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18. Restatement of financial statements | 9 Months Ended
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Sep. 30, 2013
Accounting Changes and Error Corrections [Abstract] |
18. Restatement of financial statements | On May 24, 2011, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with eight investors (collectively, the “Investors”) pursuant to which the Company sold 8,700 shares of a new series of convertible preferred stock designated as Series E Convertible Preferred Stock (“Original Series E”), the terms of which are set forth in the Certificate of Designations of Series E Preferred Stock (the “Certificate”), for $1,000 per share, or $8,700,000. In October 2012, the Company sold 1,000 shares of Series E for $1,000,000 (“New Series E”). The Original Series E and New Series E together are referred to herein as “Series E”. These Series E contained “full ratchet-down” liquidity protection that provides that if the Company issues securities for less than the existing conversion price for the Series E Preferred Stock or the strike price of the Series E warrants, then the conversion price for Series E Preferred Stock will be lowered to that lower price. Also, the strike price for Series E warrants will be decreased to that lower price and the number of Series E warrants will be increased such that the product of the original strike price times the original quantity equals the lower strike price times the higher quantity. In preparing the financial statements for 2012, the Company determined that the warrants for these financings included certain embedded derivative features as set forth in ASC Topic 815 “Derivatives and Hedging” and that this conversion feature of the Series E was not an embedded derivative because this feature was clearly and closely related to the host (Series E) as defined in ASC 815. These derivative liabilities were initially recorded at their estimated FV on the date of issuance and were subsequently adjusted each quarter to reflect the estimated FV at the end of each period, with any decrease or increase in the estimated fair value of the derivative liability for each period being recorded as other income or expense. Since the value of the embedded derivative feature for the related warrants was higher than the value of both Series E issuances, there was no beneficial conversion feature recorded for either transaction, and the excess of the value of the embedded derivative feature over the value of the transaction was recorded in each period on the Statement of Operations. As the result of this determination, the Company had incorrectly accounted for the derivative liabilities embedded in the Series E and related warrants. The consolidated balance sheet as of June 30, 2012 and the related consolidated statements of operations for the three months then ended were restated to reflect the correct treatment. The following table presents the effect of the restatement adjustment on the accompanying consolidated statement of operations for the three months ended September 30, 2012:
|  |  | Three Months Ended September 30, 2012 |
Consolidated Statement of Operations for Three Months Ended September 30, 2012 |  |  | As Previously Reported |  |  |  | Restated |  |  |  | Net Adjustment |
Loss from operations |  | $ | (3,426,250 | ) |  | $ | (3,426,250 | ) |  | $ | – |
Other (income)/expenses |  |  |  |  |  |  |  |  |  |  |  |
Fair value of derivative liabilities in excess of proceeds |  |  | – |  |  |  | – |  |  |  | – |
Adjustments to fair value of derivative securities |  |  | – |  |  |  | (2,022,790 | ) |  |  | (2,022,790 | )
Other (income)/expenses |  |  | (133,770 | ) |  |  | (133,770 | ) |  |  | – |
Interest expense |  |  | 172,057 |  |  |  | 52,313 |  |  |  | (119,744 | )
Total other (income)/expenses |  |  | 38,287 |  |  |  | (2,104,247 | ) |  |  | (2,142,534 | )
Net loss |  |  | (3,464,537 | ) |  |  | (1,322,003 | ) |  |  | 2,142,534 |
Preferred dividends |  |  | – |  |  |  | 119,744 |  |  |  | 119,744 |
Net loss atttributable to common shareholders |  | $ | (3,464,537 | ) |  | $ | (1,441,747 | ) |  | $ | 2,022,790 |
Basic and diluted loss attributable to common shareholders per share |  | $ | (0.04 | ) |  | $ | (0.02 | ) |  | $ | 0.02 |
Basic weighted average shares outstanding |  |  | 89,748,496 |  |  |  | 89,748,496 |  |  |  | – |
Fully-diluted weighted average shares outstanding |  |  | 89,748,496 |  |  |  | 117,915,163 |  |  |  | 28,166,667 |
The following table presents the effect of the restatement adjustment on the accompanying consolidated statement of operations for the nine months ended September 30, 2012:
|  |  | Nine Months Ended September 30, 2012 |
Consolidated Statement of Operations for Nine Months Ended September 30, 2012 |  |  | As Previously Reported |  |  |  | Restated |  |  |  | Net Adjustment |
Loss from operations |  | $ | (8,221,091 | ) |  | $ | (8,221,091 | ) |  | $ | – |
Other (income)/expenses |  |  |  |  |  |  |  |  |  |  |  |
Fair value of derivative liabilities in excess of proceeds |  |  | – |  |  |  | – |  |  |  | – |
Adjustments to fair value of derivative securities |  |  | – |  |  |  | 13,845,208 |  |  |  | 13,845,208 |
Other (income)/expenses |  |  | 626,926 |  |  |  | 626,926 |  |  |  | – |
Interest expense |  |  | 469,848 |  |  |  | 104,431 |  |  |  | (365,417 | )
Total other (income)/expenses |  |  | 1,096,774 |  |  |  | 14,576,565 |  |  |  | 13,479,791 |
Net loss |  |  | (9,317,865 | ) |  |  | (22,797,656 | ) |  |  | (13,479,791 | )
Preferred dividends |  |  | – |  |  |  | 365,417 |  |  |  | 365,417 |
Net loss attributable to common shareholders |  | $ | (9,317,865 | ) |  | $ | (23,163,073 | ) |  | $ | (13,845,208 | )
Basic and diluted loss attributable to common shareholders per share |  | $ | (0.10 | ) |  | $ | (0.26 | ) |  | $ | (0.16 | )
Basic weighted average shares outstanding |  |  | 89,220,298 |  |  |  | 89,220,298 |  |  |  | – |
Fully-diluted weighted average shares outstanding |  |  | 89,220,298 |  |  |  | 117,386,965 |  |  |  | 28,166,667 |
The FV of these derivative liabilities was calculated using the Black Scholes pricing model that is based on the closing price of the common stock, the strike price of the underlying instrument, the risk-free interest rate for the applicable remaining life of the underlying instrument (i.e., the U.S. treasury rate for that period) and the historical volatility of the Company’s common stock.

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- Definition The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22644-107794 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 45 -Paragraph 23 -URI http://asc.fasb.org/extlink&oid=6368906&loc=d3e21914-107793 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22595-107794 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=28359718&loc=d3e22499-107794 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 250 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB TOPIC 1.N.Q3) -URI http://asc.fasb.org/extlink&oid=26874127&loc=d3e30840-122693 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 1 -Section N + Details
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