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<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"><b>Overview</b></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Applied
Visual Sciences, Inc. was incorporated under the name Guardian Technologies International, Inc., in the Commonwealth of Virginia
in 1989 and reincorporated in State of Delaware in February 1996. We changed our name to Applied Visual Sciences, Inc., on July
9, 2010. The Company, previously an operating stage company, became a development stage company on April 1, 2012, the date of
inception as a development stage company for financial reporting. Applied Visual Sciences, Inc. and its subsidiaries are collectively
referred to herein as the “Company,” “Applied Visual Sciences, Inc.,” “Applied Visual,” “us,”
“we,” or “our.”</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Applied
Visual Sciences is a software technology company that designs and develops imaging informatics solutions for delivery to its target
markets, aviation/homeland security and healthcare. Our two product lines are offered through our two operating subsidiaries as
follows: Guardian Technologies International, Inc. for aviation/homeland security products and Signature Mapping Medical Sciences,
Inc., for healthcare products.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">The
Company utilizes imaging technologies and analytics to create integrated information management technology products and services
that address critical problems experienced by corporations and governmental agencies in healthcare and homeland security. Each
product and service can improve the quality and response time of decision-making, organizational productivity, and efficiency
within the enterprise. Our product suite integrates, streamlines, and distributes business and clinical information and images
across the enterprise.<font style="color: black"> </font></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: bold 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Our
Business Strategy</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Our
strategic vision is to position our core technology as the de facto standard for digital image analysis, knowledge extraction,
and detection. Our strategy is based upon the following principal objectives:</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Verdana, Helvetica, Sans-Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td><td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Maintain
product development and
sales/marketing focus
on large, underserved,
and rapidly growing markets
with a demonstrated need
for intelligent imaging
informatics.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Verdana, Helvetica, Sans-Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td><td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Leverage
Applied Visual Sciences,
Inc.’s technology,
experienced management
team, research and development
infrastructure.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Verdana, Helvetica, Sans-Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td><td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Focus
our talents on solving
highly challenging information
problems associated with
digital imaging analysis.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Verdana, Helvetica, Sans-Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td><td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Establish
an international market
presence through the
development of a significant
OEM/Reseller network.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Verdana, Helvetica, Sans-Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td><td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Build
and maintain a strong
balance sheet to ensure
the availability of capital
for product development,
acquisitions, and growth.</font></td></tr></table>
<table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Verdana, Helvetica, Sans-Serif; margin-top: 0; margin-bottom: 0"><tr style="vertical-align: top">
<td style="width: 0.5in"></td><td style="width: 0.25in"><font style="font: 8pt Times New Roman, Times, Serif">·</font></td><td style="text-align: justify"><font style="font: 8pt Times New Roman, Times, Serif">Seek
to broaden our investment
appeal to large institutions.</font></td></tr></table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">To
achieve our strategic vision, we are aware of the need to exercise the financial and operational discipline necessary to achieve
the proper blend of <font style="color: black">resources, products and strategic partnerships. These efforts can accelerate our
ability to develop, deploy and service a broad range of intelligent imaging informatics solutions directly to our target markets
and indirectly through OEM/value added reseller (“VAR”) partners. During 2012,<font style="font-style: normal; text-underline-style: none">
we continued implementing changes across the spectrum of our business. We refined our marketing strategy for </font></font></font>PinPoint™
and Signature Mapping™, <font style="font-style: normal; text-underline-style: none">and enhanced our </font>Signature Mapping™
<font style="font-style: normal; text-underline-style: none">product offerings.<sup> </sup></font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">We
may engage in one or more acquisitions of businesses that are complementary, and may form subsidiaries to operate within defined
vertical markets.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: bold 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Our
Core Technology</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">Our
core technology is an “intelligent imaging informatics” (“3i™”) engine that is capable of extracting
embedded knowledge from digital images, and has the capacity to analyze and detect image anomalies. The technology is not limited
by type of digital format. It can be deployed across divergent digital sources such as still images, x-ray images, video and hyper-spectral
imagery. To date, the technology has been tested in the area of threat detection for baggage scanning at airports, for bomb squad
