount of $1,732, $1,995, and
$0 was accrued on this note during the three months ended June 30, 2006,
2005, and 2004, respectively. During the twelve months ended
December 31, 2006, $75,000 of the principal amount was converted into
common stock.
|
$ | 25,000 | $ | 100,000 | $ | - |
Convertible
note payable in the amount of $85,000 to Briolette Investments, Ltd, dated
March 11, 2004. The note bears interest at the rate of 8% per annum, and
is due in Full on March 11, 2006. The note is convertible into common
stock of the Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of
$85,000 was recorded as a discount to the note, and was amortized to
interest expense during the twelve months ended December 31, 2004 Accrued
interest is convertible by the holder into common stock of the Company at
a price of $0.005 per share (post-reverse
split) Interest in the amount of $819, $1,696, and $1,696 was accrued on
this note during the three months ended March 30, 2006, 2005,
and 2004, respectively. During the twelve months ended December 31, 2005,
the note holder converted $44,000 of the note payable into common
stock. During the twelve months ended December 31,
2006, the Company made a $3,000 cash payment on the principal amount of
the note.
|
$ | 41,000 | $ | 85,000 | $ | 85,000 |
Convertible
note payable in the amount of $80,000 to Brown Door, Inc., dated March 11,
2004. The note bears interest at the rate of 8% per annum, and was due in
full on March 11, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $80,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible by the holder into common stock of the Company at maturity of
the note at a price of $0.005 per share (post-reverse
split) Interest in the amount of $1,596 was accrued on
this note during each of the three months ended June 30, 2006,
2005, and 2004.
|
$ | 80,000 | $ | 80,000 | $ | 80,000 |
Convertible
note payable in the amount of $50,000 to Whalehaven Capital Fund, Ltd.
(“Whalehaven Capital”) dated February 25, 2005. We did not meet certain of
our obligations under the loan documents relating to this
issuance. These lapses include not reserving the requisites
numbers of treasury shares, selling subsequent securities without offering
a right of first refusal, not complying with reporting obligations, not
having our common shares quoted on the OTC:BB and not timely registering
certain securities. This note is in technical default as of May
16, 2005. The note originally carried interest at
the rate of 8% per annum, and was due in Full on February 24, 2007. Upon
default, the note’s interest rate increased to 15% per annum, and the note
became due immediately. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of
$50,000 was recorded as a discount to the note, and was amortized to
interest expense during the three months ended March 31, 2005. Accrued
interest is convertible into common stock of the Company at a price of
$0.005 per share (post-reverse
split). Interest in the amount of $1,792, $1,429, and $0 was accrued on
this note during the each of the three months ended June 30, 2006 and
2005, respectively. During the twelve months ended December 31,
2006, $5,000 of principal was converted into common
stock. During the twelve months ended December 31, 2006 the
holder of the note converted $5,000 of principal and $589 of accrued
interest into shares of common stock. This note is
in default at June 30, 2006 and 2005.
|
$ | 45,000 | $ | 50,000 | $ | - |
Convertible
note payable in the amount of $50,000 to Oppenheimer & Co., /
Custodian for Joel Gold IRA, a related party, dated March 14, 2004. The
note bears interest at the rate of 8% per annum, and was due in full on
October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $50,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued
interest is convertible into common stock of the Company at a price of
$0.005 per share (post-reverse
split). Interest in the amount of $998 was accrued on this note
during each of the three months ended June 30, 2006, 2005, and
2004.
|
$ | 50,000 | $ | 50,000 | $ | 50,000 |
Convertible
note payable in the original amount of $30,000 to Huo Hua dated May 9,
2005. The note bears interest at the rate of 8% per annum, and was due in
full on October 12, 2006. The note is convertible into common
stock of the Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $30,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share(post-reverse
split) Interest in the amount of $400, $342, and $0
was accrued on this note during the three months ended June 30,
2006, 2005, and 2004, respectively. During the twelve months ended
December 31, 2006, the note holder converted $10,000 of principal into
common stock.
|
$ | 20,000 | $ | 30,000 | $ | - |
Convertible
note payable in the original amount of $5,000 to Ke Du dated May 9, 2005.
