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EXPLANATORY NOTE
Our consolidated financial statements for the three months ended September 30, 2009 and related condensed footnote disclosures in this Amendment No. 1 to the Quarterly Report on Form 10-Q/A have been restated in accordance with the changes described below:
In September 2010, we concluded that it was necessary to amend this Quarterly Report in order to restate our  consolidated financial statements for the three and nine months ended September  30, 2009 to reflect the audit adjustments made to the December 31, 2008 consolidated financial statements included in the Form 10-K, which were not reflected in the  consolidated financial statements for the three and nine months ended September  30, 2009 originally filed on the Form 10-Q. While preparing this amendment, the Company noted certain other misstatements to the originally filed  consolidated financial statements as of and for the three and nine months ended September 30, 2009, and the period from April 30, 1998 (inception) to September  30, 2009.
The  consolidated financial statements and other financial information included in this Amendment No. 1 have been restated accordingly. The public should no longer rely on our previously filed financial statements for the three and nine months ended September 30, 2009.  These matters have been discussed by our authorized executive officers and with our independent registered public accounting firm. This Amendment No. 1 is stated as of the file date of the Original Filing and does not reflect events occurring after the filing date of the Original Filing, or modify or update the disclosures therein in any way other than as required to reflect the amendment described above.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains forward-looking statements. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including without limitation, statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words "believe", "expects", "anticipates", "intends", "estimates", "projects", "target", "goal", "plans", "objective", "should", or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements.
*Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.*

 

 
2 




  
 AMERICAN ASSET DEVELOPMENT, INC.
 INDEX   











 
  
 
  
Page No.
 

PART I. FINANCIAL INFORMATION 
  





 Item 1
  
Financial Statements
  









  
Consolidated Balance Sheets (unaudited)
  
 
4
  






  
Consolidated Statements of Operations (unaudited)
  
 
5
  






  
Consolidated Statements of Cash Flows (unaudited)
  
 
6
  






  
Notes to Consolidated Financial Statements (unaudited)
  
 
8
  





 Item 2
  
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
 
16
  





 Item 3
  
Quantitative and Qualitative Disclosures About Market Risk
  
 
17
  





 Item 4
  
Controls and Procedures
  
 
17
  



PART II. OTHER INFORMATION 
  







 Item 5
  
Other Information
  
 
17
  







 Item 6
  
Exhibits
  
 
17
  






  
Signature
  
 
18
  





    

  
 3 
 

Table of Contents

   PART
I—FINANCIAL INFORMATION   


ITEM 1.
FINANCIAL STATEMENTS 
AMERICAN ASSET DEVELOPMENT, INC. 
(fka EMPYREAN HOLDINGS, INC.)
(A Development Stage Company)
<FONT
STYLE="font-family:ARIAL" SIZE="2">CONSOLIDATED BALANCE SHEETS 














 
  
As of
  September 30,
  2009
(Restated)
(Unaudited)
 
  
As of
  December 31,
  2008
 

 Assets
  



  




 Current assets:
  



  




 Cash
  
$
15,427
  
  
$
354
  


 Real estate held for sale
  
 
-
  
  
 
97,000
  


 Investment in real estate
  
 
214,445
  
  
 
-
  


 Other current assets
  
 
525
  
  
 
10,675
  


  
 
 
 
  
 
 
 


 Total current assets
  
 
230,397
  
  
 
108,029
  


  
 
 
 
  
 
 
 

 Total assets
  
$
230,397
  
  
$
108,029
  


  
 
 
 
  
 
 
 

 
  



  




 Liabilities and Stockholders’ Deficit
  



  




 Current liabilities:
  



  




 Accounts payable
  
$
181,125
  
  
$
132,940
  

 Accrued expense
  
 
218,272
  
  
 
210,000
  

 Notes payable - related parties
  
 
303,326
  
  
 
249,017
  



  
 
 
 
  
 
 
 

 Total current liabilities
  
 
702,723
  
  
 
591,957
  


  
 
 
 
  
 
 
 

 Commitments & contingencies
  
 
-
  
  
 
-
  



  
 
 
 
  
 
 
 

 
  



  




 Stockholders’ deficit:
  



  






 Convertible preferred stock, $0.001 par value per share, 200,000,000 shares authorized;15,140,000 shares issued and outstanding
  
 
15,140
 
  
 
15,140
 

 Common stock, $0.001 par value per share: 1,000,000,000 shares authorized; 20,208,066 shares issued and outstanding
  
