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<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Nature
of Business: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Digital
Ally, Inc. (the “Digital Ally”) and subsidiary (collectively, the “Company”) produces digital video imaging,
audio recording and related storage products for use in law enforcement and security applications. Its current products are an
in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets, a weather-resistant
mobile digital video recording system for use on motorcycles, ATV’s and boats, a miniature digital videosystem designed to
be worn on an individual’s body; a digital video/audio recorder contained in a flashlight sold to law enforcement agencies
and other security organizations; and a hand-held laser speed detection device and hand-held thermal imaging camera that it is
offering primarily to law enforcement agencies. The Company has active research and development programs to adapt its technologies
to other applications. The Company has the ability to integrate electronic, radio, computer, mechanical, and multi-media technologies
to create unique solutions to address needs in a variety of other industries and markets, including mass transit, school bus,
taxi cab and the military.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November
30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed
Digital Ally, Inc.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>The
following is a summary of the Company’s Significant Accounting Policies: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Basis
of Consolidation: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
accompanying financial statements include the consolidated accounts of Digital Ally and its wholly-owned subsidiary, Digital Ally
International, Inc. All intercompany balances and transactions have been eliminated during consolidation.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Digital
Ally formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Fair
Value of Financial Instruments: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and subordinated
note payable, approximate fair value because of the short-term nature of these items.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Revenue
Recognition: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Revenues
from the sale of products are recorded when the product is shipped, title and risk of loss have transferred to the purchaser,
payment terms are fixed or determinable and payment is reasonably assured. Customers do not have a right to return the product
other than for warranty reasons for which they would only receive repair services or replacement product.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company sells its products and services to law enforcement and commercial customers in the following manner:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt 65.45pt; text-indent: -28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">·</font>               
Sales to domestic and international customers are made direct to the end customer (typically a law enforcement agency or a commercial
customer) through commissioned third-party sales agents or our direct sales force (Digital Ally employees). Revenue is recorded
when the product is shipped to the end customer.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt 65.45pt; text-indent: -28.05pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">·</font>               
Sales to domestic and international customers are made through independent distributors who purchase products from  the Company
<font style="color: black">at a wholesale price and sell to the end user (typically law enforcement agencies or a commercial customer)
at a retail price. The distributor retains the margin as its compensation for their role in the transaction. The distributor generally
maintains product inventory, customer receivables and all related risks and rewards of ownership. Revenue is recorded when the
product is shipped to the distributor consistent with the terms of the distribution agreement.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt 65.45pt; text-indent: -28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">·</font>               
Repair parts and services for domestic and international customers are generally handled by our inside customer service employees.
Revenue is recognized upon shipment of the repair parts and acceptance of the service or materials by the end customer.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Sales
taxes collected on products sold are excluded from revenues and are reported as an accrued expense in the accompanying balance
sheets until payments are remitted.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">	Other
revenue is comprised of revenues from repair services and the sale of scrap and excess raw material and component parts. Revenue
is recognized upon shipment of the product and acceptance of the service or materials by the end customer.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Sales
returns and allowances aggregated $752,452 and $801,601 for the years ended December 31, 2011 and 2010, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Use
of Estimates: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues
and expenses during the reporting period. Actual results could differ from those estimates.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Cash
and cash equivalents: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Cash
and cash equivalents include funds on hand, in bank and short-term investments with original maturities of ninety (90) days or
less.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Accounts
Receivable: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Accounts
receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding
amounts on a weekly basis. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer
receivables and considering a customer’s financial condition, credit history, and current economic conditions. Trade receivables
are written off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded when received.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">A
trade receivable is considered to be past due if any portion of the receivable balance is outstanding for more than thirty (30)
days beyond terms. No interest is charged on overdue trade receivables.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>Inventories:
</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Inventories
consist of electronic parts, circuitry boards, camera parts and ancillary parts (collectively, “components”), work-in-process
and finished goods, and are carried at the lower of cost (First-in, First-out Method) or market value. The Company determines
the estimate for the reserve for slow moving or obsolete inventories by regularly evaluating individual inventory levels, projected
sales and current economic conditions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Furniture,
fixtures and equipment: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Furniture,
fixtures and equipment is stated at cost net of accumulated depreciation. Additions and improvements are capitalized while ordinary
maintenance and repair expenditures are charged to expense as incurred. Depreciation is recorded by the straight-line method over
the estimated useful life of the asset, which ranges from 3 to 10 years.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Intangible
assets: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Intangible
assets include deferred patent costs and license agreements. Legal expenses incurred in preparation of patent application have
been deferred and will be amortized over the useful life of granted patents. Costs incurred in preparation of applications that
are not granted will be charged to expense at that time. The Company has entered into several sublicense agreements whereby it
has been assigned the exclusive rights to certain licensed materials used in its products. These sublicense agreements generally
require upfront payments to obtain the exclusive rights to such material. The Company capitalizes the upfront payments as intangible
assets and amortizes such costs over their estimated useful life. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Long-Lived
Assets: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Long-lived
assets such as property, plant and equipment and purchased intangible assets subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances
require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows
expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or
asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying
value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models,
quoted market values and third-party appraisals, as considered necessary. As of December 31, 2011 and December 31, 2010, there
were no impairment indicators that required the Company to test for impairment in the carrying value of long-lived assets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Warranties:
</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company’s products carry explicit product warranties that extend two years from the date of shipment. The Company records
a provision for estimated warranty costs based upon historical warranty loss experience and periodically adjusts these provisions
to reflect actual experience. Accrued warranty costs are included in accrued expenses.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Customer
Deposits: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company requires deposits in advance of shipment for certain customer sales orders, in particular when accepting orders from foreign
customers for which the Company does not have a payment history. Customer deposits are reflected as a current liability in the
accompanying consolidated balance sheets.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Shipping
and Handling Costs: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Shipping
and handling costs for outbound sales orders totaled $105,655 and $80,794 for the years ended December 31, 2011 and 2010, respectively.
Such costs are included in selling, general and administrative expenses in the statements of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Advertising
Costs: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Advertising
expense includes costs related to trade shows and conventions, promotional material and supplies, and media costs. Advertising
costs are expensed in the period in which they are incurred. The Company incurred total advertising expense of approximately $302,052
and $732,336 for the years ended December 31, 2011 and 2010, respectively. Such costs are included in selling, general and administrative
expenses in the consolidated statements of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Income
Taxes: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Deferred
taxes are provided for by the liability method wherein deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">  The
Company applies the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) No. 740 - Income Taxes that provides a framework for accounting for uncertainty in income taxes and provided
a comprehensive model to recognize, measure, present, and disclose in its financial statements uncertain tax positions taken or
expected to be taken on a tax return. It initially recognizes tax positions in the financial statements when it is more likely
than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently
measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with
the tax authority assuming full knowledge of the position and all relevant facts. Application requires numerous estimates based
on available information. The Company considers many factors when evaluating and estimating its tax positions and tax benefits,
and it recognized tax positions and tax benefits may not accurately anticipate actual outcomes. As it obtains additional information,
the Company may need to periodically adjust its recognized tax positions and tax benefits. These periodic adjustments may have
a material impact on its consolidated statements of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company’s policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax
expense in the consolidated statements of operations.  There was no interest expense related to the underpayment of
estimated taxes during the year ended December 31, 2011 and 2010.  There have been no penalties in 2011 and 2010.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Research
and Development Expenses: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company expenses all research and development costs as incurred.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Stock-Based
Compensation: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 10pt; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company grants stock-based compensation to its employees, board of directors and certain third party contractors. Share-based
compensation arrangements may include the issuance of options to purchase common stock in the future or the issuance of restricted
stock, which generally are subject to vesting requirements. The Company records stock-based compensation expense for all stock-based
compensation granted after January 1, 2006 based on the grant-date fair value. The Company recognizes these compensation costs
on a straight-line basis over the requisite service period of the award.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.5pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company estimates the grant-date fair value of stock-based compensation using the Black-Scholes valuation model. Assumptions used
to estimate compensation expense are determined as follows:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 4.5pt; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 28.05pt"></td><td style="width: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">•</font></td><td><font style="font: 10pt Times New Roman, Times, Serif">Expected
term
is
determined
using
the
contractual
term
and
vesting
period
of
the
award;</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 4.5pt; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 28.05pt"></td><td style="width: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">•</font></td><td><font style="font: 10pt Times New Roman, Times, Serif">Expected
volatility
of
award
grants
made
in
the
Company’s
plan
is
measured
using
the
weighted
average
of
historical
daily
changes
in
the
market
price
of
the
Company’s
common
stock
over
the
period
equal
to
the
expected
term
of
the
award;</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 4.5pt; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 28.05pt"></td><td style="width: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">•</font></td><td><font style="font: 10pt Times New Roman, Times, Serif">Expected
dividend
rate
is
determined
based
on
expected
dividends
to
be
declared;</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 4.5pt; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 28.05pt"></td><td style="width: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">•</font></td><td><font style="font: 10pt Times New Roman, Times, Serif">Risk-free
interest
rate
is
equivalent
to
the
implied
yield
on
zero-coupon
U.S.