The note bears interest at the rate of 8% per annum, and was due in full
on October 12, 2006. The note is convertible into common stock
of the Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $5,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. This
note was converted to common stock during the year ended December 31,
2005. Accrued interest is convertible into common stock of the
Company at a price of $0.005 per share(post-reverse
split) Interest in the amount of $57 was accrued on this note
during the three months ended June 30, 2005.
|
$ | - | $ | 5,000 | $ | - |
Convertible
note payable in the amount of $25,000 to Joel Gold a board member and
related party, dated January 25, 2005. The note bears interest at the rate
of 8% per annum, and is due in full on January 25, 2007. The
note is convertible into common stock of the Company at a
conversion of $0.025 per share. A beneficial conversion feature in the
amount of $25,000 was recorded as a discount to the note, and was
amortized to interest expense during the twelve months ended December 31,
2005. Accrued interest is convertible into common stock of the Company at
a price of $0.025 per share. Interest in the amount of $498, $498,. And $0
was accrued on this note during the three months ended June 30, 2006,
2005, and 2004, respectively.
|
$ | 25,000 | $ | 25,000 | $ | - |
Convertible
note payable in the amount of $25,000 to The Jay & Kathleen Morren
Trust dated January 25, 2005. The note bears interest at the
rate of 6% per annum, and is due in full on January 25,
2007. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $25,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split) Interest in the amount of $373, $373, and $0 was accrued on this
note during the three months ended June 30, 2006,
2005, and 2004, respectively.
|
$ | 25,000 | $ | 25,000 | $ | - |
Convertible
note payable in the amount of $10,000 to Lauren M. Ferrone, a relative of
a board member and related party, dated October 12, 2004. The note bears
interest at the rate of 8% per annum, and was originally due in full on
October 12, 2005. On February 25, 2005, an amendment to the convertible
notes was signed which extended the term, which resulted in a new maturity
date of October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per share
(post-reverse
split). Interest in the amount of $200 was accrued on this note during
each of the three months ended June 30, 2006 and
2005. This note is in default at June 30, 2006. and
2005.
|
$ | 10,000 | $ | 10,000 | $ | - |
Convertible
note payable in the amount of $10,000 to Richard D. Ferrone, a relative of
a board member and related party, dated October 12, 2004. The note bears
interest at the rate of 8% per annum, and was originally due in full on
October 12, 2005. On February 25, 2005, an amendment to the convertible
notes was signed which extended the term, which resulted in a new maturity
date of October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per share
(post-reverse
split) Interest in the amount of $200 was accrued on this note during each
of the three months ended June 30, 2006 and
2005. This note is in default at June 30, 2006. and
2005.
|
$ | 10,000 | $ | 10,000 | $ | - |
Convertible
note payable in the amount of $10,000 to Christian D. Ferrone, a relative
of a board member and related party, dated October 12, 2004. The note
bears interest at the rate of 8% per annum, and was originally
due in full on October 12, 2005. On February 25, 2005, an amendment to the
convertible notes was signed which extended the term, which resulted in a
new maturity date of October 12, 2006. The note is convertible into common
stock of the Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per
share (post-reverse
split) Interest in the amount of $200 was accrued on this note during each
of the three months ended June 30, 2006 and
2005. This note is in default at June 30, 2006. and
2005.
|
$ | 10,000 | $ | 10,000 | $ | - |
Convertible
note payable in the amount of $10,000 to Andrew I. Ferrone, a relative of
a board member and related party, dated October 12, 2004. The note bears
interest at the rate of 8% per annum, and was originally due in full on
October 12, 2005. On February 25, 2005, an amendment to the convertible
notes was signed which extended the term, which resulted in a new maturity
date of October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.01 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004. Accrued interest is
convertible into common stock of the Company at a price of $0.01 per
share (post-reverse
split Interest in the amount of $200 was accrued on this note during each
of the three months ended June 30, 2006 and
2005. This note is in default at June 30, 2006. and
2005.
|
$ | 10,000 | $ | 10,000 | $ | - |
Convertible
note payable in the amount of $8,000 to Adrian Neilan dated March 11,
2004. The note bears interest at the rate of 8% per annum, and is due in
full on October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $8,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2004.. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split). Interest in the amount of $160 was accrued on this note during the
each of the three months ended June 30, 2006, 2005, and
2004.
|
$ | 8,000 | $ | 8,000 | $ | 8,000 |
Convertible
note payable in the amount of $5,000 to Matthias Mueller dated March 11,
2004. The note bears interest at the rate of 8% per annum, and was due in
full on October 12, 2006. The note is convertible into common stock of the
Company at a conversion of $0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $5,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split). Interest in the amount of $100 was accrued on this note during the
each of the three months ended June 30, 2006, 2005, and
2004.