 
22,208
  
  
 
12,008
  

 Additional paid-in capital
  
 
1,907,534
  
  
 
1,815,734
  


 Stock payable
  
 
86,000
  
  
 
-
  


 Accumulated deficit during development stage
  
 
(2,503,208)
  
  
 
(2,326,810)
  


  
 
 
 
  
 
 
 

 Total stockholders’ deficit
  
 
(472,326)
  
  
 
(483,928)
  


  
 
 
 
  
 
 
 

 Total liabilities and stockholders’ deficit
  
$
230,397
  
  
$
108,029
  


  
 
 
 
  
 
 
 
See accompanying condensed notes to these consolidated financial statements.
  
 4 




Table of Contents

 AMERICAN ASSET DEVELOPMENT,
INC. 
(fka EMPYREAN HOLDINGS, INC.)
(A Development Stage Company)
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 
   
     
     
     
     
     
     
     
     
     
     
     
     
     
     
     
   
   
      
     Three Months Ended September  30,
      
     Nine Months Ended September  30,
      
     Period From
       April 30, 1998
       (Inception)
       Through
         September 30,
   
   
      
     2009
       (Restated)
      
     2008
      
     2009
       (Restated)
      
     2008
      
     2009
     (Restated)
   
   
     Revenue

Rental income

Construction income

Payroll processing and other

Sales of real estate

Total revenue



Costs and expense

Cost of real estate sold

General and administrative

Impairment of related party receivable

Loss on abandonment of property

Total costs and expense



Other income (expense)

Interest income (expense)

Cost of recapitalization

Loss on settlement of accounts payable

Total other income (expense)

Net loss



Deemed dividend on preferred stock

Net Loss attributable to

common shareholders



Total basic and diluted net loss per share

Basic and diluted weighted average

Number of shares outstanding

Table of Contents
AMERICAN ASSET DEVELOPMENT,
INC. 
(fka EMPYREAN HOLDINGS, INC.)
(A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited) 

   
     
     
     
     
     
     
     
     
     
   
   
      
     Nine Months Ended September       30,
      
     Period From
       April 30, 1998
       (Inception)
       Through
         September 30,
   
   
      
     2009
       (Restated)
      
     2008
      
     2009
     (Restated)
   
   
     Cash flows from operating activities

Net loss

Adjustments to reconcile net loss to cash

used in operating activities

Depreciation and amortization

Stock issued for services

Stock based compensation

Cost of recapitalization

Non-cash interest expense

Bad debt expense

Loss on sale of property

Impairment of property

Loss on settlement of accounts payable

Loss on abandoned investment property

Changes in:

Prepaid expenses and other assets

Accounts payable and accrued expenses

Net cash used in operating activities



Cash flows from investing activities

Payment received on note receivable

Purchase of fixed assets

Investment in real estate property

Proceeds from sale of real estate

Issuance of note receivable

Net cash provided by investing activities



Cash flows from financing activities

Proceeds from issuance of common stock

Proceeds from issuance of stock payable

Proceeds from related party debt

Proceeds from short term mortgage loan

Payment on short term mortgage loan

Principal payments on related party debt

Net cash provided by financing activities

 
See accompanying condensed notes to these consolidated financial statements.
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 AMERICAN ASSET DEVELOPMENT,
INC. 
(fka EMPYREAN HOLDINGS, INC.)
(A Development Stage Company)
 CONSOLIDATED STATEMENTS OF CASH FLOWS (cont'd)
 (Unaudited)
  
 
   
     
     
     
     
     
     
     
     
     
   
   
      
     Nine Months Ended
       September 30,
      
     Period From
       April 30, 1998
       (Inception)
       Through
         September 30,
   
   
      
     2009
       (Restated)
      
     2008
      
     2009
     (Restated)
   

   
     Net increase (decrease) in cash

Cash at beginning of period

Cash at end of period



Supplemental disclosures:

Cash paid for interest

Cash paid for income taxes



Non-cash activities:

Shares issued to settle related party debt

Shares issued for property

Forgiveness of related party debt

Common stock  issued for property

Debt assumed for purchase of property

 
See accompanying condensed notes to these consolidated financial statements.
 
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   AMERICAN ASSET DEVELOPMENT,
INC. 
(fka EMPYREAN HOLDINGS, INC.)
(A Development Stage Company) 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

NOTE 1 - BASIS OF PRESENTATION 
American Asset Development, Inc. (formerly Empyrean Holdings, Inc.) ("AADI" or the "Company") was incorporated in Nevada on April 30, 1998. AADI is a U.S. based holding company structured to operate similarly to a Business Development Corporation while incubating several different corporate infrastructures that we expect to eventually spin-off into their own publicly-traded companies. AADI is a development stage entity.