applications and the detection of tuberculosis by analyzing digital images of stained sputum slides captured through a photo microscopy
system. Varying degrees of research and development have been conducted in the areas of detection for cargo scanning, people scanning,
military target acquisition in a hyper-spectral environment, satellite remote sensing ground surveys and mammography CAD products
and radiologists’ diagnostic imaging tools, and while product development in these areas is ongoing, there can be no assurance
that we will successfully develop product offerings in these areas.</font></p>
<p style="font: 10pt Verdana, Helvetica, Sans-Serif; margin: 0; text-align: justify; text-indent: 0.5in"><font style="font-family: Times New Roman, Times, Serif"> </font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="font-family: Times New Roman, Times, Serif">We
are currently focused on providing software technology solutions and services in two primary markets - aviation/homeland security
with PinPoint™ and healthcare technology with Signature Mapping™ solutions. However, as new or enhanced solutions
are developed, we expect to expand into other markets such as military and defense utilizing hyper-spectral technology, and imaging
diagnostics for the medical industry.</font></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company, previously an operating stage company,
became a development stage company on April 1, 2012, the date of inception as a development stage company for financial reporting.  A
development stage company, as defined by ASC-915-10 “Accounting and Reporting by Development Stage Enterprise”, is
an entity that devotes substantially all of its efforts to establish a business and either of the following conditions exists:
1) the principal operations have not commenced, or 2) the principal operations have commenced, but there has been no significant
revenue therefrom.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The unaudited condensed consolidated financial
statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
The accompanying unaudited condensed consolidated financial statements do not include complete footnotes and financial statement
presentations. As a result, these unaudited condensed consolidated financial statements should be read along with the audited consolidated
financial statements and notes thereto for the year ended December 31, 2011, included in our 2011 Annual Report on Form 10-K. In
our opinion, the unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments,
necessary for a fair presentation of the financial position, results of operations and cash flows for those periods presented.
The preparation of financial statements in conformity with United States (U.S.) generally accepted accounting principles requires
management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses, as well as disclosure
of contingent assets and liabilities. Actual results could differ from those estimates and assumptions. Moreover, the results of
operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire
year. The Company maintains a web site at <i>www.appliedvs.com, </i>which makes available free of charge our recent annual report
and other filings with the SEC.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These unaudited condensed consolidated financial
statements have been prepared assuming that the Company will continue as a going concern and, accordingly, do not include any adjustments
that might result from the outcome of this uncertainty. Our independent registered public accounting firm’s reports on the
consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2011, contains an
explanatory paragraph wherein it expressed an opinion that there is substantial doubt about our ability to continue as a going
concern. Accordingly, careful consideration of such opinion should be given in determining whether to continue or become our stockholder.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Summary of Significant Accounting Policies</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company, previously an operating stage company,
became a development stage company on April 1, 2012, the date of inception as a development stage company for financial reporting.  A
development stage company, as defined by ASC-915-10 “Accounting and Reporting by Development Stage Enterprise”, is
an entity that devotes substantially all of its efforts to establish a business and either of the following conditions exists:
1) the principal operations have not commenced, or 2) the principal operations have commenced, but there has been no significant
revenue therefrom.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As disclosed in our most recent Annual Report
on Form 10-K for the fiscal year ended December 31, 2011, the discussion and analysis of our financial condition and results of
operations are based upon the consolidated financial statements, which have been prepared in conformity with United States (U.S.)
generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements.
These judgments can be subjective and complex and, consequently, actual results could differ from those estimates and assumptions.
Since December 31, 2011, there have been no significant changes to the assumptions and estimates related to those critical accounting
policies.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries, RJL Marketing Services, Guardian Technologies International, Inc., Signature
Mapping Medical Sciences, Inc., Instasis Imaging, Inc., Guardian Healthcare Systems UK, Ltd., and Wise Systems Ltd., in which it
has the controlling interest.  Subsidiaries acquired are consolidated from the date of acquisition.  All significant
intercompany balances and transactions have been eliminated.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The carrying value of cash and cash equivalents,
accounts receivable, accounts payable, and embedded conversion features and detachable warrants approximates fair value based on
the liquidity of these financial instruments and their short-term nature.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company reviews the terms of convertible
debt and equity securities for indications requiring bifurcation, and separate accounting, for the embedded conversion feature.