Treasury
bonds
with
a
maturity
equal
to
the
expected
term
of
the
awards;
and</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 4.5pt; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 28.05pt"></td><td style="width: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">•</font></td><td><font style="font: 10pt Times New Roman, Times, Serif">Forfeitures
are
based
on
the
history
of
cancellations
of
awards
granted
and
management’s
analysis
of
potential
forfeitures.</font></td></tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Segments
of Business: </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Management
has determined that its operations are comprised of one reportable segment: the sale of speed detection and digital audio and
video recording devices. For the year ended December 31, 2011 and 2010, sales by geographic area were as follows:</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 4pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; font-weight: bold; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="7" style="font-size: 9pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">Year
ended  December 31,</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 4pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 9pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2011</font></td><td style="font-size: 9pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 9pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2010</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; text-indent: -1pc; padding-left: 1pc"><font style="font: 10pt Times New Roman, Times, Serif">Sales
by geographic area:</font></td><td style="font-size: 4pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; text-align: left; text-indent: -10.85pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">United
States of America</font></td><td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 14%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">17,548,562</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">23,428,355</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt; text-indent: -10.85pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Foreign</font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,028,591</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,782,650</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; padding-left: 0.6pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt; text-indent: -1pc; padding-left: 5pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">19,577,153</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">25,211,005</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; padding-left: 0.6pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Sales to
customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United
States.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Reclassifications:</b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Certain amounts and balances for 2010 have been reclassified
in the consolidated financial statements to conform to their current year presentation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>Recent
Accounting Pronouncements:<br style="mso-special-character: line-break" />
<br style="mso-special-character: line-break" />
</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In September
2011, the FASB issued Accounting Standards Update (ASU) No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing
Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option
to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair
value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances
that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair
value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances
that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure
an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for
annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011 and will become effective
for the Company on January 1, 2012. Early adoption is permitted, including for annual and interim goodwill impairment tests performed
as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period
have not yet been issued. The adoption of this guidance is not expected to have a material impact on the Company’s financial
position or results of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In June
2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income,” which is
effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on
January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement
of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss
are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence
of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous
statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption
of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In May 2011,
the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and
Disclosure Requirements in U.S. GAAP and IFRSs,” which is effective for annual reporting periods beginning after December
15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure
requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs
used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements
to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s
highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure
of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure
of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on
January 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our
financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In April
2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is
a Troubled Debt Restructuring.” This amendment explains which modifications constitute troubled debt restructurings (“TDR”).
Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification
to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim
and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the
beginning of the fiscal year of adoption. The adoption of this ASU did not have a material impact on our financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">In December
2010, the FASB issued ASU 2010-28, “Intangible –Goodwill and Other (Topic 350): When to perform Step 2 of the goodwill
impairment test for reporting units with zero or negative carrying amounts.” This update requires an entity to perform all
steps in the test for a reporting unit whose carrying value is zero or negative if it is more likely than not (more than 50%)
that a goodwill impairment exists based on qualitative factors, resulting in the elimination of an entity’s ability to assert
that such a reporting unit’s goodwill is not impaired and additional testing is not necessary despite the existence of qualitative
factors that indicate otherwise. These changes become effective for the Company beginning January 1, 2012. The Company does not
expect that the guidance effective in future periods will have a material impact on its financial statements.</font></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
2. 	CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Financial
instruments that potentially subject the Company to concentrations of credit risk consist of accounts receivable. Sales to domestic
customers are typically made on credit and the Company generally does not require collateral. The Company performs ongoing credit
evaluations of its customers’ financial condition and maintains an allowance for estimated losses. Accounts are written off
when deemed uncollectible and accounts receivable are presented net of an allowance for doubtful accounts. The allowance for doubtful
accounts totaled $125,000 and $110,000 as of December 31, 2011 and December 31, 2010, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">The
Company sells primarily through a network of unaffiliated international distributors for foreign sales and independent sales agents
for domestic sales. Three distributor/agents individually exceeded 10% and represented $8,584,636, or 44% of total revenues, for
the year ended December 31, 2011. No</font> customer receivable balance exceeded 10% of total accounts receivable as of December
31, 2011. <font style="color: black">Two distributor/agents individually exceeded 10% and in the aggregate represented $8</font><font style="color: blue; letter-spacing: 0pt"></font>,<font style="color: #000000">086,905,
</font><font style="color: black">or 32% of total revenues, for the year ended December 31, 2010. No</font> customer receivable
balance exceeded 10% of total accounts receivable as of December 31, 2010. Following is a summary of distributor/agents identified
which individually exceeded 10% of total revenues for the years ended December 31, 2011 and 2010:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="6" style="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">Year
ended December 31,</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">Distributor/Agent</font></td><td style="font-size: 10pt; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">2011</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="2" style="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">2010</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">  Number 1</font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,674,015</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,503,867</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">  Number 2</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,474,545</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,552,478</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">  Number 3</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,436,076</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,583,038</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company purchases finished circuit boards and other proprietary component parts from suppliers located in the United States and
on a limited basis from Asia. Although the Company obtains certain of these components from single source suppliers, management
has located or is in process of locating alternative suppliers to reduce the risk in most cases to supplier problems that could
result in significant produc<font style="color: Black">tion delays. The Company has not historically experienced any significant
supply disruptions from any <font style="letter-spacing: 0pt">of its principal vendors</font>, and does not anticipate future
supply disruptions. The Company acquires most of its components on a purchase order basis and does not have long-term contracts
with <font style="letter-spacing: 0pt">its </font>suppliers.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: Black">The
Company has entered into agreements with two unaffiliated companies (“Manufacturers”</font>) to development, license
and manufacture certain products that the Company offers for sale to its customers. Currently, these products represent less than
10% of the Company’s total revenue; however, revenue generated by these products are expected to increase in the future to
the extent that they may represent a significant portion of the Company’s total revenue. These products can only be manufactured
by the Manufacturers except in situations where the Manufacturers are unable for any reason to supply the products. Backup proprietary
documentation for each product is required to be maintained offsite by each Manufacturer thereby allowing the Company to continue
production in such cases where the Manufacturers are unable to supply the product. The Manufacturers are located in the United
States and in Asia. Natural disasters, financial stress, bankruptcy and other factors may cause conditions that would disrupt
either Manufacturer’s ability to supply such products in quantities needed by the Company. It would take time for management
to locate and activate alternative suppliers to replace the Manufacturers should it become necessary, which could result in significant
production delays. The Company has not historically experienced any significant supply disruptions from either of these Manufacturers,
and does not anticipate future supply disruptions. </p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
3. 	ACCOUNTS RECEIVABLE </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">The
allowance for doubtful accounts receivable was comprised of the following for the years ended December 31, 2011 and December 31,
2010:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2011</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin-top: 0; border-top: Black 1pt solid; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2010</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt; text-align: left; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Beginning
balance</font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">110,000</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">110,000</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Provision
for bad debts</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">25,301</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif">   Charge-offs 
to allowance, net of recoveries</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(10,301</font></td><td style="padding-bottom: 1pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif">   Ending
balance</font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">125,000</font></td><td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">110,000</font></td><td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
4. 	INVENTORIES </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Inventories
consisted of the following at December 31, 2011 and December 31, 2010:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2011</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin-top: 0; border-top: Black 1pt solid; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: center; vertical-align: top"><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,</b></font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2010</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt; text-align: left; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Raw
material and component parts</font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,168,761</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,272,304</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Work-in-process</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">217,264</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">88,635</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif">   Finished
goods</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,844,446</font></td><td style="padding-bottom: 1pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,460,924</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">           Subtotal</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">7,230,471</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,821,863</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif">   Reserve
for excess and obsolete inventory</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(547,182</font></td><td style="padding-bottom: 1pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(733,578</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 2.5pt; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">       Total</font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6,683,289</font></td><td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,088,285</font></td><td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 0.75pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Finished
goods inventory includes units held by potential customers and sales agents for test and evaluation purposes. The cost of such
units totaled $339,981 and $872,369 as of December 31, 2011 and December 31, 2010, respectively.</font></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
5. FURNITURE, FIXTURES AND EQUIPMENT</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Furniture,
fixtures and equipment consisted of the following at December 31, 2011 and December 31, 2010:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 3pc"></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><p style="font: 9pt Times New Roman, Times, Serif; margin: 0; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"><b>Estimated
<u>Useful Life</u></b></font></p></td><td style="font-size: 9pt; font-weight: bold; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 9pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">December
31,<br /> 2011</font></td><td style="font-size: 9pt; font-weight: bold; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 9pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">December