|
$ | 5,000 | $ | 5,000 | $ | 5,000 |
Convertible
note payable in the amount of $120,000 to Alpha Capital dated August 25,
2005. We did not meet certain of our obligations under the loan documents
relating to this issuance. These lapses include not reserving
the requisite number of treasury shares, selling subsequent securities
without offering a right of first refusal, not complying with reporting
obligations, not having our common shares quoted on the OTC:BB and not
timely registering certain securities. This note is in
technical default as of November 13, 2005. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due. The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $120,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split). Interest in the amount of $5,359 was accrued on this note during
the three months ended June 30, 2006. This note is in
default at June 30, 2006.
|
$ | 120,000 | $ | - | $ | - |
Convertible
note payable in the amount of $30,000 to Whalehaven Capital dated August
25, 2005. We did not meet certain of our obligations under the
loan documents relating to this issuance. These lapses include
not reserving the requisite number of treasury shares, selling subsequent
securities without offering a right of first refusal, not complying with
reporting obligations, not having our common shares quoted on the OTC:BB
and not timely registering certain securities. This note was in
technical default as of November 13, 2006. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due. The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $30,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split). Interest in the amount of $1,122 was accrued on this note during
the three months ended June 30, 2006. This note is in
default at June 30, 2006.
|
$ | 30,000 | $ | - | $ | - |
Convertible
note payable in the original amount of $25,000 to Asher Brand, dated
August 25, 2005. We did not meet certain of our obligations under the loan
documents relating to this issuance. These lapses include not
reserving the requisite number of treasury shares, selling subsequent
securities without offering a right of first refusal, not complying with
reporting obligations, not having our common shares quoted on the OTC:BB
and not timely registering certain securities. This note was in
technical default as of November 13, 2006. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $25,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split) Interest in the amount of $934 was accrued on this note during the
three months ended June 30, 2006. During the three months
ended September 30, 2006, the holder of the note converted $2,000 of
principal and $3,667 of accrued interest into common
stock. This note is in default at June 30,
2006.
|
$ | 25,000 | $ | - | $ | - |
Convertible
note payable in the original amount of $25,000 to Momona Capital, dated
August 25, 2005. We did not meet certain of our obligations under the loan
documents relating to this issuance. These lapses include not
reserving the requisite number of treasury shares, selling subsequent
securities without offering a right of first refusal, not complying with
reporting obligations, not having our common shares quoted on the OTC:BB
and not timely registering certain securities. This note was in
technical default at November 13, 2005. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $25,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split). Interest in the amount of $934 was accrued on this note during the
three months ended June 30, 2006. During the twelve
months ended December 31, 2006, the holder of the note converted $2,000 of
principal and $3,667 of accrued interest into common stock. This note is
in default at June 30, 2006.
|
$ | 25,000 | $ | - | $ | - |
Convertible
note payable in the amount of $10,000 to Lane Ventures dated August 25,
2005. We did not meet certain of our obligations under the loan documents
relating to this issuance. These lapses include not reserving
the requisite number of treasury shares, selling subsequent securities
without offering a right of first refusal, not complying with reporting
obligations, not having our common shares quoted on the OTC:BB and not
timely registering certain securities. This note was in
technical default at November 13, 2005. The note originally
carried interest at the rate of 8% per annum, and was due in
full on August 25, 2007. Upon default, the note’s interest rate increased
to 15% per annum and the note became immediately due. The note is
convertible into common stock of the Company at a conversion of
$0.005 per share (post-reverse
split). A beneficial conversion feature in the amount of $10,000 was
recorded as a discount to the note, and was amortized to interest expense
during the twelve months ended December 31, 2005. Accrued interest is
convertible into common stock of the Company at a price of $0.005 per
share (post-reverse
split). Interest in the amount of $373 was accrued on this note during the
three months ended June 30, 2006. During the twelve months
ended December 31, 2006, the holder of the note converted $4,000 of
principal and $1,467 of accrued interest into common
stock. This note is in default at June 30,
2006.
|
$ | 10,000 | $ | - | $ | - |
Note
payable in the amount of $120,000 to Alpha Capital, dated February 7,
2006. The originally carried interest at the rate of 15% per annum, and
was originally due in full on February 7, 2007. The Company is not in
compliance with various terms of this note, including making timely
payments of interest, and this note was in technical default at May 8,
2006. At this time, the interest rate increased to 20% and the note became
immediately due and payable. Interest in the amount of $5,359
was accrued on this note during the three months ended June 30, 2006. This
note is in default at June 30, 2006.
