10. Restatement

The Company identified an error in the Company’s accounting treatment relating to the deferred tax liability created as a result of an acquisition in the first quarter of 2010, On February 12, 2010, the Company purchased all of the outstanding stock of Premier Packaging Corporation for $2,000,000 in cash and 735,437 shares of the Company’s common stock with a value of $2,566,675 plus the assumption of liabilities at February 12, 2010. Among the various assets and liabilities acquired, the Company allocated $1,557,500 to machinery and equipment and $1,372,000 to other intangible assets. The tax basis for the machinery and equipment and other intangible assets as of the date of acquisition was zero, resulting in a deferred tax liability of $1,141,040 as a result of the acquisition. As part of the business combination accounting, the Company properly recorded the deferred tax liability that was caused by the acquisition, but erroneously reduced a deferred tax asset valuation allowance. The Company has determined that the deferred tax liability should have been included in the business combination accounting, resulting in an additional $1,141,040 of goodwill. Also, the Company in a separate entry should have recorded a deferred tax benefit along with a reversal of the deferred tax asset valuation allowance. As a result of this determination, the Company recorded an additional deferred tax benefit and additional goodwill in the amount of $1,141,040 as of the March 31, 2010 and subsequent periods. The correction of this error had no impact on previously disclosed revenue, cost of sales, gross profit, operating expenses and other income and expense. Additionally, this error had no impact on net loss for the interim periods ended June 30, 2011 and March 31, 2011.

The following table represents the impact of the restatement adjustments on the Company's Condensed Consolidated Balance Sheet as of December 31, 2010

	As Originally Reported			As Adjusted			Effect of Change

Current assets		7,147,000			7,147,000			-
Goodwill		1,943,081			3,084,121			1,141,040
Total assets		13,807,387			14,948,427			1,141,040
Total current liabilities		4,144,110			4,144,110			-
Total liabilities		10,360,499			10,360,499			-
Accumulated deficit		(41,093,672	)		(39,952,632	)		1,141,040
Total stockholders' equity		3,446,888			4,587,928			1,141,040
Total liabilities and stockholders' equity		13,807,387			14,948,427			1,141,040

The following table represents the impact of the restatement adjustments on the Company's Condensed Consolidated Statement of Operations for the nine months ended September 30, 2010. There was no effect on the three months ended September 30, 2010 Consolidated Statement of Operations.

	Originally Reported			As Adjusted			Effect of Change

Revenue		9,251,138			9,251,138			-
Cost of revenue		6,642,526			6,642,526			-
Gross profit		2,608,612			2,608,612			-
Operating expense		5,265,546			5,265,546			-
Operating loss		(2,656,934	)		(2,656,934	)		-
Other expense		(328,608	)		(328,608	)		-
Loss before income taxes		(2,985,542	)		(2,985,542	)		-
Income tax expense (benefit)		14,212			(1,126,828	)		(1,141,040	)
Net Loss		(2,999,754	)		(1,858,714	)		1,141,040
Comprehensive loss		(3,031,588	)		(1,890,548	)		1,141,040
Net Loss per share -basic and diluted		(0.17	)		(0.11	)		0.06

The following table represents the impact of the restatement adjustments on the Company's Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2010

	Originally Reported			As Adjusted			Effect of Change

Net Loss		(2,999,754	)		(1,858,714	)		1,141,040
Adjustments to reconcile net loss to net cash used by operating activities:
Deferred tax benefit		-			1,141,040			1,141,040
Net cash used by operating activities		(1,261,495	)		(1,261,495	)		-
Net cash used by investing activities		(2,530,044	)		(2,530,044	)		-
Net cash provided by financing activities		3,750,726			3,750,726			-
Net decrease in cash		(40,813	)		(40,813	)		-