| RESTATEMENT OF FINANCIAL STATEMENTS |
NOTE 17. RESTATEMENT OF FINANCIAL STATEMENTS In connection with the audit of the Company's financial statements for the fiscal year ended December 31, 2012, adjustments were made to the Company's equity accounting for certain first quarter 2012 transactions. The effects of these adjustments were included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012, as filed with the Commission. The financial statements for the quarter ended March 31, 2012 has been restated to include the effects of these adjustments. The following details the effects of the changes on the statement of operations and comprehensive loss and statement of cash flows for the quarter ended March 31, 2012: | | | Three Months Ended March 31, 2012 | | | Adjustment | | | Three Months Ended March 31, 2012 (As Restated) | | | | | | | | | | | | | | | | | Net Revenues | | $ | 74,810 | | | $ | - | | | $ | 74,810 | | | | | | | | | | | | | | | | | Operating Expenses | | | | | | | | | | | | | | Cost of revenues | | | 100,585 | | | | - | | | | 100,585 | | | Business development | | | 185,519 | | | | - | | | | 185,519 | | | General and administrative | | | 1,641,516 | | | | 2,140,001 | | | | 3,781,517 | | | Product development | | | 50,711 | | | | - | | | | 50,711 | | | Depreciation and amortization | | | 68,663 | | | | - | | | | 68,663 | | | Total operating expenses | | | 2,046,994 | | | | 2,140,001 | | | | 4,186,995 | | | Loss from operations | | | (1,972,184 | ) | | | (2,140,001 | ) | | | (4,112,185 | ) | | | | | | | | | | | | | | | | Non-operating expense | | | | | | | | | | | | | | Interest income (expense) | | | (72,674 | ) | | | - | | | | (72,674 | ) | | Other income (expense) | | | (411,225 | ) | | | - | | | | (411,225 | ) | | Loss before income tax provision | | | (2,456,083 | ) | | | (2,140,001 | ) | | | (4,596,084 | ) | | Income tax provision | | | - | | | | - | | | | - | | | Net Loss from operations | | | (2,456,083 | ) | | | (2,140,001 | ) | | | (4,596,084 | ) | | Net loss attributable to | | | | | | | | | | | | | | the noncontrolling interest | | | 72,088 | | | | - | | | | 72,088 | | | Net loss | | $ | (2,383,995 | ) | | $ | (2,140,001 | ) | | $ | (4,523,996 | ) | | | | | | | | | | | | | | | | Other comprehensive income | | | | | | | | | | | | | | Foreign currency translation gain | | | 100 | | | | - | | | | 100 | | | Comprehensive loss | | $ | (2,383,895 | ) | | $ | (2,140,001 | ) | | $ | (4,523,896 | ) | | | | | | | | | | | | | | | | Net loss per share - basic and diluted | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.01 | ) | | | | | | | | | | | | | | | | Weighted average number of common shares | | | | | | | | | | | | | | outstanding - basic and diluted | | | 752,792,562 | | | | 752,792,562 | | | | 752,792,562 | | The adjustment of $2,140,001 is comprised of $1,333,334 in non-cash compensation expense related to a subscription agreement entered into with one of our current directors, Kenges Rakishev, pursuant to which shares of common stock were sold to Mr. Rakishev below the market price at the time of sale and $806,667 in non-cash compensation expense related to a subscription agreement entered into with one of our current directors, Felix Vulis, pursuant to which shares of common stock and warrants were sold to Mr. Vulis below the market price at the time of sale. | | | | | | | | | Three Months | | | | | Three Months | | | | | | Ended | | | | | Ended | | | | | | 3/31/2012 | | | | | March 31, 2012 | | | Adjustment | | | (As Restated) | | | Cash flows from operating activities: | | | | | | | | | | | | | | Net loss | | $ | (2,383,995 | ) | | $ | (2,140,001 | ) | | $ | (4,523,996 | ) | | Adjustments to reconcile net loss to net | | | | | | | | | | | | | | cash used in operating activities: | | | | | | | | | | | | | | Loss attributable to Investment in Subsidiary | | | 411,225 | | | | - | | | | 411,225 | | | Decrease in noncontrolling interests | | | (72,088 | ) | | | - | | | | (72,088 | ) | | Loan discount interest expense | | | 2,859 | | | | - | | | | 2,859 | | | Depreciation and amortization | | | 68,663 | | | | - | | | | 68,663 | | | Non-cash compensation | | | 521,771 | | | | 2,140,001 | | | | 2,661,772 | | | | | | | | | | | | | | | | | Changes in assets and liabilities, net of acquisitions | | | | | | | | | | | | | | and the effect of consolidation of equity affiliates: | | | | | | | | | | | | | | Prepaid expenses and other assets | | | (8,994 | ) | | | - | | | | (8,994 | ) | | Contract receivable, net | | | 346 | | | | - | | | | 346 | | | Accounts payable | | | 160,278 | | | | - | | | | 160,278 | | | Accrued expenses | | | 23,923 | | | | - | | | | 23,923 | | | Total adjustments | | | 1,107,983 | | | | 2,140,001 | | | | 3,247,984 | | | Net cash used in operating activities | | | (1,276,012 | ) | | | - | | | | (1,276,012 | ) | | | | | | | | | | | | | | | | Cash flows from investing activities | | | | | | | | | | | | | | Capitalized web development and patent costs | | | (168,738 | ) | | | - | | | | (168,738 | ) | | Purchase of fixed assets | | | (21,886 | ) | | | - | | | | (21,886 | ) | | Net cash used in investing activities | | | (190,624 | ) | | | - | | | | (190,624 | ) | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | Due from related parties | | | (46,492 | ) | | | - | | | | (46,492 | ) | | Contributed capital from non-controlling equity investors | | | 2,140,000 | | | | - | | | | 2,140,000 | | | Payments on related party note | | | (75,000 | ) | | | - | | | | (75,000 | ) | | Net cash provided by financing activities | | | 2,018,508 | | | | - | | | | 2,018,508 | | | | | | | | | | | | | | | | | Effect of exchange rate changes on cash | | | 100 | | | | - | | | | 100 | | | Net increase (decrease) in cash | | | 551,972 | | | | - | | | | 551,972 | | | | | | | | | | | | | | | | | Cash at beginning of period | | | 83,173 | | | | - | | | | 83,173 | | | Cash at end of period | | $ | 635,145 | | | $ | - | | | $ | 635,145 | | |