|
$ | 120,000 | $ | - | $ | - |
Note
payable in the amount of $30,000 to Whalehaven Capital dated February 7,
2006. The note originally carried interest at the rate of 15%
per annum, and was due in full on February 7, 2007. The Company is not in
compliance with various terms of this note, including making timely
payments of interest, and this note was in technical default at May 8,
2006. At this time, the interest rate increased to 20% and the note became
immediately due and payable. Interest in the amount of $1,340
was accrued on this note during the three months ended June 30,
2006. This note is in default at June 30,
2006.
|
$ | 30,000 | $ | - | $ | - | ||||||
Note
payable in the amount of $75,000 to Michael Ferrone , dated August 2,
2004. The note bears interest at the rate of 8% per annum, and was due in
full on February 2, 2005. Interest in the amount of $1,496 was accrued on
this note during each of the three months ended June 30, 2006
and 2005. This note is in default at June 30,
2006 and 2005.
|
$ | 75,000 | $ | 75,000 | $ | - |
Note
payable in the amount of $10,000 to Alpha Capital, dated May 19, 2006. The
note bears interest at the rate of 15% per annum, and was due in full on
November 19, 2006. Interest in the amount of $172 was accrued on this
note during the three months ended June 30,
2006.
|
$ | 10,000 | $ | - | $ | - | ||||||
Note
payable in the original amount of $25,787 to Microsoft Corporation dated
May 3, 2006. The note bears interest at the rate of 9.7% per annum, and is
payable in 60 monthly payments of $557 beginning October 1,
2006.
|
$ | 25,787 | $ | - | $ | - |
Total | $ | 1,339,787 | $ | 1,088,000 | $ | 388,000 | ||||||
Less: Current maturities | (1,314,000 | ) | (710,000 | ) | (- | ) | ||||||
Long-term
portion
|
$ | 25,787 | $ | 378,000 | $ | 388,000 | ||||||
Total
Non-related parties
|
$ | 964,787 | $ | 638,000 | $ | 178,000 | ||||||
Total
related parties
|
375,000 | 450,000 | 210,000 | |||||||||
Total
|
$ | 1,339,787 | $ | 1,088,000 | $ | 388,000 |
Risk
Free
|
Expected
|
Expected
|
||||||||||||||
Interest
|
Dividend
|
Option
|
||||||||||||||
Rate
|
Yield
|
Life
|
Volatility
|
|||||||||||||
June
30, 2006
|
4.75 | % | 0 | 5 | 141.4 | % |
Weighted
|
Weighted
|
|||||||||
Weighted
|
average
|
average
|
||||||||
average
|
exercise
|
exercise
|
||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
|||||
exercise
|
shares
|
contractual
|
outstanding
|
shares
|
exercisable
|
|||||
prices
|
outstanding
|
life
(years)
|
warrants
|
exercisable
|
options
|
$ | 0.005 | 132,000,000 | 4.66 | $ | 0.005 | 132,000,000 |
$
|
0.005 |
Weighted
|
Weighted
|
|||||||||
Weighted
|
average
|
average
|
||||||||
average
|
exercise
|
exercise
|
||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
|||||
exercise
|
shares
|
contractual
|
outstanding
|
shares
|
exercisable
|
|||||
prices
|
outstanding
|
life
(years)
|
warrants
|
exercisable
|
options
|
$ | .0050 | 136,200,000 | 3.67 | $ | .0050 | 136,200,000 | $ | 0.0050 | ||||||||||||||
$ | .1100 | 10,500,000 | 4.15 | $ | .1100 | 10,500,000 | $ | 0.1100 | ||||||||||||||
$ | .1150 | 42,000,000 | 4.15 | $ | .1150 | 42,000,000 | $ | 0.1150 | ||||||||||||||
188,700,000 | 3.80 | $ | .0353 | 188,700,000 | $ | 0.0353 |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Warrants
exercisable at December 31, 2003
|
- | $ | - | |||||
Granted
|
- | - | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at March 31, 2004
|
- | $ | - | |||||
Granted
|
- | - | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at June 30, 2004
|
- | $ | - | |||||
Granted
|
- | - | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at Sept 30, 2004
|
- | $ | - |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Granted
|
- | - | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at December 31, 2004
|
- | $ | - | |||||
Granted
|
132,000,000 | 0.005 | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at March 31, 2005
|
132,000,000 | $ | 0.005 | |||||
Granted
|
- | |||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at June 30, 2005
|
132,000,000 | $ | 0.005 | |||||
Granted
|
56,700,000 | 0.079 | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at Sept 30, 2005
|
188,700,000 | $ | 0.027 | |||||
Granted
|
- | |||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at Dec 31, 2005
|
188,700,000 | $ | 0.027 | |||||
Granted
|
- | |||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at March 31, 2006
|
188,700,000 | $ | 0.027 | |||||
Granted
|
300,000 | 0.005 | ||||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Warrants
exercisable at June 30, 2006
|
189,000,000 | $ | 0.027 |
Weighted
|
Weighted
|
|||||||||||||||||||||
Weighted
|
average
|
average
|
||||||||||||||||||||
average
|
exercise
|
exercise
|
||||||||||||||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
|||||||||||||||||
exercise
|
Options
|
contractual
|
outstanding
|
Options
|
exercisable
|
|||||||||||||||||
prices
|
outstanding
|
life
(years)
|
options
|
exercisable
|
options
|
|||||||||||||||||
$ | 0.50 | 500,000 | 2.88 | $ | 0.50 | 100,000 | $ | 0.500 | ||||||||||||||
500,000 | 2.88 | 100,000 | $ | 0. 500 |
Weighted
|
Weighted
|
|||||||||||||||||||||
Weighted
|
average
|
average
|
||||||||||||||||||||
average
|
exercise
|
exercise
|
||||||||||||||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
|||||||||||||||||
exercise
|
Options
|
contractual
|
outstanding
|
Options
|
exercisable
|
|||||||||||||||||
prices
|
outstanding
|
life
(years)
|
options
|
exercisable
|
options
|
|||||||||||||||||
$ | 0.50 | 500,000 | 3.88 | $ | 0.50 | - | $ | - | ||||||||||||||
500,000 | 3.88 | - | - |
Weighted
|
Weighted
|
|||||||||||||||||||||
Weighted
|
average
|
average
|
||||||||||||||||||||
average
|
exercise
|
exercise
|
||||||||||||||||||||
Range
of
|
Number
of
|
remaining
|
price
of
|
Number
of
|
price
of
|
|||||||||||||||||
exercise
|
Options
|
contractual
|
outstanding
|
Options
|
exercisable
|
|||||||||||||||||
prices
|
outstanding
|
life
(years)
|
options
|
exercisable
|
options
|
|||||||||||||||||
$ | 0.50 | 500,000 | 4.88 | $ | 0.50 | - | $ | - | ||||||||||||||
500,000 | 3.88 | - | - |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Options
exercisable at December 31, 2003
|
- | - | ||||||
Granted
|
500,000 | $ | 0.50 | |||||
Exercised
|
- | |||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 12.31.04
|
500,000 | $ | 0.50 | |||||
Exercisable
|
- | $ | - | |||||
Not
exercisable
|
500,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 03.31.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
- | $ | - | |||||
Not
exercisable
|
500,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 06.30.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
100,000 | $ | 0.50 | |||||
Not
exercisable
|
400,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 09.30.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
100,000 | $ | 0.50 | |||||
Not
exercisable
|
400,000 | $ | 0.50 |
Weighted
|
||||||||
Average
|
||||||||
Number
of
|
Exercise
|
|||||||
Shares
|
Price
|
|||||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 12.31.05
|
500,000 | $ | 0.50 | |||||
Exercisable
|
100,000 | $ | 0.50 | |||||
Not
exercisable
|
400,000 | $ | 0.50 | |||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 03.31.06
|
500,000 | $ | 0.500 | |||||
Exercisable
|
100,000 | $ | 0.500 | |||||
Not
exercisable
|
400,000 | $ | 0.500 |
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
/ Expired
|
- | - | ||||||
Options
outstanding at 06.30.06
|
500,000 | $ | 0.500 | |||||
Exercisable