On October 19, 2010, the Company filed Amended and Restated Articles of Incorporation changing the Company's name from Empyrean Holdings, Inc. to American Asset Development, Inc., effective October 21, 2010.


The consolidated financial statements have been prepared by the Company in accordance with U.S. generally accepted accounting principles ("GAAP") and the accounting policies set forth in its audited financial statements for the period ended December 31, 2008 as filed with the Securities and Exchange Commission (the "SEC") and should be read in conjunction with the Company's Annual Report on Form 10-K. The Company is in the development stage and consequently its financial statements have been prepared in accordance with FASB Accounting Standards Codification  ("ASC") 915 "Development Stage Entities".



In the opinion of management, the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. The results of operations presented for the three and nine months ended September 30, 2009 are not necessarily indicative of the results to be expected for the year.

  
As described in Note 7, the consolidated financial statements have been restated to reflect the audit adjustments made to the December 31, 2008 consolidated financial statements included in the Form 10-K, which were not reflected in the consolidated financial statements for the three and nine months ended September 30, 2009 originally filed on the Form 10-Q.

  
While preparing this amendment, the Company noted certain other misstatements to the consolidated financial statements as of and for the three and nine months ended September 30, 2009 and the period from April 30, 1998 (inception) to September 30, 2009, which are also described in Note 7.

  
Use of Estimates
In preparing financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheet and revenue and expenses in the statements of income and expenses. Actual results could differ from those estimates.

  
Reclassifications
Certain 2008 amounts have been reclassified to be consistent with current year classification. 


 
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Table of Contents

NOTE 2 - GOING CONCERN 
As shown in the accompanying financial statements, Empyrean incurred net losses of ($176,398) during the  nine months ended September 30, 2009, which increased the accumulated deficit to ($2,503,208) as of September 30, 2009. Empyrean has a working capital deficit of ($472,326) as of September 30, 2009. These conditions raise substantial doubt about Empyrean's ability to continue as a going concern. Management is trying to raise additional capital through sales of common stock as well as seeking financing from third parties. The financial statements do not include any adjustments that might be necessary if Empyrean is unable to continue as a going concern.


NOTE 3 - REAL ESTATE 

Sales of Real Estate
In March 2008, one of the three lots in Kewaskum, Wisconsin acquired in June 2007 was sold for $49,000, and in April 2008 another one of the remaining two lots was sold for $45,000. As the proceeds received were less than the $105,000 carrying value of these assets, the Company incurred a loss during 2008 of $11,000.  
During July 2009 an agreement was reached with the Wisconsin Department of Transportation ("WI DOT") for an early buyout of the Green Bay, Wisconsin property that it was  intending to acquire for a road project. The company accepted the fair market value of $102,000 offered by WI DOT and the sale was finalized during August 2009. The net proceeds received after deduction for the full settlement of the outstanding amount on the mortgage and the payment of all back property taxes was $63,201. A large portion of these proceeds was used to repay a $36,500 short term mortgage property loan that included a high penalty for delayed payment, and the remaining amount was utilized as working capital.

Property Mortgage Loan
During June 2009, in anticipation of the July 2009 sale discussed above, the Company obtained a high interest short term mortgage loan of $36,500 from a mortgage lender, collateralized by the Company's unencumbered property in Green Bay, Wisconsin. The net proceeds of this loan of $25,241 were used for working capital. Financing costs and prepaid interest was capitalized and was amortized into interest expense over the term of the loan. The mortgage loan was repaid during August 2009 with proceeds from the sale of property, discussed above.