31,<br /> 2010</font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 43%; text-align: left; padding-left: 3pc; text-indent: -33pt"><font style="font: 10pt Times New Roman, Times, Serif">Office
furniture, fixtures and equipment</font></td>
<td style="width: 31%; text-align: right; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">3-10
years</font></td><td style="width: 6%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 13%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,753,859</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 6%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 13%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,662,397</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; text-indent: -33pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Warehouse
and production equipment</font></td>
<td style="text-align: right; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">3-5 years</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,367,342</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,356,773</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">   Demonstration and tradeshow
equipment</font></td>
<td style="text-align: right; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">2-5 years</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">778,800</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">178,437</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">   Leasehold improvements</font></td>
<td style="text-align: right; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">2-5 years</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">88,196</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">80,167</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">   Website development</font></td>
<td style="text-align: right; padding-left: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">3 years</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">11,178</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">11,178</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif">   Other equipment</font></td>
<td style="text-align: right; padding-left: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif">3 years</font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">74,338</font></td><td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">63,420</font></td><td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; padding-left: 0.45pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">  Total
cost</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"></font></td><td style="text-align: right; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"> </font>4,073,713</td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"></font></td><td style="text-align: right; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif"> </font>3,352,372</td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Less:
accumulated depreciation and amortization</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"></font></td><td style="text-align: right; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">(3,212,827)</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"></font></td><td style="text-align: right; vertical-align: bottom"><font style="font: 10pt Times New Roman, Times, Serif">(2,307,244)</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: -26.65pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; text-indent: -26.65pt; padding-left: 3pc; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Net
furniture, fixtures and equipment</font></td><td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left; padding-bottom: 2.5pt"></td><td style="text-align: left; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$ </font></td><td style="text-align: right; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">860,886</font></td>
<td style="text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"></font></td><td style="text-align: right; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"></font></td><td style="text-align: left; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$ </font></td><td style="text-align: right; vertical-align: bottom; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif"> </font>1,045,128</td>
<td style="text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 5pt; text-indent: -26.65pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">Depreciation
and amortization of furniture fixtures and equipment aggregated $854,783 and $714,370 for the years ended December 31, 2011 and
2010, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font> <b> </b></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 3pc"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
6. INTANGIBLE ASSETS</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Intangible
assets consisted of the following at December 31, 2011 and 2010:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-indent: 3pc"></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="11" style="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">December
31, 2011</font></td><td style="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="11" style="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">December
31, 2010</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 8pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Gross
value</font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Accumulated
amortization</font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Net
carrying value</font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Gross
value</font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Accumulated
amortization</font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Net
carrying value</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Amortized intangible assets:</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 28%; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Licenses</font></td><td style="width: 3%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">255,000</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 3%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">230,536</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 3%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">24,464</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 3%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">255,000</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 3%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">163,869</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 3%"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 7%; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">91,131</font></td><td style="width: 1%; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Patents
and Trademarks</font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5,467</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,685</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,782</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">Unamortized intangible assets:</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Patents
and trademarks pending</font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">198,556</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">198,556</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">202,446</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">202,446</font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: -26.65pt; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">       Total</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">459,023</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">232,221</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">226,802</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">457,446</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">163,869</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">293,577</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-indent: 3pc"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Patents
and trademarks pending will be amortized beginning at the time they are issued by the appropriate authorities. If issuance of
the final patent or trademark is denied, then the amount deferred will be immediately charged to expense.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Amortization
expense for the years ended December 31, 2011 and 2010 was $96,898 and $85,000, respectively. Estimated amortization for
intangible assets with definite lives for the next five years ending December 31 and thereafter is as follows:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"></p>
<table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr>
<td style="width: 86%; vertical-align: top; padding-left: 1pc; font-weight: bold; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">Year
ending December 31:</font></td>
<td style="width: 14%; vertical-align: bottom; font-size: 4pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2012 </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">  $26,272</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2013 </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">     1,822</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2014 </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">       
152</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2015</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">      
—</font></td></tr>
<tr style="vertical-align: top">
<td style="padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2016  and thereafter</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">      
—</font></td></tr>
<tr>
<td style="vertical-align: top; font-size: 4pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; padding-right: 7.9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$28,246</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
7. 	SUBORDINATED NOTES PAYABLE AND BANK LINE OF CREDIT</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 10pt">
<tr>
<td style="width: 66%; vertical-align: bottom; font: 4pt/2pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 16%; vertical-align: bottom"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31, </b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2011</b></font></p>
<p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="width: 3%; vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 15%; vertical-align: bottom"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>2010</b></font></p>
<p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -3pc"><font style="font: 10pt Times New Roman, Times, Serif">Subordinated
notes payable, at par.</font></td>
<td style="vertical-align: bottom; padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$2,500,000</font></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$           
—</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -3pc"><font style="font: 10pt Times New Roman, Times, Serif">Unamortized
discount</font></td>
<td style="vertical-align: bottom; padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(142,711)</font></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif; text-underline-style: double; letter-spacing: 0pt"><u>—</u></font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -3pc"><font style="font: 10pt Times New Roman, Times, Serif">Bank
line of credit</font></td>
<td style="vertical-align: bottom; padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif; text-underline-style: double; letter-spacing: 0pt"><u>—</u></font></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,500,000</font></td></tr>
<tr>
<td style="font: 1pt/2pt Times New Roman, Times, Serif; vertical-align: bottom; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: right; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: right; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 1pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">Total
notes payable            </font></td>
<td style="padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,357,289</font></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 1,500,000</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">Less:
Current Maturities of long-term debt</font></td>
<td style="padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif; text-underline-style: double; letter-spacing: 0pt"><u>—</u></font></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,500,000)</font></td></tr>
<tr>
<td style="font: 1pt/2pt Times New Roman, Times, Serif; vertical-align: bottom; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: right; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: right; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 1pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">Subordinated
notes payable, long-term</font></td>
<td style="padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$2,357,289</font></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 13.9pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$           
—</font></td></tr>
<tr>
<td style="font: 1pt/2pt Times New Roman, Times, Serif; vertical-align: bottom; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: right; text-indent: 28.05pt; border-top: Black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="vertical-align: top; padding-right: 11.75pt; padding-bottom: 0.75pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: right; text-indent: 28.05pt; border-top: Black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-align: justify; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-align: justify; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">During
the year ended December 31, 2011, the Company, in two separate transactions, borrowed an aggregate of $2.5 million under two unsecured
notes payable to a private, third-party lender. The loans were funded in May and November 2011 and both are represented by promissory
notes (the "Notes") that bear interest at the rate of 8% per annum and are payable interest only on a monthly basis. The
maturity date of the original Note in the principal amount of $1,500,000 was extended from May 30, 2012 to May 30, 2013 in conjunction
with the issuance of the second Note during November 2011. Both Notes are due and payable in full on May 30, 2013 and may be prepaid
without penalty at any time. The Notes are subordinated to all existing and future senior indebtedness, as such term is defined
in the Notes.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-align: justify; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">The
Company used a portion of the Notes proceeds to pay the outstanding borrowings under its line of credit with a bank and such bank
line of credit has been retired as of December 31, 2011. The remaining proceeds were used for working capital purposes.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-align: justify; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">The
Company granted the lender warrants (the "Warrants") exercisable to purchase a total of 450,000 shares of its common stock
at an exercise price of $1.00 per share (as modified) until November 30, 2013. The exercise price on the 300,000 warrants issued
pursuant to the first Note was modified from $1.50 per share to $1.00 per share in consideration for the modification of the first
Note’s maturity date. The Company paid fees totaling $147,500 to an unaffiliated entity and issued warrants exercisable to
purchase 110,000 shares of its Common Stock on the same terms and conditions as the Warrants for its services relating to the
transactions, including the modification of the warrants issued pursuant to the first Note.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-align: justify; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">The
Company allocated $</font><font style="color: black">236,726 </font>of the proceeds of the Notes to additional paid-in-capital,
which represented the grant date fair value of the Warrant for 450,000 common shares issued to the lender and the warrant for
110,000 shares issued to the unaffiliated third party who arranged the transactions. In addition, the cash fees paid to the unaffiliated
third party totaling $147,500 is included in the discount on the Notes. The discount is amortized to interest expense ratably
over the modified terms of the Notes and totaled $110,425 for the year ended December 31, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-align: justify; text-indent: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">The
modification of the original Note that occurred during November 2011 was treated as an early extinguishment of the debt. Accordingly,
the remaining unamortized discount as of the date of modification ($131,093) was charged off and reflected as a loss on extinguishment