Under guidelines of ASC 815-40, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in,
a Company’s Own Stock,” public companies that are required, or that could be required, to deliver shares of common
stock as part of a physical settlement or a net-share settlement, under a freestanding financial instrument, are required to initially
measure the contract at fair value (or allocate on a fair value basis if issued as part of a debt financing), and report the value
in permanent equity. However, in certain circumstances (e.g. the company could not ascertain whether sufficient authorized shares
exist to settle the contract), permanent equity classification should be reassessed. The classification of the contract as permanent
equity should be reassessed at each balance sheet date and, if necessary, reclassified as a liability on the date of the event
causing the reclassification. If a reclassification occurs from permanent equity to a liability, the fair value of the financial
instrument should be removed from permanent equity as an adjustment to stockholders’ equity. Any portion of the contract
that could be net-share settled as of the balance sheet date would remain classified in permanent equity. Subsequent to the initial
reclassification event, changes in fair value of the instrument are charged to expense until the conditions giving rise to the
reclassification are resolved.  When a company has more than one contract subject to reclassification, it must determine
a method of reclassification that is systematic, rational, and consistently applied. The Company adopted a reclassification policy
that reclassifies contracts with the latest inception date first. To the extent that changes in fair value of  equity
instruments relates to financings since November 8, 2006 (the date of first closing under the debenture financing with reset provisions
that made the number of potentially issuable shares indeterminable), the increase or decrease in the fair value of the warrants
is charged or credited to interest expense. To the extent the equity instruments relate to other transactions (e.g. consulting
expense), the increases or decreases are charged or credited based on the nature of the transaction. The number of additional shares
potentially issuable under the November 8, 2006, outstanding convertible debentures and related outstanding warrants and other
subsequent warrants issued was determinable as of the debentures’ final milestone reset date on May 20, 2008, and, therefore,
the outstanding fair value of the warrants issued to the debenture holders, other subsequent warrants issued through May 20, 2008,
and the warrants’ related beneficial conversion feature were reclassified as stockholders’ equity in accordance with
currently effective generally accepted accounting principles.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Reclassifications</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain reclassifications of previously reported
amounts have been made to conform to the current period presentation. These classifications had no effect on the previously reported
net loss.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Segment Data and Related Information</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 280-10, “Disclosures about Segments
of an Enterprise and Related Information,” establishes standards for the manner in which public companies report information
about operating segments in annual and interim financial statements.  It also establishes standards for related disclosures
about products and services, geographic areas, and major customers.  The method for determining what information to report
is based on the way management organizes the operating segments within the Company for making operating decisions and assessing
financial performance.  The Company’s chief operating decision-maker is considered to be the Company’s chief
executive officer (“CEO”).  The CEO reviews financial information presented on an entity level basis accompanied
by disaggregated information about revenues by product type and certain information about geographic regions for purposes of making
operating decisions and assessing financial performance.  The entity level financial information is identical to the
information presented in the accompanying consolidated statements of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has two groups of products and services
- Security (PinPoint™) and Healthcare (Signature Mapping™ Medical Computer Aided Detection (“Medical CAD”),
and operates in three geographic markets. The Company has determined that as of the balance sheet date, it operates as a single
operating unit since the two products make up a slight revenue stream to the Company.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates in North America, and Africa
and Asia.  In general, revenues are attributed to the country in which the contract originates. There were no revenues
for the nine months ended September 30, 2012 and $6,589 for the same period in 2011.  Our product and service categories
would include software licenses, research funding, maintenance support, and hardware. The Company continues to focus efforts in
developing the Signature Mapping™ imaging technologies, while at the same time pursuing opportunities for our security product/services.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following information represents software
license activities, except for the revenue in 2011 of $6,589, which is for hardware activities.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left; font-weight: bold"> </td>
<td colspan="2" style="text-align: center; font-weight: bold">Cumulative</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left; font-weight: bold"> </td>
<td colspan="2" style="text-align: center; font-weight: bold">From</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-weight: bold"> </td>
<td colspan="6" style="text-align: center; font-weight: bold">Three Months Ended</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td>
<td style="text-align: left; font-weight: bold"> </td>
<td colspan="6" style="text-align: center; font-weight: bold">Nine Months Ended</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td>
<td style="text-align: left; font-weight: bold"> </td>