Investment in Real Estate
During July 2009 the Company finalized a Purchase and Sale Agreement ("Purchase Agreement") with Terri A. Hourigan, trustee of the Terri A. Hourigan 2003 Revocable Trust (the "Seller") dated May 23, 2003 for the purchase of real property located at 118 N. Patterson, Santa Barbara, California 93111 which is in the development stage for $5,800,000 (Five million eight hundred thousand dollars). 
A purchase option ("Option") for this purchase was executed with the Purchase Agreement, requiring payment of the purchase price to be made within 30 (Thirty) days from the time the option is exercised on the completion of the recordation of the Final Map for the property and fulfillment of certain other conditions. 
The consideration for the Option consisted of: payment of option deposits pursuant to the Option terms; payment of the development costs for the project; $50,000 (5,000,000 shares) of restricted common stock; and assumption of $100,000 of personal loans borrowed by the seller at a 15% interest rate from November 1, 2008. As of September 30, 2010, the Company's total investment in this real estate was $214,445, which was comprised of: $50,000 of restricted common stock; assumption of $100,000 of debt of the seller and related accrued interest of $13,726, and $50,719 of real estate purchase costs.  
Ms. Hourigan was not a related party of the Company at the time the Purchase Agreement and Option was executed. However, on July 31, 2010, over a year  after the execution of the Purchase Agreement and Option, Ms. Hourigan assumed the role of Chief Executive Officer of the Company. 

 
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NOTE 4 - NOTES PAYABLE - RELATED PARTIES 
During 2007, the Company received advances from IMR, LLC. This note payable incurs interest at 8% per annum and is due on demand. This note continued to accrued interest during the nine months ended September 30, 2009. As of September 30, 2009, the Company's Note payable due to IMR, LLC was $160,057, which includes $18,663 of accrued interest. 
Advances made to the Company by a former consultant accrue interest at 8 % per annum. As of September 30, 2009, the amount due on this note was $19,610, which includes $4,354 of accrued interest. The note is due on demand. 
During the nine months ended September 30, 2009, the Company received advances from investors and related parties of $97,420 and made payments totaling $173,996 on prior advances. These advances are due on demand and accrue interest at 8% per annum. As of June 30, 2009, the Company's payable to investors and related parties for advances totaled $9,933, which includes $3,356 of accrued interest. 
During July 2009, in connection with the Purchase and Sale agreement for the purchase of real property, discussed in Note 3, the Company assumed $100,000 of personal loans borrowed by the seller (Terri Hourigan), at a 15% interest rate from November 1, 2008. The assumed debt incurs interest at 15% per annum and is due on demand. As of September 30, 2009, the Company's note payable due to Ms. Hourigan, was $113,726, which includes $13,726 of accrued interest.

NOTE 5 - INCOME TAXES

The Company records its income taxes in accordance with FASB Accounting Standards Codification  (“ASC”) 740 “Income Taxes”. The Company incurred net operating losses during all periods presented in a deferred tax asset, which was fully allowed for; therefore, the net benefit and expense resulted in $-0- income taxes.


NOTE 6 - STOCKHOLDER'S EQUITY

During July 2009, the Company issued 5,000,000 restricted common shares, par value $.001, valued at $50,000, as partial consideration for finalizing the option and sale and purchase agreement with the owner of real property, discussed above. 
Also during July 2009, 13,800,000 restricted common shares, par value $.001, were sold through a Private Placement to accredited investors for aggregate $138,000. As of September 30, 2009, 8,600,000 of the common shares sold remained unissued and are reflected as a stock payable on the consolidated balance sheet. These shares were subsequently issued, on October 6, 2009. 
Warrants, valued at $68,068, expiring on July 12, 2010, for the purchase of an additional 13,800,000 restricted common shares were issued to the investors who purchased shares pursuant to the private placement. The warrants expired unexercised. The estimated fair value of the warrants was computed using the Black-Scholes option pricing model with the following assumptions: an exercise price of $.02 per share; a market price of common stock of $.02 per share; an expected term of 1.0 years; a dividend yield of zero; and expected volatility of 460%.

 
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Table of Contents

NOTE 7 - RESTATEMENT

Summary of Restatement Items 

During September 2010, while preparing for the 2009 audit, the Company concluded that it was necessary to amend and restate its  consolidated financial statements  for the three and nine months ended September 30, 2009 to reflect the audit adjustments recorded for the year ended December 31, 2008. The audit adjustments primarily related to writing off the Company's fixed assets in settlement of an account payable obligation, recording additional non-cash accrued interest expense, impairment of certain other assets, and adjustments to accrued expenses. 
While preparing this amendment, the Company noted certain other misstatements to the consolidated financial statements as of and for the three and nine months ended September 30, 2009 and the period from April 30, 1998 (inception) to September 30, 2009, which are also corrected in this amendment, relating to: assumed debt in connection with the Purchase and Sale agreement for the purchase of real property (discussed above in Note 4), non-cash accrued interest, reclassification of property tax expense within the statement of operations, capitalization of deferred loan costs and prepaid interest related to the June 2009 mortgage loan, amortization of deferred loan costs and prepaid interest, loss on settlement of accounts payable, and accrual for past due wages. 