of debt in the Statement of Operations.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
8 . 	ACCRUED EXPENSES </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 4.5pt 0 0; text-indent: 0pt"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
expenses consisted of the following at December 31, 2011 and December 31, 2010:</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,
</b></font></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>2011</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>December
31,</b></font></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>2010</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
warranty expense</font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">211,421</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">228,233</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
sales commissions</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">64,782</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">51,596</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
payroll and related fringes</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">305,328</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">360,713</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
insurance</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">61,355</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Employee
separation agreement</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">3,366</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1pt; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Other</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">187,008</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">87,937</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -1pc; padding-left: 3pc; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">833,260</font></td><td style="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">728,479</font></td><td style="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 0pt"><font style="font: 10pt Times New Roman, Times, Serif">Accrued
warranty expense was comprised of the following for the years ended December 31, 2011 and 2010:</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1pt; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2011</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2010</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Beginning
balance</font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">228,233</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">277,137</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Provision
for warranty expense</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">432,456</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">135,906</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Charges
applied to warranty reserve</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(449,268</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(184,810</font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -1pc; padding-left: 1pc; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Ending
balance</font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">211,421</font></td><td style="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font-size: 10pt; text-align: right; border-bottom: Black 2.5pt double"><font style="font: 10pt Times New Roman, Times, Serif">228,233</font></td><td style="font-size: 10pt; text-align: left; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 13.5pt 0 0.5pc"><b>NOTE 9. 	INCOME TAXES</b>	</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 4.5pt; text-indent: 28.05pt">The components of income tax (provision)
benefit for the years ended December 31, 2011 and 2010 are as follows:</p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">2011</td><td style="font-weight: bold"> </td>
<td colspan="2" style="font-weight: bold; text-align: center">2010</td><td style="font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: top">Current taxes:</td>
<td colspan="2" style="text-align: center"> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: top">Federal</td>
<td colspan="2" style="text-align: right">$—</td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 68%; padding-bottom: 1pt">    State</td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left"> </td><td style="width: 14%; border-bottom: Black 1pt solid; text-align: right">—</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left"> </td><td style="width: 14%; border-bottom: Black 1pt solid; text-align: right">(20,000</td><td style="width: 1%; padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Total current taxes</td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">(20,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Deferred tax (provision) benefit</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(2,730,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Income tax (provision) benefit</td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">(2,750,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-left: 0.45pc"> <br />Total income tax (provision) benefit allocation:</td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Loss from operations</td>
<td style="text-align: left">$</td><td style="text-align: right">—</td><td style="text-align: left"> </td>
<td style="text-align: left">$</td><td style="text-align: right">(2,750,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-left: 0.45pc">Stockholders’ equity, for compensation expense for<br /> financial reporting purposes in excess of amounts <br /> recognized for tax reporting purposes</td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">(125,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right"> </td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt; text-align: right"> </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">(2,855,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">	</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 10pt; text-indent: 24.5pt">The Company received total consideration
of $-0- and $845,890 during the years ended December 31, 2011 and 2010, respectively, from the exercise of stock purchase options
and warrants. The Company realized an aggregate tax deduction approximating $-0- and $329,737 relative to the exercise of such
stock options during the year ended December 31, 2011 and 2010, respectively. The related deficiency in tax benefits aggregated
$125,000 for the year ended December 31, 2010, which has been allocated directly to additional paid in capital.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt">A reconciliation of the income tax (provision)
benefit at the statutory rate of 34% for the years ended December 31, 2011 and 2010 to the Company’s effective tax rate is
as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 28.05pt"> </p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-left: 0.45pc"> </td>
<td style="text-align: center; vertical-align: top"><b> </b></td><td style="text-align: center; vertical-align: top"><b>2011</b></td><td style="text-align: center; vertical-align: top"><b> </b></td>
<td style="text-align: center; vertical-align: top"><b> </b></td><td style="text-align: center; vertical-align: top"><b>2010</b></td><td style="text-align: center; vertical-align: top"><b> </b></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 68%; text-align: left">U.S. Statutory tax rate</td>
<td style="width: 1%; text-align: left"> </td><td style="width: 14%; text-align: right">34.0%</td><td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 14%; text-align: right">34.0%</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">State taxes, net of Federal benefit</td>
<td style="text-align: left"> </td><td style="text-align: right">2.7%</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">3.4%</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">State tax credits</td>
<td style="text-align: left"> </td><td style="text-align: right">2.3%</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">5.5%</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Federal Research and development tax credits</td>
<td style="text-align: left"> </td><td style="text-align: right">4.9%</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">6.3%</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Stock based compensation</td>
<td style="text-align: left"> </td><td style="text-align: right">(11.1</td><td style="text-align: left">)%</td>
<td style="text-align: left"> </td><td style="text-align: right">(2.6</td><td style="text-align: left">)%</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Change in valuation reserve on deferred tax assets</td>
<td style="text-align: left"> </td><td style="text-align: right">(36.5</td><td style="text-align: left">)%</td>
<td style="text-align: left"> </td><td style="text-align: right">(120.4</td><td style="text-align: left">)%</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Other, net</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">3.7%</td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(4.7</td><td style="padding-bottom: 1pt; text-align: left">)%</td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.45pc"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Income tax (provision) benefit</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(0.0</td><td style="padding-bottom: 1pt; text-align: left">)%</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(78.5</td><td style="padding-bottom: 1pt; text-align: left">)%</td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 3pc">Significant components of the Company’s
deferred tax assets (liabilities) as of December 31, 2011 and 2010 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 3pc"><b> </b></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="padding-left: 0.45pc; text-align: center; vertical-align: top"><b> </b></td>
<td style="text-align: center; vertical-align: top"><b> </b></td><td style="text-align: center; vertical-align: top"><b>2011</b></td><td style="text-align: center; vertical-align: top"><b> </b></td>
<td style="text-align: center; vertical-align: top"><b> </b></td><td style="text-align: center; vertical-align: top"><b>2010</b></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-left: 0.45pc">Deferred tax assets:</td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 68%">    Stock-based compensation</td>
<td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">1,285,000</td><td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">1,555,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td>    Start-up costs</td>
<td style="text-align: left"> </td><td style="text-align: right">165,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">165,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Inventory reserves</td>
<td style="text-align: left"> </td><td style="text-align: right">200,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">270,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Uniform capitalization of inventory costs</td>
<td style="text-align: left"> </td><td style="text-align: right">5,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">20,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Allowance for doubtful accounts receivable</td>
<td style="text-align: left"> </td><td style="text-align: right">45,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Other reserves</td>
<td style="text-align: left"> </td><td style="text-align: right">10,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">140,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Accrued expenses</td>
<td style="text-align: left"> </td><td style="text-align: right">140,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">135,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Net operating loss carryforward</td>
<td style="text-align: left"> </td><td style="text-align: right">2,570,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,075,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Research and development tax credit carryforward</td>
<td style="text-align: left"> </td><td style="text-align: right">1,010,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">815,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Alternative minimum tax credit carryforward</td>
<td style="text-align: left"> </td><td style="text-align: right">90,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">90,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    State jobs credit carryforward</td>
<td style="text-align: left"> </td><td style="text-align: right">245,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">100,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    State research and development credit carryforward</td>
<td style="text-align: left"> </td><td style="text-align: right">195,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">145,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt">    Other</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">5,000</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Total deferred tax assets</td>
<td style="text-align: left"> </td><td style="text-align: right">5,960,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,555,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">    Valuation reserve</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(5,830,000</td><td style="padding-bottom: 1pt; text-align: left">)</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(4,385,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Net deferred tax assets</td>
<td style="text-align: left"> </td><td style="text-align: right">130,000</td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right">170,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-left: 0.45pc">Deferred tax liabilities:</td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    Domestic international sales company</td>
<td style="text-align: left"> </td><td style="text-align: right">(105,000</td><td style="text-align: left">)</td>
<td style="text-align: left"> </td><td style="text-align: right">(100,000</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">    State taxes</td>
<td style="text-align: left"> </td><td style="text-align: right">(10,000</td><td style="text-align: left">)</td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">    Equipment depreciation</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(15,000</td><td style="padding-bottom: 1pt; text-align: left">)</td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(70,000</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom">
<td style="padding-left: 0.45pc"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Net deferred tax assets (liability)</td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1pt; padding-left: 0.45pc"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right"> </td><td style="padding-bottom: 1pt; text-align: left"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right"> </td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-left: 0.45pc">Net deferred tax asset (liability) are classified in our consolidated balance sheets as follows:</td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td>    Current</td>
<td style="text-align: left">$</td><td style="text-align: right">—</td><td style="text-align: left"> </td>
<td style="text-align: left">$</td><td style="text-align: right">—</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td>    Non-current</td>
<td style="text-align: left">$</td><td style="text-align: right">—</td><td style="text-align: left"> </td>
<td style="text-align: left">$</td><td style="text-align: right">—</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt">The valuation allowance on deferred
tax assets totaled $5,830,000 and $4,385,000 as of December 31, 2011 and December 31, 2010, respectively. We record the benefit
we will derive in future accounting periods from tax losses and credits and deductible temporary differences as “deferred
tax assets,” which are included in the caption “Deferred income taxes, net” on our consolidated balance sheets.  In
accordance with Accounting Standards Codification (ASC) 740, “Income Taxes,” we record a valuation allowance to reduce
the carrying value of our deferred tax assets if, based on all available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. At December 31, 2010, we had recorded a valuation allowance of $4,385,000 based
on our assessment of the realizability of our deferred tax assets at that date</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc">The economic recession and its effect on state
and local governmental budgets in particular remained weak in 2010 and the Company incurred operating losses during this period.