|
200,000 | $ | 0.500 | |||||
Not
exercisable
|
300,000 | $ | 0.500 |
Previously
Reported
|
Adjustment
|
Restated
Amount
|
||||||||||
Balance
Sheet:
|
||||||||||||
Cash
|
$ | 4,827 | $ | - | $ | 4,827 | ||||||
Accounts
Receivable
|
359,159 | (28,121 | ) | 331,038 | ||||||||
Loans
receivable
|
419,302 | (134,302 | ) | 285,000 | ||||||||
Interest
receivable
|
- | 7,147 | 7,147 | |||||||||
Inventory
|
5,201 | (5,201 | ) | - | ||||||||
Prepaid
expenses
|
18,658 | (18,658 | ) | - | ||||||||
Other
current assets
|
- | 18,658 | 18,658 | |||||||||
Total
Current Assets
|
807,147 | (160,477 | ) | 646,670 | ||||||||
Property
and equipment, net
|
84,403 | 37,151 | 121,554 | |||||||||
Total
assets
|
891,550 | (123,326 | ) | 768,224 | ||||||||
Warrant
liability
|
$ | - | $ | 6,577,232 | $ | 6,577,232 | ||||||
Conversion
option liability
|
- | 7,470,856 | 7,470,856 | |||||||||
Accounts
payable and accrued liabilities (note11)
|
- | 742,500 | 742,500 | |||||||||
Accrued
interest, net of discount
|
- | 84,367 | 84,367 | |||||||||
Accrued
interest - related party, net of discount
|
- | 73,451 | 73,451 | |||||||||
Notes
payable - related party, current portion (note 5)
|
- | 375,000 | 375,000 | |||||||||
Penalty
for late registration of shares
|
- | 2,154,880 | 2,154,880 | |||||||||
Notes
payable - current portion
|
184,105 | 757,095 | 941,200 | |||||||||
Accounts
payable
|
621,767 | (621,767 | ) | - | ||||||||
Accrued
taxes and expenses
|
68,904 | (68,904 | ) | - | ||||||||
Accrued
interest payable
|
147,805 | (147,805 | ) | - | ||||||||
Loan
payable bank
|
24,247 | 4 | 24,251 | |||||||||
Total
current liabilities
|
1,046,828 | 17,396,909 | 18,443,737 | |||||||||
Notes
payable
|
710,190 | (686,603 | ) | 23,587 | ||||||||
Common
stock
|
11,169 | 2,400 | 13,569 | |||||||||
Additional
paid-in capital
|
2,273,151 | (1,970,515 | ) | 302,636 | ||||||||
Paid-in
capital warrants
|
294,101 | (294,101 | ) | - | ||||||||
Accumulated
deficit
|
(3,443,889 | ) | (14,571,416 | ) | (18,015,305 | ) | ||||||
Total
equity
|
(865,468 | ) | (16,833,632 | ) | (17,699,100 | ) | ||||||
Total
liabilities and owners equity
|
$ | 891,550 | $ | (123,326 | ) | $ | 768,224 |
Previously
Reported
|
Adjustment
|
Restated
Amount
|
||||||||||
Statement
of Operations:
|
||||||||||||
Revenue
- sales
|
$ | 1,825,309 | $ | 14,961 | $ | 1,840,270 | ||||||
Other
Income
|
43,580 | (43,580 | ) | - | ||||||||
Total
revenue
|
1,868,889 | (28,619 | ) | 1,840,270 | ||||||||
Cost
of good sold
|
1,394,282 | 4,040 | 1,398,322 | |||||||||
Selling,
general, and administrative expenses
|
- | - | 586,954 | |||||||||
Selling
expenses
|
249,194 | (249,194 | ) | - | ||||||||
General
and administrative expenses
|
246,156 | (246,156 | ) | - | ||||||||
Total
expenses
|
1,889,632 | 95,644 | 1,985,276 | |||||||||
Loss
before other expenses and income tax expense
|
(20,743 | ) | (124,263 | ) | (145,006 | ) | ||||||
Cost
of penalty for late registration
|
- | 556,320 | 556,320 | |||||||||
Change
in fair value of warrant liability
|
- | (638,829 | ) | (638,829 | ) | |||||||
Change
in fair value of option liability
|
- | (1,270,054 | ) | (1,270,054 | ) | |||||||
(gain)
loss from mark to market - penalty
|
- | (141,080 | ) | (141,080 | ) | |||||||
Interest
expense
|
24,593 | 62,287 | 86,880 | |||||||||
Amortization
of discount on debentures
|
(33,634 | ) | 33,634 | - | ||||||||
Net
Loss
|
$ | (78,970 | ) | $ | 1,340,727 | $ | 1,261,757 |
Previously
Reported
|
Adjustment
|
Restated
Amount
|
||||||||||
Balance
Sheet:
|
||||||||||||
Cash
|
$ | 119,833 | (23,860 | ) | $ | 95,973 | ||||||
Accounts
Receivable
|
318,299 | - | 318,299 | |||||||||
Inventory
|
- | - | - | |||||||||
Prepaid
expenses
|
84,564 | (84,564 | ) | - | ||||||||
Other
current assets
|
- | - | 79,900 | |||||||||