The impact of the above restatement on the Company's consolidated statements of operations for the three months ended September 30, 2009, for the period six months ended September 30, 2009, and for the period from April 30, 1998 to September 30, 2009 is summarized below.

Restatement Impact on Statements of Operations - Three and Nine Months Ended September 30, 2009

 

   
     
     
     
     
     
     
     
     
     
     
     
     
   
   
      
       
     Three Months Ended
       September 30, 2009
   
   
      
       
     As initially 
       reported
      
      
     Adjustment
      
       
     As
     restated
   
   
     Revenue

Sales of  real estate

Total revenue

 

Cost and expenses

Cost of real estate sold

General and administrative

Total cost and expenses

 

Other income (expenses)

Interest income (expense)

Total other income (expenses)

 

Net loss

Table of Contents
 

Restatement Impact on Statements of Operations - Nine Months Ended September 30, 2009
The impact of the above restatement on the Company's consolidated statements of operations for the nine month period ending September 30, 2009 is summarized below.
 

   
     
     
     
     
     
     
     
     
     
     
     
     
   
   
      
       
     Nine Months Ended
       September 30, 2009
   
   
      
       
     As initially 
       reported
      
      
     Adjustment
      
       
     As
     restated
   
   
     Revenue

Sales of  real estate

Total revenue

 

Cost and expenses

Cost of real estate sold

General and administrative

Total cost and expenses

 

Other income (expenses)

Interest income (expense)

Loss on settlement of accounts payable

Total other income (expenses)

 

Net loss

Table of Contents
 

Restatement Impact on Statements of Operations - April 30, 1998 (Inception) Through September 30, 2009
The impact of the above restatement on the Company's consolidated statements of operations for the period of April 30, 1998 (inception) through  September 30, 2009 is summarized below.
 

   
     
     
     
     
     
     
     
     
     
     
     
     
   
   
      
       
     April 30, 1998 (inception) through
       September 30, 2009
   
   
      
       
     As initially 
       reported
      
      
     Adjustment
      
       
     As
     restated
   
   
     Revenue

Rental income

Construction income

Payroll processing and other

Sale of  real estate

Total income

 

Cost and expenses

Cost of real estate sold

General and administrative

Impairment of related party receivable

Loss on abandonment of property

Total cost and expenses

 

Other income (expenses)

Interest income (expense)

Loss on settlement of accounts payable

Cost of recapitalization

Total other income (expenses)

 

Net loss

Table of Contents
 

Restatement Balance Sheet Impact - September 30, 2009
The impact of the above restatement on the Company's consolidated balance sheet as of  September 30, 2009 is summarized below.
 


   
     
     
     
     
     
     
     
     
     
     
     
     
   
   
      
       
     September 30, 2009
   
   
      
       
     As initially 
       reported
      
      
     Adjustment
      
       
     As
     restated
   
      
     Current assets

Fixed assets

Total assets

 