Law enforcement agencies are our primary customer and are typically funded through state and local tax roles. The economic recession
showed improvement in the second half of 2010 but the impact to state and local budgets are still uncertain at best. Despite the
improvement in general economic conditions and our ongoing cost containment efforts, we incurred additional losses in 2010 that
placed us in a three year cumulative loss position at December 31, 2010. Accordingly, we determined there was not sufficient positive
evidence regarding our potential for future profits to outweigh the negative evidence of our three year cumulative loss position
under the guidance provided in ASC 740.  Therefore, we determined that our valuation allowance should be increased to
$4,385,000 to fully reserve our deferred tax assets at December 31, 2010. During 2011, we continued to incur operating losses which
provides a basis to continue to fully reserve our deferred tax assets as of December 31, 2011. Therefore, the valuation reserve
has been increased to $5,830,000 as of December 31, 2011 which provides a full reserve on all deferred tax assets. We expect to
continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates
our ability to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely
than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.  Such a
reversal would be recorded as an income tax benefit and, for some portion related to deductions for stock option exercises, an
increase in shareholders' equity.<br />
<br style="mso-special-character: line-break" />
<br style="mso-special-character: line-break" />
</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt">At December 31, 2011, the Company had
available approximately $7,040,000 of net operating loss carryforwards available to offset future taxable income generated. Such
tax net operating loss carryforwards expire between 2024 and 2031. In addition, the Company had research and development tax credit
carryforwards totaling $1,010,000 available as of December 31, 2011, which expire between 2023 and 2031.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.5pc; text-indent: 24.5pt">The Internal Revenue Code contains
provisions under Section 382 which limit a Company’s ability to utilize net operating loss carry-forwards in the event that
it has experienced a more than 50% change in ownership over a three-year period. Current estimates prepared by the Company indicate
that due to ownership changes which have occurred, approximately $765,000 of its net operating loss and $175,000 of its research
and development tax credit carryforwards are currently subject to an annual limitation of approximately $1,151,000, but may be
further limited by additional ownership changes which may occur in the future. As stated above, the net operating loss and research
and development credit carryforwards expire between 2024 and 2031, allowing the Company to potentially utilize all of the limited
net operating loss carry-forwards during the carryforward period.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.5pc; text-indent: 24.5pt">As discussed in Note 1, "Summary
of Significant Accounting Policies," tax positions are evaluated in a two-step process. We first determine whether it is more
likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition
threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is
measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Management
has identified no tax positions taken that would meet or exceed these thresholds and therefore there are no gross interest, penalties
and unrecognized tax expense/benefits that are not expected to ultimately result in payment or receipt of cash in the consolidated
financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt; text-indent: 24.5pt">The Company’s federal and state
income tax returns are closed for examination purposes by relevant statute and by examination for 2008 and all prior tax years.
The Company recently underwent an examination of its 2008 federal income tax return by the Internal Revenue Service. The examination
process has been concluded with no proposed adjustments.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.5pc; text-indent: 24.5pt">The effective tax rate for the year
ended December 31, 2011 varied from the expected statutory rate due to the Company determining during 2010 to provide a 100% valuation
allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full valuation allowance on
net deferred tax assets as of December 31, 2011 because of the current year operating losses.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.5pc"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
10. 	COMMITMENTS AND CONTINGENCIES </b></font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0 0 0.5pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black"><b><i>Lease
commitments</i></b>. The Company has several non-cancelable long-term operating lease agreements for office space and warehouse
space. The agreements expire at various dates through December 2012. The Company has also entered into month-to-month leases for
equipment and facilities. Rent expense for the years ended December 31, 2011 and 2010 was $383,530 and $407,070, respectively,
</font><font style="text-underline-style: double; color: blue; letter-spacing: 0pt"><u> </u></font><font style="font-size: 10pt; color: black">related
to these leases. The future minimum amounts due under the leases are as follows: </font></p>
<table align="center" cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse">
<tr>
<td style="width: 81%; font: 12pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 19%; font: 1pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 1pc; font-size: 10pt; font-weight: bold; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">Year
ending December 31:</font></td>
<td style="font: 4pt/2pt Times New Roman, Times, Serif; vertical-align: bottom; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; font-size: 10pt; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2012</font></td>
<td style="vertical-align: bottom; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$ 
279,703</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; font-size: 10pt; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2013</font></td>
<td style="vertical-align: bottom; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">              
—</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; font-size: 10pt; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2014</font></td>
<td style="vertical-align: bottom; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">              
—</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; font-size: 10pt; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2015 </font></td>
<td style="vertical-align: bottom; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">              
—</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; font-size: 10pt; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">2016
and thereafter</font></td>
<td style="vertical-align: bottom; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">              
—</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt/2pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: right; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
<tr>
<td style="font: 4pt/2pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$
279,703</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt/2pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>License
agreements. </i></b>The Company has several license agreements whereby it has been assigned the rights to certain licensed materials
used in its products. Certain of these agreements require the Company to pay ongoing royalties based on the number of products
shipped containing the licensed material on a quarterly basis. Royalty expense related to these agreements aggregated $34,905
and $19,909 for the years ended December 31, 2011 and 2010, respectively.<br />
<br />
Following is a summary of the Company’s licenses as of December 31, 2011:</font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: top">
<td style="width: 29%; border: windowtext 1pt solid; padding-bottom: 4.5pt; font-weight: bold; text-align: center"><br /><font style="font: 10pt Times New Roman, Times, Serif">License
Type</font></td>
<td style="width: 16%; border: windowtext 1pt solid; padding-bottom: 4.5pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Effective<br /> Date</font></td>
<td style="width: 16%; border: windowtext 1pt solid; padding-bottom: 4.5pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Expiration<br /> Date</font></td>
<td style="width: 39%; border: windowtext 1pt solid; padding-bottom: 4.5pt; font-weight: bold; text-align: center"><br /><font style="font: 10pt Times New Roman, Times, Serif">Terms</font></td></tr>
<tr style="vertical-align: top">
<td style="border: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Production
software license agreement</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">April
2005</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">April
2012</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Automatically
renews for one year periods unless terminated by either party.</font></td></tr>
<tr style="vertical-align: top">
<td style="border: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Software
sublicense agreement</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">October
2007</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">October
2012</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Automatically
renews for one year periods unless terminated by either party.</font></td></tr>
<tr style="vertical-align: top">
<td style="border: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Technology
license agreement</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">July
2007</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">July
2012</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Automatically
renews for one year periods unless terminated by either party.</font></td></tr>
<tr style="vertical-align: top">
<td style="border: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Development,
license and manufacturing agreement</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">July
2011</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">July
2016</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Company
has option to renew for three successive options to renew for three years periods unless terminated by either party.</font></td></tr>
<tr style="vertical-align: top">
<td style="border: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Limited
license agreement</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">August
2008</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Perpetual</font></td>