Total
Current Assets
|
522,696 | (28,524 | ) | 494,172 | ||||||||
Property
and equipment, net
|
63,270 | 10,429 | 73,699 | |||||||||
Total
assets
|
585,966 | (18,095 | ) | 567,871 | ||||||||
Accounts
payable and accrued expenses
|
$ | - | $ | 522,119 | $ | 522,119 | ||||||
Accrued
interest, net of discount
|
- | 3,711 | 3,711 | |||||||||
Accrued
interest - related party, net of discount
|
- | 20,052 | 20,052 | |||||||||
Accounts
payable
|
521,754 | (521,754 | ) | - | ||||||||
Accrued
taxes and expenses
|
68,248 | (68,248 | ) | - | ||||||||
Notes
and loans payable
|
- | - | - | |||||||||
Notes
payable - current portion
|
865,000 | (430,000 | ) | 435,000 | ||||||||
Notes
payable - related party, current portion
|
- | 275,000 | 275,000 | |||||||||
Penalty
for late registration of shares
|
- | 537,600 | 537,600 | |||||||||
Total
current liabilities
|
1,455,002 | 338,480 | 1,793,482 | |||||||||
Notes
payable
|
215,000 | (12,000 | ) | 203,000 | ||||||||
Notes
payable - related party
|
175,000 | 175,000 | ||||||||||
Loans
payable stockholders
|
7,448 | (7,448 | ) | - | ||||||||
Common
stock
|
8,154 | - | 8,154 | |||||||||
Common
stock subscribed
|
- | 67,000 | 67,000 | |||||||||
Additional
paid-in capital
|
1,838,048 | 3,479,851 | 5,317,899 | |||||||||
Accumulated
deficit
|
(2,937,687 | ) | (4,058,977 | ) | (6,996,664 | ) | ||||||
Total
equity
|
(1,094,484 | ) | (509,127 | ) | (1,603,611 | ) | ||||||
Total
liabilities and owners equity
|
$ | 585,966 | $ | (18,095 | ) | $ | 567,871 |
Previously
Reported
|
Adjustment
|
Restated
Amount
|
||||||||||
Statement
of Operations:
|
||||||||||||
Revenue
- sales
|
$ | 1,281,850 | $ | 43,636 | $ | 1,325,486 | ||||||
Other
Income
|
43,964 | (43,964 | ) | - | ||||||||
Total
revenue
|
1,325,814 | (328 | ) | 1,325,486 | ||||||||
Cost
of good sold
|
1,034,733 | - | 1,034,733 | |||||||||
Selling,
general, and administrative expenses
|
- | 409,918 | 409,918 | |||||||||
Selling
expenses
|
202,675 | (202,675 | ) | - | ||||||||
General
and administrative expenses
|
210,467 | (210,467 | ) | - | ||||||||
Total
expenses
|
1,447,875 | (3,224 | ) | 1,444,651 | ||||||||
Loss
before other expenses and income tax expense
|
(122,061 | ) | 2,896 | (119,165 | ) | |||||||
Interest
expense
|
19,748 | 47,067 | 66,815 | |||||||||
Cost
of penalty for late registration
|
- | 467,200 | 467,200 | |||||||||
(gain)
loss from mark to market - penalty
|
- | 70,400 | 70,400 | |||||||||
Net
Loss
|
$ | (141,809 | ) | $ | (581,771 | ) | $ | (723,580 | ) |
Previously
Reported
|
Adjustment
|
Restated
Amount
|
||||||||||
Total
liabilities and owners equity
|
$ | 891,550 | $ | (123,326 | ) | $ | 768,224 |
Statement
of Operations:
|
||||||||||||
Revenue
- sales
|
$ | 1,076,001 | 45,549 | $ | 1,121,550 | |||||||
Other
Income
|
45,549 | 926,250 | 971,799 | |||||||||
Total
revenue
|
1,121,550 | (971,799 | ) | 149,751 | ||||||||
Cost
of good sold
|
971,799 | - | 971,799 | |||||||||
Sales,
general, and administrative expenses
|
2,710,035 | 2,710,035 | ||||||||||
Selling
expenses
|
292,786 | (292,786 | ) | |||||||||
General
and administrative expenses
|
287,249 | (287,249 | ) | |||||||||
Total
expenses
|
1,551,834 | 2,130,000 | 3,681,834 | |||||||||
Loss
before other expenses and income tax expense
|
(430,284 | ) | (2,130,000 | ) | (2,560,284 | ) | ||||||
Interest
expense
|
16,756 | 290,000 | 306,756 | |||||||||
Net
Loss
|
$ | (447,040 | ) | (2,420,000 | ) | $ | (2,867,040 | ) |
·
|
Our
ability to raise capital necessary to sustain our anticipated operations
and implement our proposed business
plan,
|
·
|
Our
ability to implement our proposed business
plan,
|
·
|
The
ability to successfully integrate the operations of businesses we have
acquired, or may acquire in the future, into our
operations.