Current liabilities

Accounts payable

Accrued expense

Notes payable - related parties

Total current liabilities

Total stockholders' deficit

Total liabilities and stockholders' deficit

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   | Three Months Ended September  30, |   | Nine Months Ended September  30, |   | Period From
       April 30, 1998
       (Inception)
       Through
         September 30, |
|   | 2009
       (Restated) |   | 2008 |   | 2009
       (Restated) |   | 2008 |   | 2009
     (Restated) |
| Revenue |   |   |    |   |  |    |   |   |    |   |  |   |   |  |
| Rental income | $ | - |    | $ | - |    | $ | - |    | $ | - |   | $ | 6,714 |
| Construction income |   | - |    |   | 51,522 |    |   | - |    |   | 59,779 |   |   | 59,779 |
| Payroll processing and other |   | - |    |   | - |    |   | - |    |   | - |   |   | 16,564 |
| Sales of real estate |   | 102,000 |    |   | - |    |   | 102,000 |    |   | 94,000 |   |   | 1,080,200 |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total revenue |   | 102,000 |    |   | 51,522 |    |   | 102,000 |    |   | 153,779 |   |   | 1,163,257 |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Costs and expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Cost of real estate sold |   | 97,000 |    |   | - |    |   | 97,000 |    |   | 114,677 |   |   | 1,257,304 |
| General and administrative |   | 93,757 |    |   | 114,548 |    |   | 137,290 |    |   | 465,440 |   |   | 1,828,764 |
| Impairment of related party receivable |   | - |    |   | - |    |   | - |    |   | - |   |   | 162,148 |
| Loss on abandonment of property |   | - |    |   | - |    |   | - |    |   | - |   |   | 154,354 |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total costs and expense |   | 190,757 |    |   | 114,548 |    |   | 234,290 |    |   | 580,117 |   |   | 3,402,570 |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Other income (expense) |   |  |    |   |   |    |   |  |    |   |   |   |   |  |
| Interest income (expense) |   | (30,036) |   |   | 560 |    |   | (40,364) |   |   | (7,530) |   |   | (128,370) |
| Cost of recapitalization |   | - |    |   | - |    |   | - |    |   | - |   |   | (115,479 |
| Loss on settlement of accounts payable |   | - |    |   | - |    |   | (3,744) |    |   | - |   |   | (20,046) |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other income (expense) | $ | (30,036) |    | $ | 560 |    | $ | (44,108) |    | $ | (7,530) |   | $ | (263,895) |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss | $ | (118,793) |    | $ | 62,466 |    | $ | (176,398) |    | $ | (433,868) |   | $ | (2,503,208) |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Deemed dividend on preferred stock | $ | - |    | $ | - |    | $ | - |    | $ | - |   | $ | 373,200 |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss attributable to |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| common shareholders | $ | (118,793) |    | $ | 62,466 |    | $ | (176,398) |    | $ | (433,868) |   | $ | (2,876,408) |
|  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Total basic and diluted net loss per share | $ | (.006) |  | $ | (0.006) |  | $ | (.012) |  | $ | (0.042) |  |  |  |
| Basic and diluted weighted average |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Number of shares outstanding |   | 20,501,544 |    |   | 10,287,167 |    |   | 14,870,337 |    |   | 10,316,333 |   |   |  |

|  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   | Nine Months Ended September       30, |   | Period From
       April 30, 1998
       (Inception)
       Through
         September 30, |
|   | 2009
       (Restated) |   | 2008 |   | 2009
     (Restated) |
| Cash flows from operating activities |   |   |    |   |  |    |   |  |
| Net loss | $ | (176,398) |    | $ | (433,868) |    | $ | (2,503,208) |
| Adjustments to reconcile net loss to cash |   |  |    |   |   |    |   |   |
| used in operating activities |   |   |    |   |   |    |   |   |
| Depreciation and amortization |   | - |    |   | 8,376 |    |   | 35,192 |
| Stock issued for services |   | - |    |   | 26,250 |    |   | 277,250 |
| Stock based compensation |   | - |    |   | - |    |   | 120,000 |
| Cost of recapitalization |   | - |    |   | - |    |   | 115,479 |
| Non-cash interest expense |   | 9,744 |    |   | 7,530 |    |   | 86,836 |
| Bad debt expense |   | - |    |   | - |    |   | 162,148 |
| Loss on sale of property |   | (5,000) |    |   | 11,000 |    |   | 57,041 |
| Impairment of property |   | - |    |   | - |    |   | 11,500 |
| Loss on settlement of accounts payable |   | 3,744 |    |   | - |    |   | 20,046 |
| Loss on abandoned investment property |   | - |    |   | - |    |   | 154,354 |
| Changes in: |   |   |    |   |   |    |   |   |
| Prepaid expenses and other assets |   | 10,150 |    |   | (24,404) |    |   | (524) |
| Accounts payable and accrued expenses |   | 52,713 |    |   | 259,127 |    |   | 531,433 |
|  |   |   |   |   |   |   |   |   |
| Net cash used in operating activities | $ | (105,047) |    | $ | (145,989) |    | $ | (932,453) |
|  |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |
| Cash flows from investing activities |  |  |  |  |  |  |  |  |
| Payment received on note receivable |   | - |    |   | - |    |   | 46,500 |
| Purchase of fixed assets |   | - |    |   | - |    |   | (41,500) |
| Investment in real estate property |   | (50,719) |    |   | - |    |   | (50,719) |
| Proceeds from sale of real estate |   | 102,000 |    |   | 94,000 |    |   | 703,459 |
| Issuance of note receivable |   | - |    |   | - |    |   | (208,648) |
|  |   |   |   |   |   |   |   |   |
| Net cash provided by investing activities | $ | 51,281 |    | $ | 94,000 |    | $ | 449,092 |
|  |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |
| Cash flows from financing activities |   |  |    |   |   |    |   |  |
| Proceeds from issuance of common stock |   | 52,000 |   |   | - |    |   | 426,538 |
| Proceeds from issuance of stock payable |   | 86,000 |    |   | - |    |   | 86,000 |
| Proceeds from related party debt |   | 111,146 |    |   | 87,311 |    |   | 522,642 |
| Proceeds from short term mortgage loan |   | 36,500 |   |   | - |    |   | 36,500 |
| Payment on short term mortgage loan |   | (36,500) |    |   | - |    |   | (36,500) |
| Principal payments on related party debt |   | (180,307) |    |   | (33,673) |    |   | (536,392) |
|  |   |   |   |   |   |   |   |   |
| Net cash provided by financing activities | $ | 68,839 |    | $ | 53,638 |    | $ | 498,788 |
|  |   |   |   |   |   |   |   |   |