<td style="border-right: windowtext 1pt solid; border-bottom: windowtext 1pt solid; padding-bottom: 4.5pt"><font style="font: 10pt Times New Roman, Times, Serif">May
be terminated by either party.</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0 0.75pc; text-indent: 28.1pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">During
April 2009, the Co</font>mpany terminated two license agreements because of failure of the counterparty to deliver the required
materials and refusal to honor warranty provisions. In addition, one of the agreements was never approved by the Company. Both
of these terminations are in dispute and the Company has filed a lawsuit to enforce its rights and protect its interests pursuant
to these agreements. See “Litigation” below.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Supply
and distribution agreement. </i></b>The Company entered into a supply and distribution agreement on May 1, 2010 under which it
was granted the exclusive worldwide right to sell and distribute a proprietary law enforcement speed measurement device and derivatives
to its customers. The term of the agreement was 42 months after the date the supplier began full scale production of the product
which commenced in August 2010 and final certification of the product was obtained. The agreement had minimum purchase requirements
of 1,000 units per period over three commitment periods. On January 31, 2012, the supply and distribution agreement was amended
to reduce the minimum purchase commitment over the second and third years by 52% of the original commitment. The Company agreed
to release its world wide right to exclusively market the product to the law enforcement community in exchange for the reduction
in the purchase commitment.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">After
the initial term has expired, the parties may continue on a month-to-month basis and is terminable by either party upon 30 days
advance notice. The contract may be terminated earlier in case of material breach by either party that is not cured within thirty
days of notice of the breach.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">The
agreement contains required minimum order quantities and fixed prices per unit according to the following schedule:</font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: top">
<td style="padding-left: 3pc; font-weight: bold; text-align: center; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="5" style="font-weight: bold; text-decoration: underline; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Minimum
order commitment amount ($)</font></td></tr>
<tr>
<td style="width: 62%; vertical-align: top; padding-left: 3pc; font-weight: bold; text-decoration: underline; text-align: center; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">Commitment
time period</font></td>
<td style="width: 14%; vertical-align: top"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><u>Commitment</u></font></p></td>
<td style="width: 1%; vertical-align: top; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 10%; vertical-align: top"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><u>Purchases</u></font></p></td>
<td style="width: 1%; vertical-align: top; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 12%; vertical-align: bottom; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Remaining
<u>Commitment</u></font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">August
2010 through February 2012</font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$ 1,763,000</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$1,510,741</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$   
252,259</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">March
2012 through February 2013</font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">846,240</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">      
—</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">846,240</font></td></tr>
<tr>
<td style="vertical-align: top; padding-left: 3pc; text-indent: -1pc"><font style="font: 10pt Times New Roman, Times, Serif">March
2012 through February 2014</font></td>
<td style="vertical-align: bottom; text-decoration: underline; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">     
846,240       </font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-decoration: underline; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">             
—</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-decoration: underline; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">     
846,240       </font></td></tr>
<tr>
<td style="font: 4pt/2pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="font: 4pt/2pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$ 3,455,480</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$1,510,741</font></td>
<td style="vertical-align: top; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">$ 1,944,739</font></td></tr>
<tr style="vertical-align: top">
<td style="font: 4pt/2pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">=========</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">========</font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">==========</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 1pc 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">The
above table reflects the modified terms of the amended supply and distribution agreement. The supplier is responsible for all
warranty, damage or other claims, losses or liabilities related to the product and is obligated to defend and indemnify the Company
against such risks. The Company holds approximately $870,000 of such products in finished goods inventory as of December 31, 2011.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.1pt"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Litigation.
</i></b>The Company is subject to various legal proceedings arising from normal business operations. Although there can be no
assurances, based on the information currently available, management believes that it is probable that the ultimate outcome of
each of the actions will not have a material adverse effect on the consolidated financial statements of the Company. However,
an adverse outcome in certain of the actions could have a material adverse effect on the financial res<font style="color: black">ults
of the Company in the period in which it is recorded.</font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.1pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">On
June 8, 2009, the Company filed suit against Z3 Technologies, LLC (“Z3”) in Federal Court for the District of Kansas
claiming breach of a production software license agreement entered into during October 2008 and the rescission of a second limited
license agreement entered into during January 2009. Among various other claims, the Company has asserted that Z3 failed to deliver
the material required under the contracts, the product that was delivered by Z3 is defective and/or unusable and that the January
2009 contract should be rescinded and declared void, unenforceable and of no force or effect. The Company paid license fees and
made other payments to Z3 totaling $265,000 to-date under these contracts. Z3 has denied the Company’s claims and has filed
counterclaims that allege the Company did not have the right to terminate the contracts and therefore it had been damaged for
loss of profits and related damages. The Company’s insurance carrier has settled a portion of the counterclaims under its
director and officer liability insurance policy. The counterclaims that remain after consideration of the settlement by the insurance
carrier continue in controversy. Discovery and depositions by both parties </font>have <font style="color: black">been concluded
and both parties have filed summary judgment motions at this time. These summary judgment motions have not yet been ruled upon
and no trial date has been set. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.1pt"><font style="font: 10pt Times New Roman, Times, Serif">On
October 23, 2009, the Circuit Court of Jackson County, Missouri awarded the Company an interlocutory judgment against a former
contract manufacturer. The Company had filed for and received a temporary restraining order in June 2009 that forbids the supplier
from engaging in certain actions involving the Company. The interlocutory judgment was entered in favor of the Company against
the supplier that in effect cancelled all purchase orders and confirmed that the Company has no further obligations, whether monetary
or otherwise, to the supplier. The Company received a notice of the filing of bankruptcy under Chapter 7 effective October 26,
2009 by this supplier. On May 28, 2010, the court granted a default judgment awarding the Company damages and legal fees totaling
$11,166,686. The Company is pursuing collection from the bankruptcy estate and applicable insurance policies. Management believes
that the ultimate collection of any award of damages over and above the $72,000 in unpaid invoices is uncertain at this time because
of the current financial status of the supplier in the pending bankruptcy proceedings and the uncertainty of insurance coverage.
The Company has filed a garnishment claim against all insurance proceeds from policies issued and in force covering the contract
manufacturer when these actions occurred. <font style="color: black">Discovery and depositions by both parties have been concluded
and both parties have filed summary judgment motions at this time. These summary judgment motions have not yet been ruled upon
and no trial date has been set. </font></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company is also involved as a plaintiff and defendant in ordinary, routine litigation and administrative proceedings incidental
to its business from time to time, including customer collections, vendor and employment-related matters. The Company believes
the likely outcome of any other pending cases and proceedings will not be material to its business or its financial condition.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>401
(k) Plan. </i></b>In July 2008, the Company amended and restated its 401(k) retirement savings plan. The amended plan requires
the Company to provide 100% matching contributions for employees who elect to contribute up to 3% of their compensation to the
plan and 50% matching contributions for employee’s elective deferrals on the next 2% of their contributions. The Company
has made matching contributions totaling $121,745 and $158,225 for the years ended December 31, 2011 and 2010, respectively. Each
participant is 100% vested at all times in employee and employer matching contributions.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Stock
Repurchase Program</i></b>. During June 2008, the Board of Directors approved a program that authorized the repurchase of up to
$10 million of the Company’s common stock in the open market, or in privately negotiated transactions, through July 1, 2010.