|
·
|
Our
ability to generate sufficient cash to pay our lenders and other
creditors,
|
·
|
Our
ability to identify and complete acquisitions and successfully integrate
the businesses we acquire, if any,
|
·
|
Our
ability to employ and retain qualified management and
employees,
|
·
|
Our
dependence on the efforts and abilities of our current employees and
executive officers,
|
·
|
Changes
in government regulations that are applicable to our
anticipated business,
|
·
|
Changes
in the demand for our services,
|
·
|
The
degree and nature of our
competition,
|
·
|
Our
lack of diversification of our business
plan,
|
·
|
The
general volatility of the capital markets and the establishment of a
market for our shares,
|
·
|
Our
ability to generate sufficient cash to pay our creditors,
and
|
·
|
Disruption
in the economic and financial conditions primarily from the impact of past
terrorist attacks in the United States, threats of future attacks, police
and military activities overseas and other disruptive worldwide political
and economic events and natural
disasters.
|
SIGNATURE
|
TITLE
|
DATE
|
||
/s/
Sam
Klepfish
Sam Klepfish
|
Chief
Executive Officer
|
July
31, 2008
|
||
/s/
John
McDonald
John McDonald
|
Principal
Financial Officer
|
July
31, 2008
|
a.
|
designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to
ensure that material information relating
to the registrant,
including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period
in
which this report is being prepared;
|
|
b.
|
designed such
internal control over
financial reporting, or caused such
internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the
reliability
of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted
accounting principles;
|
|
c.
|
evaluated
the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end
of the period covered by this report based on
such evaluation; and
|
|
d.
|
disclosed in
this report any change in the registrant's internal
control over financial reporting that occurred during
the
registrant's most recent fiscal quarter
(the small business
issuer's fourth
quarter in the case of an
annual report)
that has materially
affected,
or is reasonably likely to materially
affect, the
registrant's internal control over financial reporting;
and
|
a.
|
all significant
deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which
are reasonably likely
to adversely affect
the registrant's ability to
record, process, summarize and report financial information;
and
|
|
b.
|
any fraud, whether
or not material, that involves management or other employees
who have a significant role in the registrant's
internal
control over financial
reporting;
|
Date: July 31, 2008 | /s/ Sam Klepfish |
Sam Klepfish, Chief Executive Officer and Director |
a.
|
designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to
ensure that material information relating
to the registrant,
including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period
in
which this report is being prepared;
|
|
b.
|
designed such
internal control over
financial reporting, or caused such
internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the
reliability
of financial reporting and the preparation of
financial statements for external purposes in accordance with generally
accepted
accounting principles;
|
|
c.
|
evaluated
the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and
procedures, as of the end
of the period covered by this report based on
such evaluation; and
|
|
d.
|
disclosed in
this report any change in the registrant's internal
control over financial reporting that
occurred during the
registrant's most recent fiscal quarter
(the small business
issuer's fourth
quarter in the case of
an annual report) that has materially
affected, or is reasonably likely to materially
affect, the
registrant's internal control over financial reporting;
and
|
a.
|
all significant
deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which
are reasonably likely
to adversely affect the registrant's ability
to
record, process, summarize and report financial information;
and
|
|
b.
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting; |
Date: July 31, 2008 | /s/ John McDonald |
John
McDonald
Principal
Financial Officer
|