|  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   | Nine Months Ended
       September 30, |   | Period From
       April 30, 1998
       (Inception)
       Through
         September 30, |
|   | 2009
       (Restated) |   | 2008 |   | 2009
     (Restated) |
| Net increase (decrease) in cash |   | 15,073 |    |   | 1,649 |    |   | 15,427 |
| Cash at beginning of period |   | 354 |    |   | 1,969 |    |   | - |
|  |   |   |   |   |   |   |   |   |
| Cash at end of period | $ | 15,427 |    | $ | 3,618 |    | $ | 15,427 |
|  |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |
| Supplemental disclosures: |   |  |    |   |   |    |   |   |
| Cash paid for interest | $ | 33,629 |    | $ | - |    | $ | 44,543 |
|  |   |   |   |   |   |   |   |   |
| Cash paid for income taxes | $ | - |    | $ | - |    | $ | - |
|  |   |   |   |   |   |   |   |   |
|  |  |  |  |  |  |  |  |  |
| Non-cash activities: |   |  |    |   |   |    |   |   |
| Shares issued to settle related party debt | $ | - |    | $ | - |    | $ | 77,759 |
| Shares issued for property | $ | - |    | $ | - |    | $ | 1,517,200 |
| Forgiveness of related party debt | $ | - |    | $ | - |    | $ | 226,334 |
| Common stock  issued for property | $ | 50,000 |    | $ | - |    | $ | 50,000 |
| Debt assumed for purchase of property | $ | 113,726 |    | $ | - |    | $ | 113,726 |

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   |    | Three Months Ended
       September 30, 2009 |
|   |    | As initially 
       reported |   |   | Adjustment |   |    | As
     restated |
| Revenue |    |   |   |    |   |   |  |    |    |   |  |
| Sales of  real estate |    | $ | 102,000 |    |   | $ | - |   |    | $ | 102,000 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total revenue |    | $ | 102,000 |    |   | $ | - |    |    | $ | 102,000 |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Cost and expenses |    |   |   |    |   |   |  |    |    |   |  |
| Cost of real estate sold |    | $ | 97,000 |    |   | $ | - |   |    | $ | 97,000 |
| General and administrative |    | $ | 102,381 |    |   | $ | (8,624) | (a) |    | $ | 93,757 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total cost and expenses |    | $ | 199,381 |    |   | $ | (8,624) |    |    | $ | 190,757 |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Other income (expenses) |    |   |   |    |   |   |   |    |    |   |   |
| Interest income (expense) |    |   | (20,856) |    |   |   | (9,180) | (b) |    |   | (30,036) |  |    |   |   |   |   |   |   |   |    |   |   |
| Total other income (expenses) |    | $ | (20,856) |    |   | $ | (9,180) |    |    | $ | (30,036) |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Net loss |    | $ | (118,237) |    |   | $ | (556) |    |    | $ | (118,793) |
|  |    |   |   |   |   |   |   |   |    |   |   |

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   |    | Nine Months Ended
       September 30, 2009 |
|   |    | As initially 
       reported |   |   | Adjustment |   |    | As
     restated |
| Revenue |    |   |   |    |   |   |  |    |    |   |  |
| Sales of  real estate |    | $ | 102,000 |    |   | $ | - |   |    | $ | 102,000 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total revenue |    | $ | 102,000 |    |   | $ | - |    |    | $ | 102,000 |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Cost and expenses |    |   |   |    |   |   |  |    |    |   |  |
| Cost of real estate sold |    | $ | 96,190 |    |   | $ | 810 | (a) |    | $ | 97,000 |
| General and administrative |    | $ | 147,130 |    |   | $ | (9,840) | (b) |    | $ | 137,290 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total cost and expenses |    | $ | 243,320 |    |   | $ | (9,030) |    |    | $ | 234,290 |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Other income (expenses) |    |   |   |    |   |   |   |    |    |   |   |
| Interest income (expense) |    |   | (32,849) |    |   |   | (7,515) | (c) |    |   | (40,364) | Loss on settlement of accounts payable |    |   | - |    |   |   | (3,744) | (d) |    |   | (3,744) |  |    |   |   |   |   |   |   |   |    |   |   |
| Total other income (expenses) |    | $ | (32,849) |    |   | $ | (11,259) |    |    | $ | (44,108) |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Net loss |    | $ | (174,169) |    |   | $ | (2,229) |    |    | $ | (176,398) |
|  |    |   |   |   |   |   |   |   |    |   |   |