The Board of Directors approved an extension of this program to July 1, 2012. The Company made no purchases under this program
during the year ended December 31, 2011. The Company has repurchased 508,145 shares at a total cost of $2,157,226 (average cost
of $4.25 per share) under this program from inception to December 31, 2011.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.5pc; text-indent: 2.25pc"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Standby
Letters of Credit<font style="text-underline-style: double; color: blue; letter-spacing: 0pt"><u>.</u></font></i></b> The Company
is contingently liable as of December 31, 2011 for standby letters of credit issued by a bank for an aggregate amount of $211,421
to certain customers as security if the Company does not honor its contractual warranty obligations on the products delivered
to such customers. The outstanding standby letters expire in May 2012 and the Company has never had a beneficiary demand funding
related to such standby letters of credit.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc"><font style="font: 10pt Times New Roman, Times, Serif"><b><i>Non-Compliance
with Nasdaq listing requirements. </i></b>On September 13, 2011 we received a notice from The Nasdaq Stock Market stating that
the closing bid price of our common stock for the prior 30 consecutive business days had been below $1.00 per share and therefore
we were not in compliance with Marketplace Rule 5550(a)(2). We had 180 calendar days, or until March 12, 2012, to regain compliance
with the minimum bid requirement under the first notice, but were unable to do so. On March 13, 2012, The Nasdaq Stock Market
advised us that it had determined that we are eligible for an additional 180 day calendar period to regain compliance with the
minimum bid requirement for continued listing on it. Accordingly, to regain compliance, the closing bid price of our common stock
must be at least $1.00 per share for a minimum of ten consecutive business days prior to September 12, 2012 in accordance with
Marketplace Rule 5810(c)(3)(A). If we fail to achieve compliance within such period our common stock could be de-listed and we
would most likely be traded on the OTC Bulletin Board. Such event could have an adverse impact on the liquidity of our trading
market and price of our common stock, among other items.</font></p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
11. 	STOCK-BASED COMPENSATION </b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">The
Company recorded pretax compensation expense related to the grant of stock options and restricted stock issued of $839,232 and
$1,755,720 for the years ended December 31, 2011 and 2010, respectively.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">As
of December 31, 2011, the Company has adopted five separate stock-based option plans: (i) the 2005 Stock Option and Restricted
Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii)
the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan
(the “2008 Plan”) and (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”). These Plans permit
the grant of share options to its employees, non-employee directors and others for up to a total of 7,000,000 shares of common
stock. The Company believes that such awards better align the interests of its employees with those of its shareholders. Option
awards have been granted with an exercise price equal to the market price of the Company’s stock at the date of grant with
such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These
option awards provide for accelerated vesting if there is a change in control (as defined in the Plans). In July 2008, the Company
registered 6,500,000 shares of common stock that are issuable under its 2005 Plan, 2006 Plan, 2007 Plan and 2008 Plan with the
SEC and intends to register the shares issuable under the 2011 Plan with the SEC in the near future. A total of 1,544,754 options
remain available for grant under the various Plans as of December 31, 2011.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">In
addition to the Stock Option and Restricted Stock Plans described above, the Company has issued other options outside of these
Plans to non-employees for services rendered that are subject to the same general terms as the Plans, of which 20,000 options
are fully vested and remain outstanding as of December 31, 2011.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">The
fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The assumptions
used for determining the grant-date fair value of options granted during the year ended December 31, 2011 </font><font style="color: Black; letter-spacing: 0pt">are
</font><font style="color: black">reflected in the following table: </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; border-collapse: collapse">
<tr>
<td style="width: 58%; vertical-align: bottom; font: 8pt/2pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 18%; vertical-align: top; font: bold 8pt Times New Roman, Times, Serif; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 23%; vertical-align: bottom"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 28.05pt"><br />
<font style="font: 10pt Times New Roman, Times, Serif"><b>2011</b></font></p>
<p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 1pt 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="width: 1%; vertical-align: top; font: bold 8pt Times New Roman, Times, Serif; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected term of the
options in years</font>	</td>
<td style="font: 8pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0-5
years</font></p></td>
<td style="font: 12pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility of
Company stock</font>	</td>
<td style="font: 8pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 67%
- 70%</font></p></td>
<td style="font: 12pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected dividends</font>	</td>
<td style="font: 8pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">None</font></p></td>
<td style="font: 12pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free interest rate</font>	</td>
<td style="font: 8pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 0.11%
- 1.98%</font></p></td>
<td style="font: 12pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr>
<td style="vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Forfeiture rate</font>	</td>
<td style="font: 8pt Times New Roman, Times, Serif; vertical-align: top; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 5%
- 10%</font></p></td>
<td style="font: 12pt Times New Roman, Times, Serif; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 24.5pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0"><font style="font: 10pt Times New Roman, Times, Serif">The
following is a summary of stock options outstanding:</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font-family: Times New Roman, Times, Serif"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0.25pc 0 0; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"><b>Options</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0.25pc 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0.25pc 0 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Shares</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0.25pc 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0.25pc 0 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Weighted<br />
Average<br />
Exercise
Price</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0.25pc 0 0; text-align: center; text-indent: 28.05pt; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding
at January 1, 2011</font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,001,726</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.83</font></td><td style="width: 1%; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -1pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,046,000</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1.33</font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-indent: -1pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; text-indent: -1pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Exercised
and surrendered/cancelled (cashless exercise)</font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1pt; text-indent: -1pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1,002,421</font></td><td style="padding-bottom: 1pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.25</font></td><td style="padding-bottom: 1pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 2.5pt; text-indent: -3pc; padding-left: 64.05pt"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding
at December 31, 2011</font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,045,305</font></td><td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.59</font></td><td style="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1.5pt; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">Exercisable
at December 31, 2011</font></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,295,855</font></td><td style="padding-bottom: 1.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.73</font></td><td style="padding-bottom: 1.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; text-align: left; padding-bottom: 1.5pt; text-indent: -1pc; padding-left: 1pc"><font style="font: 10pt Times New Roman, Times, Serif">Weighted-average
fair value for options granted<br /> during the period at fair value</font></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,046,000</font></td><td style="padding-bottom: 1.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 10pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt double; font-size: 10pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0.62</font></td><td style="padding-bottom: 1.5pt; font-size: 10pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font: 1pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">The
Company’s 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan and 2011 Plan </font><font style="color: Black; letter-spacing: 0pt">allows
</font><font style="color: black">for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel
options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no cashless exercises
during the year ended December 31, 2011. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">At
December 31, 2011, the aggregate intrinsic value of options outstanding was approximately $-0-, the aggregate intrinsic value
of options exercisable was approximately $-0-, and there were no options exercised during the year ended December 31, 2011</font>.
The aggregate intrinsic value of options exercised was $549,437 and the weighted average fair value of options granted per share
was $1.03 for the year ended December 31, 2010.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">As
of December 31, 2011, the unamortized portion of stock compensation expense on all existing stock options was $640,931, which
will be recognized over the next forty-eight months.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">The
following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable
options under the Company’s option plans as of December 31, 2011:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font: 9pt Times New Roman, Times, Serif; text-align: center; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Outstanding
options</font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Exercisable
options</font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif">Exercise
price range</font></td><td style="font-size: 9pt; padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Number
of
options</font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Weighted
average
remaining
contractual
life</font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Number
of
options</font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">Weighted
average
remaining
contractual
life</font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 28%; font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$0.01
to $0.99</font></td><td style="width: 5%; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 11%; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">398,500</font></td><td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 5%; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 11%; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">9.8
years</font></td><td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 5%; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 11%; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 5%; font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 11%; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="width: 1%; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$1.00
to $1.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,416,205</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.1
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1,510,355</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4.6
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$2.00
to $2.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">96,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">7.2
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">34,500</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.8
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$3.00
to $3.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">169,600</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.8
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">66,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.7
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$4.00
to $4.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">235,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.8
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">235,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.8
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$5.00
to $5.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$6.00
to $6.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">700,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.0
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">420,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.0
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$7.00
to $7.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$8.00
to $8.99</font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">30,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4.7
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">30,000</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4.7
years</font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; text-align: center; padding-bottom: 1pt; text-indent: -3pc; padding-left: 3pc"><font style="font: 10pt Times New Roman, Times, Serif">$9.00
to $9.99</font></td><td style="font-size: 9pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 9pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">4,045,305</font></td><td style="padding-bottom: 1.5pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">6.5
years</font></td><td style="padding-bottom: 1.5pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2,295,855</font></td><td style="padding-bottom: 1.5pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 9pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font-size: 9pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">5.0
years</font></td><td style="padding-bottom: 1.5pt; font-size: 9pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif"><i> </i></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0.75pc; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black"><i>Restricted
stock grants. </i> The Board of Directors has granted restricted stock awards under the Plans. Restricted stock awards are valued
on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over one to four years
corresponding to anniversaries of the grant date. Under the Plans, unvested shares of restricted stock awards may be forfeited
upon the termination of service to or employment with the Company, </font><font style="color: Black; letter-spacing: 0pt">depending
</font><font style="color: black">upon the circumstances of termination. Except for restrictions placed on the transferability
of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the
right to receive cash dividends. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of all restricted stock activity under the equity compensation plans for the year ended December 31, 2011 is as follows:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font: 12pt Times New Roman, Times, Serif; padding-left: 0.45pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 9pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 9pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 9pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Restricted
stock
</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font: 9pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 9pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 9pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 9pt Times New Roman, Times, Serif; text-align: right"><p style="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Weighted
average
grant
date
fair
value
</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font: 9pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Nonvested balance, January
1, 2011</font></td><td style="width: 9%; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 14%; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">205,894</font></td><td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.83</font></td><td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">10,000</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1.42</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Vested</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(193,394</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(2.84</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Nonvested balance,
December 31, 2011</font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">22,500</font></td><td style="padding-bottom: 1.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">2.09</font></td><td style="padding-bottom: 1.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="margin: 0"><font style="font: 10pt Times New Roman, Times, Serif">During the year ended December 31, 2011, the
Company granted 10,000 shares of restricted stock to a non-employee director pursuant to the 2007 restricted stock agreement.