<td colspan="2" style="text-align: center; font-weight: bold">April, 1, 2012</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold">GEOGRAPHIC DATA</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">September 30</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">September 30</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="padding-bottom: 1.25pt; text-align: center; font-weight: bold">(inception date)</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">2012</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">2012</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">To Sept 30, 2012</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; font-weight: bold">Net revenues</td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; text-align: left">The Americas</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">Africa and Asia</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">6,589</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Total net revenue</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">6,589</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left; font-weight: bold">Cost of sales</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">The Americas</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left">Africa and Asia</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: left">Total cost of sales</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left; font-weight: bold">Operating (loss)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">The Americas</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(404,552</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(515,202</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(1,330,447</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(1,967,472</td>
<td nowrap="nowrap" style="text-align: left">)</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">(809,295</td>
<td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">Africa and Asia</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">6,589</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Total operating loss</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(404,552</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left">)</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(515,202</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left">)</td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(1,330,447</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left">)</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(1,960,883</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left">)</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">(809,295</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="4" style="text-align: left; font-weight: bold">Depreciation and amortization</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">The Americas</td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">23,716</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">24,354</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">73,079</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">72,762</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">48,398</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left">Africa and Asia</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: left">Total depreciation and amortz</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">23,716</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">24,354</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">73,079</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">72,762</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">48,398</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left; font-weight: bold">Total assets</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">The Americas</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">530,672</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">614,762</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">Africa and Asia</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Total assets</td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">530,672</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">614,762</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left; font-weight: bold">Long-lived assets, net</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">The Americas</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">513,920</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">591,257</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left">Africa and Asia</td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: left">Total long-lived assets, net</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">513,920</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">591,257</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Long-lived assets, net: consists of software,
goodwill, patents, property and equipment, and other noncurrent assets.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Stock-Based Compensation</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has two active equity compensation
plans which include the Amended and Restated 2003 Stock Incentive Plan and the 2009 Stock Compensation Plan (collectively, the
“Plans”). A total of 50,000,000 shares have been reserved for issuance under these Plans in the form of stock-based
awards to employees, non-employee directors and outside consultants of the Company, of which 25,108,586 shares remain available
for issuance thereunder as of September 30, 2012. The grant of awards under the Plans require approval by the Compensation Committee
of the Board of Directors of the Company (or the Board of Directors, in the absence of such a committee) (the “Committee”),
and the Committee is authorized under the Plans to take all actions that it determines to be necessary or appropriate in connection
with the administration of the Plans.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted the provisions of ASC 718-10,
“Share-Based Payment” to account for its share-based payments. ASC 718-10 requires all share-based payments to employees,
or to non-employee directors as compensation for service on the Board of Directors, to be recognized as compensation expense in
the consolidated financial statements based on the estimated fair values of such options as calculated using the Black-Scholes
model, and the related expense is recognized on a straight-line basis over the service period to vesting for each grant, net of
estimated forfeitures. The Company’s estimated forfeiture rates are based on its historical experience within separate groups
of employees. In accordance with ASC 718-10, the Company recognized total stock-based compensation expense for employees and non-employee
members of the Board of Directors for the nine months ended September 30, 2012 of $0, and $164,241 for the same period during 2011.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for stock options granted
to non-employees in accordance with ASC 718-10 and ASC 505-50, “Accounting For Equity Instruments That Are Issued To Other
Than Employees For Acquiring, Or In Conjunction With Selling, Goods Or Services.” ASC 505-50 establishes the measurement
principles for transactions in which equity instruments are issued in exchange for the receipt of goods or services. The Company
has relied upon the guidance provided under ASC 505-50 to determine the measurement date and the fair value re-measurement principles
to be applied, and recognizes as an expense the estimated fair value of such options as calculated using the Black-Scholes model.
The fair value is remeasured during the service period at each balance sheet date, and is amortized over the remaining service
period to vesting for each option or the remaining term of the recipient’s contractual arrangement, whichever is shorter.