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   |    | April 30, 1998 (inception) through
       September 30, 2009 |
|   |    | As initially 
       reported |   |   | Adjustment |   |    | As
     restated |
| Revenue |    |   |   |    |   |   |  |    |    |   |  |
| Rental income |    | $ | 6,714 |    |   | $ | - |   |    | $ | 6,714 |
| Construction income |    | $ | 59,779 |    |   | $ | - |   |    | $ | 59,779 |
| Payroll processing and other |    | $ | 16,564 |    |   | $ | - |   |    | $ | 16,564 |
| Sale of  real estate |    | $ | 1,080,200 |    |   | $ | - |   |    | $ | 1,080,200 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total income |    | $ | 1,163,257 |    |   | $ | - |    |    | $ | 1,163,257 |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Cost and expenses |    |   |   |    |   |   |  |    |    |   |  |
| Cost of real estate sold |    | $ | 1,226,241 |    |   | $ | 31,063 | (a) |    | $ | 1,257,304 |
| General and administrative |    | $ | 1,837,321 |    |   | $ | (8,557) | (b) |    | $ | 1,828,764 |
| Impairment of related party receivable |    | $ | 162,148 |    |   | $ | - |   |    | $ | 162,148 |
| Loss on abandonment of property |    | $ | 154,354 |    |   | $ | - |   |    | $ | 154,354 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total cost and expenses |    | $ | 3,380,064 |    |   | $ | 22,506 |    |    | $ | 3,402,570 |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Other income (expenses) |    |   |   |    |   |   |   |    |    |   |   |
| Interest income (expense) |    |   | (113,132) |    |   |   | (15,238) | (c) |    |   | (128,370) |
| Loss on settlement of accounts payable |    |   | - |    |   |   | (20,046) | (d) |    |   | (20,046) |
| Cost of recapitalization |    |   | (115,479) |    |   |   | - |   |    |   | (115,479) |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total other income (expenses) |    | $ | (228,611) |    |   | $ | (35,284) |    |    | $ | (263,895) |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Net loss |    | $ | (2,445,418) |    |   | $ | (57,790) |    |    | $ | (2,503,208) |
|  |    |   |   |   |   |   |   |   |    |   |   |

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|   |    | September 30, 2009 |
|   |    | As initially 
       reported |   |   | Adjustment |   |    | As
     restated |
| Current assets |    | $ | 100,867 |    |   | $ | 129,530 | (a) |    | $ | 230,397 |
| Fixed assets |    | $ | 19,164 |    |   | $ | (19,164) | (b) |    | $ | - |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total assets |    | $ | 120,031 |    |   | $ | (110,366) |    |    | $ | 230,397 |
|  |    |   |   |   |   |   |   |   |    |   |   |
|   |    |   |   |    |   |   |   |    |    |   |   |
| Current liabilities |    |   |  |    |   |   |   |    |    |   |   |
| Accounts payable |    |   | 150,355 |    |   |   | 30,770 | (c) |    |   | 181,125 |
| Accrued expense |    |   | 210,000 |    |   |   | 8,272 | (c) |    |   | 218,272 |
| Notes payable - related parties |    |   | 174,212 |    |   |   | (129,114) | (d) |    |   | 303,326 |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total current liabilities |    |   | 534,567 |    |   |   | 168,156 |    |    |   | 702,723 |
| Total stockholders' deficit |    |   | (414,536) |    |   |   | (57,790) | (e) |    |   | (472,326) |
|  |    |   |   |   |   |   |   |   |    |   |   |
| Total liabilities and stockholders' deficit |    | $ | 120,031 |    |   | $ | (110,366) |    |    | $ | 230,397 |
|  |    |   |   |   |   |   |   |   |    |   |   |