Item 2.02.  Results of Operations and Financial Condition.

On March 28, 2007, the Company announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2006 and certain other information. A copy of the Company’s press release announcing these financial results and certain other information is attached hereto as Exhibit 99.1. 

  In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

 

On March 27, 2007, the Audit Committee of the Board of Directors (the “Audit Committee”) and management of the Company determined, after consultation with its independent registered public accounting firm, that a restatement of its financial statements for the three and nine months ended September 30, 2006 which was filed on Form 10-Q on November 20, 2006 (the "Report") is necessary to reflect revised valuations for derivative liabilities and deferred debt discounts recorded for the common stock purchase warrants issued on July 21, 2006 pursuant to certain Note Purchase Agreements which the Company entered into with certain qualified institutional buyers and accredited investors. The Company and the Audit Committee determined that it should take this action to prevent future reliance on previously issued financial statements set forth in the Report. Such financial statements should no longer be relied upon.

In particular, a Black-Scholes calculation was used to determine each of these values initially using the 18 month life of the notes. The amendment will correct the term to the warrant life of five years resulting in higher valuations. The balance sheet set forth in the Report will be amended to reflect approximately $1.3 million of additional derivative liability and approximately $1.2 million of deferred debt discount as of September 30, 2006 compared to approximately $2.1 million and $1.8 million, respectively, as previously reported. The income statement as of September 30, 2006 will be adjusted to include approximately $75,000 net of other expense related to the quarterly derivative revaluation and amortization of the debt discount compared to approximately $184,000 as previously reported. All of these items are non-cash. 

 

The Company has discussed this matter with its independent registered public accounting firm.

 

Complete Description

 

 

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