The Company recognizes compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service
period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual
option forfeitures when estimating the forfeiture rate. Total stock-based compensation expense for consultants during the nine
months ended September 30, 2012 and the same period in 2011 were $11,125 and $229,035, respectively.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Black-Scholes Merton option valuation model
(Black-Scholes model) was developed for use in estimating the fair value of traded options, which have no vesting restrictions
and are not transferable.  The fair value of each option granted was estimated using the Black-Scholes model with the
following weighted-average assumptions:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: center; font-weight: bold">Black-Scholes Model Assumptions</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">2012</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-align: left">Risk-free interest rate (1)</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">0.99</td>
<td nowrap="nowrap" style="width: 1%; text-align: left">%</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">2.27</td>
<td nowrap="nowrap" style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Expected volatility (2)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">163.6</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">136.7</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Dividend yield (3)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.0</td>
<td nowrap="nowrap" style="text-align: left">%</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.0</td>
<td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Expected life (4)</td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">5.4 years</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td colspan="2" style="text-align: right">6.5 years</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 3%; text-align: center">(1)</td>
<td style="text-align: left">The risk-free interest rate is based on US Treasury debt securities with maturities similar to the expected term of the option.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: center">(2)</td>
<td style="text-align: left">Expected volatility is based on historical volatility of the Company’s stock factoring in daily share price observations.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: center">(3)</td>
<td style="text-align: justify">No cash dividends have been declared on the Company’s common stock since the Company’s inception, and the Company currently does not anticipate paying cash dividends over the expected term of the option.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: top">
<td style="text-align: center">(4)</td>
<td style="text-align: justify">The expected term of stock option awards granted is derived from historical exercise experience under the Company’s stock option plan and represents the period of time that stock option awards granted are expected to be outstanding.  The expected term assumption incorporates the contractual term of an option grant, which is usually ten years, as well as the vesting period of an award, which is generally pro rata vesting over two years.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"><i>The Amended and Restated 2003 Stock Incentive
Plan</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Board of Directors adopted the 2003 Stock
Incentive Plan on August 29, 2003.  The plan may be modified or terminated at any time, and any such amendment or termination
will not affect outstanding options without the consent of the optionee.  The Board of Directors amended and restated
the plan on December 2, 2003. The Amended and Restated 2003 Stock Incentive Plan (“2003 Plan”) was approved by the
shareholders on February 13, 2004, pursuant to which it grants stock-based compensation in the form of options, which will result
in the issuance of up to an aggregate of 30,000,000 shares of the Company’s common stock. The 2003 Stock Incentive Plan terminates
on August 29, 2013.  The aggregate number of shares and the number of shares in an award (as well as the option
price) may be adjusted if the outstanding shares of the Company are increased, decreased or exchanged through merger or other stock
transaction.  The Plan provides for options which qualify as Incentive Stock Options under Section 422 of the Internal
Revenue Code of 1986, as well as the issuance of Non-Qualified Options, which do not so qualify. Pursuant to the terms of the 2003
Plan, the Company, as determined by the Board of Directors or a committee appointed by the Board, may grant Non-Qualified Stock
Options (“NQSOs”) to its executive officers, non-employee directors, or consultants of the Company and its subsidiaries
at any time, and from time to time.  The 2003 Plan also provides for Incentive Stock Options (“ISOs”) to
be granted to any officer or other employee of the Company or its subsidiaries at any time, and from time to time, as determined
by the Compensation Committee.  Such stock options granted allow a grantee to purchase a fixed number of shares of the
Company’s common stock at a fixed exercise price not be less than the quoted market price (or 110% thereof for Incentive
Stock Options issued to a holder of 10% or greater beneficial ownership) of the shares on the date granted.  The options
may vest on a single date or over a period of time, but normally they do not vest unless the grantee is still employed by, or a
director of, the Company on the vesting date.  Generally for all employees, the options vest 50% after the first year
from the date of grant and the remaining 50% after the second year from the date of grant.  Stock options granted to
independent board of directors vest 100% after the service period, which generally is one year from the date of grant.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Factors considered in granting stock options
included: (i) the general policy during the past five, and in the foreseeable future, of not increasing base salaries of all employees,
(ii) the performance of employees, (iii) the employees’ increasing responsibilities in a dynamic, and shrinking organization,
and (iv) the accomplishments achieved by the Company during the prior year.  The 2003 Plan has been the principal method
for our employees and executive officers to acquire equity interests in the Company. We believe that the annual aggregate value
of these awards should be set near competitive median levels for comparable companies.  We may provide a greater portion
of total compensation to our executives and employees through stock options given the general policy of not increasing base salaries
in the foreseeable future. Our Compensation Committee administers the 2003 Plan based on the above factors, and the Committee approved
the grant of stock options to all current employees, including its named executives, during 2007 through 2009 as an incentive for
continued contributions in moving our product development efforts forward.  Stock options were not granted to employees,
including its named executives, during 2012 and 2011, as the Company did not achieve the desired results during 2010 and 2011.