Restricted stock grants totaling 5,000 during 2011 fully vested on May 1, 2011 with the remaining 5,000 restricted shares to
vest on May 1, 2012. Restricted stock grants made during 2009 will vest 7,500 shares on June 18, 2012 and 10,000 shares on
June 18, 2013. The Company estimated the fair market value of these restricted stock grants<font style="text-underline-style: double; color: blue; letter-spacing: 0pt"><u> </u></font><font style="color: Black">at
$14,200</font> based on the closing market price on the date of grant. <font style="color: black">As of December 31, 2011,
there were $14,228 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants,
which will be amortized over the next 18 months in accordance with the graduated vesting scale.<br style="mso-special-character: line-break" /> <br style="mso-special-character: line-break" /> </font></font></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE 12. COMMON STOCK PURCHASE WARRANTS</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif">During
the year ended December 31, 2011 the Company issued common stock purchase warrants (the “Warrants”) in conjunction with
the issuance of the Notes (see Note 7). The Warrants are immediately exercisable and allow the holders to purchase up to 560,000
shares of common stock at $1.00 per share after modification. The Warrants expire on November 30, 2013, allow for cashless exercise,
however the holder does not have registration rights.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 24.5pt"><font style="font: 10pt Times New Roman, Times, Serif; color: black">The
fair value of the Warrants was estimated on the date of grant using a Black-Scholes option valuation model. The assumptions used
for determining the grant-date fair value of the Warrants granted </font>are<font style="text-underline-style: double; color: blue; letter-spacing: 0pt"><u>
</u></font><font style="color: black">reflected in the following table: </font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="color: black; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected term
of the Warrants </font>	</td><td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"></p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">23-30
months</font></p></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: black; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected volatility
of Company stock</font>	</td><td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 6%
-
68%</font></p></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: black; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Expected dividends</font>	</td><td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> one</font></p></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="color: black; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Risk-free
interest rate</font>	</td><td style="font: 8pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> .25%
-
0.62%</font></p></td><td style="font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 60%; color: black; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif; color: black">Forfeiture
rate</font>	</td><td style="width: 10%; font: 8pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 28%; font: 8pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">0</font></td><td style="width: 1%; font: 8pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">%</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0"><font style="font: 10pt Times New Roman, Times, Serif">A
summary of all Warrant activity for the year ended December 31, 2011 is as follows:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%">
<tr style="vertical-align: bottom">
<td style="font: 12pt Times New Roman, Times, Serif; padding-left: 0.45pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Warrants</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-family: Times New Roman, Times, Serif; text-align: right"><p style="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Weighted
average
exercise
price
</b></font></p> <p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td><td style="font-family: Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Nonvested balance, January 1, 2011</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Granted</font></td><td style="width: 9%; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 14%; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">560,000</font></td><td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="width: 9%; font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">1.00</font></td><td style="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Vested</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(560,000</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(1.00</font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif">Nonvested balance,
December 31, 2011</font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 10pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font: 4pt Times New Roman, Times, Serif; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif"><b> </b></font></p>
<table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<tr>
<td style="width: 65%; vertical-align: top; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 4%; vertical-align: top; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 14%; vertical-align: bottom; padding-right: 0.45pc; padding-left: 0.45pc"><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Warrants</b></font></p>
<p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="width: 3%; vertical-align: top; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 14%; vertical-align: bottom; padding-right: 0.45pc; padding-left: 0.45pc"><p style="font: 7pt Times New Roman, Times, Serif; margin: 0; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"><b>Weighted
average exercise price </b></font></p>
<p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Vested balance, January 1, 2011</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Vested</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 
560,000</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> $ 
1.00</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Exercised</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Forfeited</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—</font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: black 1pt solid; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: top">
<td><font style="font: 10pt Times New Roman, Times, Serif">Vested balance, December 31, 2011</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 12pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> 
560,000</font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> $ 
1.00</font></td></tr>
<tr>
<td style="vertical-align: top"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: top; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; padding-right: 0.45pc; padding-left: 0.45pc"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td>
<td style="vertical-align: top; padding-right: 0.45pc; padding-left: 0.45pc; text-autospace: none; font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="vertical-align: bottom; padding-right: 0.45pc; padding-left: 0.45pc"><p style="font: 4pt/1pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0.5in; border-top: Black 2.25pt double"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">The
weighted average grant date fair value of the 560,000 Warrants granted during the year ended December 31, 2011 aggregated $207,836,
which is amortized ratably to interest expense over the term of the Notes. During 2011, the Company reached an agreement with
the holder to modify the exercise price on 375,000 warrants from $1.50 to $1.00 in consideration for the extension of the maturity
date of the first promissory note to May 31, 2013 (See Note 7). The increased value of the 375,000 warrants outstanding and subject
to the modification totaled $36,975 and has been included in the discount on the original Note and will be amortized over the
modified term of such Note.</font></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"><b>NOTE
13. NET LOSS PER SHARE<br />
<br style="mso-special-character: line-break" />
<br style="mso-special-character: line-break" />
</b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 1pc; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">The
calculation of the weighted average number of shares outstanding and loss per share outstanding for the years ended December 31,
2011 and 2010 are as follows:</font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="font-size: 4pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 8pt; font-weight: bold; padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="7" style="font-size: 8pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><font style="font: 10pt Times New Roman, Times, Serif">Year
ended  December 31,</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 4pt; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2011</font></td><td style="font-size: 8pt; font-weight: bold"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td colspan="3" style="font-size: 8pt; font-weight: bold; text-align: center"><font style="font: 10pt Times New Roman, Times, Serif">2010</font></td></tr>
<tr style="vertical-align: bottom">
<td style="width: 50%; text-align: left; padding-bottom: 2.5pt; text-indent: -8.65pt; padding-left: 8.65pt"><font style="font: 10pt Times New Roman, Times, Serif">Numerator
for basic and diluted income per share – Net loss</font></td><td style="width: 9%; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; border-bottom: Black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(3,962,246</font></td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td style="width: 9%; padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="width: 14%; border-bottom: Black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(6,544,525</font></td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; padding-left: 0.6pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: -8.65pt; padding-left: 8.65pt"><font style="font: 10pt Times New Roman, Times, Serif">Denominator
for basic loss per share – weighted average shares outstanding</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,151,834</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,315,026</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -8.65pt; padding-left: 8.65pt"><font style="font: 10pt Times New Roman, Times, Serif">Dilutive
effect of shares issuable under stock options and warrants outstanding</font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 1pt solid; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 1pt solid; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">—  </font></td><td style="padding-bottom: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; padding-left: 0.6pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 2.5pt; text-indent: -8.65pt; padding-left: 8.65pt"><font style="font: 10pt Times New Roman, Times, Serif">Denominator
for diluted loss per share – adjusted weighted average shares outstanding</font></td><td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,151,834</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="padding-bottom: 2.5pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="border-bottom: Black 2.5pt double; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="border-bottom: Black 2.5pt double; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">16,315,026</font></td><td style="padding-bottom: 2.5pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="font-size: 1pt; padding-left: 0.6pc"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 1pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: -1pc; padding-left: 1pc"><font style="font: 10pt Times New Roman, Times, Serif">Net loss per share:</font></td><td style="font-size: 4pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: right"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td><td style="font-size: 4pt; text-align: left"><font style="font: 10pt Times New Roman, Times, Serif"> </font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 18.7pt; padding-left: 8.65pt"><font style="font: 10pt Times New Roman, Times, Serif">Basic</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.25</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.40</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
<tr style="vertical-align: bottom">
<td style="text-indent: 18.7pt; padding-left: 8.65pt"><font style="font: 10pt Times New Roman, Times, Serif">Diluted</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.25</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td><td><font style="font: 10pt Times New Roman, Times, Serif"> </font></td>
<td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">$</font></td><td style="text-align: right"><font style="font: 10pt Times New Roman, Times, Serif">(0.40</font></td><td style="text-align: left"><font style="font: 10pt Times New Roman, Times, Serif">)</font></td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0.75pc 0; text-indent: 28.05pt"><font style="font: 10pt Times New Roman, Times, Serif">Basic
loss per share is based upon the weighted average number of common shares outstanding during the period. All outstanding stock
options to purchase common stock were considered antidilutive<font style="color: blue"><u>,</u></font> as a result of their exercise
price being out of the money and the net loss incurred for the respective periods and, therefore, not included in the computation
of diluted loss per share.</font></p>
<p style="font: 12pt Times New Roman, Times, Serif; margin: 0"><font style="font: 10pt Times New Roman, Times, Serif"> </font></p>
26586812
16154073
1062103
799370
-186396
173152
15000
0
0
2855000
1911504
3618800
241393
130338
3041829
-2890932
39266
-116661
-6721
44541
-2309997
1156492
104781
-1136891
-4579
16454
29257
-37282
945519
-301424
120978
341395
30123
42395
-151101
-383790
2309774
0
434317
0
0
-833991
-349
-833642
112036
24865
14416
15783
2270393
623475
183150
1500000
-1500000
147500
0
0
95300
0
-469761
-469761
0
852500
1125539
1646918
440325
190226
0
302318
341584
131093
0
-222460
-24865
-16108
-24153
0
-125000
-125000
0
16169739
16652218
16662218
-348890
250869
10000
0
0
251
10
-251
-10
236726
0
236726
46500
0