Also, the Compensation Committee, based on management’s recommendation and discussions with the Committee, may grant stock
options to new employees.  There were no stock options granted to new employees during the first nine months of 2012,
since there were no new employees hired during this period.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Options granted under the Plan must be evidenced
by a stock option agreement in a form consistent with the provisions of the 2003 Plan. Each option shall expire on the earliest
of (a) ten (10) years from the date it is granted, (b) sixty (60) days after the optionee dies or becomes disabled, (c) immediately
upon the optionee's termination of employment or service or cessation of Board service, whichever is applicable, or (d) such date
as the Committee shall determine, as set forth in the relevant option agreement; provided, however, that no ISO which is granted
to an optionee who, at the time such option is granted, owns stock possessing more than ten (10) percent of the total combined
voting power of all classes of stock of the Company or any of its subsidiaries, shall be exercisable after the expiration of five
(5) years from the date such option is granted.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To exercise an option, the 2003 Plan participant,
in accordance with the relevant option agreement, must provide the Company a written notice setting forth the number of options
being exercised and their underlying shares, and tender an amount equal to the total exercise value of the options being exercised.  The
right to purchase shares is cumulative so that once the right to purchase any shares has vested; those shares or any portion of
those shares may be purchased at any time thereafter until the expiration or termination of the option.  ISOs and NQSOs
that are not exercised in accordance with the terms and provisions of the stock option agreement, or as amended, will expire as
to any then unexercised portion.  Stock options that expire, are cancelled, or forfeited will again become available
for issuance under the 2003 Plan as described below.  The aggregate number of shares and the number of shares in an award
(as well as the option price) may be adjusted if the outstanding shares of the Company are increased, decreased or exchanged through
merger or other stock transaction.  The shares issued by the Company under the 2003 Plan may be either treasury shares
or authorized but unissued shares as the Company’s board of directors or the Compensation Committee may determine from time
to time.  Except as specifically provided in an option agreement, options granted under the 2003 Plan may not be sold,
pledged, transferred or assigned in any way, except by will or by the laws of descent and distribution, and during the lifetime
of a participant to whom the ISOs is granted, and the ISOs may only be exercised by the participant.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left">The Compensation Committee did not grant any stock
options under the 2003 Plan during the nine months ended September 30, 2012, and the Company has reserved under the plan 11,105,447
shares to be issued upon exercise of outstanding options, and 16,590,253 remain available for future awards. Compensation expense
for stock options granted is recognized over the requisite service period, which is typically the period over which the stock-based
compensation awards vest.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Stock Options Exercised under the 2003 Plan</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There were no stock options granted during the
first nine months of 2012. During the same period in 2011, employees exercised an aggregate of 511,800 stock options using outstanding
accrued wages that resulted in the aggregate issuance of 511,800 shares of common stock for a reduction in accrued wages of $153,540.
Common stock was increased by $512 for the par value of the shares and paid-in capital increased by $153,028.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Summary of stock option activity under the 2003
Plan for the nine months ended September 30, 2012 issued to employees, non-employee members of the Board of Directors and consultants
is as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid; text-align: left; font-weight: bold">Fiscal Year and Activity</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Weighted- Average Exercise Price</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Number of Options</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-align: left">Outstanding December 31, 2011</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.32</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">14,788,489</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Fiscal 2012 activity</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">  Granted</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">  Exercised</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">  Cancelled</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.30</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">(3,683,042</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">     Outstanding September 30, 2012</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right">0.33</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">11,105,447</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Reserved for future issuance at September 30, 2012</td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">16,590,253</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left">The following table summarizes additional information
about the 2003 Plan stock options outstanding at September 30, 2012:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td colspan="12" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Issued and Outstanding</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Exercisable</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: center; font-weight: bold">Type of Option and Range of Exercise Prices</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Number of Options</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Weighted-Average Remaining Contractual Life (Yrs)</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Weighted-Average Exercise Price</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Number of Options</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Weighted-Average Price</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; text-align: left">Nonqualified Stock Options   $0.30 (1) (5)</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">850,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">1.3</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.30</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">850,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.30</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Nonqualified Stock Options   $0.30 (2) (5)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">44,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2.3</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.30</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">44,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.30</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Incentive Stock Options        $0.15 - $4.05 (3)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">649,300</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">5.2</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.98</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">649,300</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.98</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">Incentive Stock Options        $0.15 - $0.30 (4) (5)</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">9,562,147</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">5.1</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.29</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">9,562,147</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.29</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">   Total</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">11,105,447</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right">4.9</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt; text-align: left">$</td>
<td style="padding-bottom: 2.5pt; text-align: right">0.32</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">11,105,447</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="padding-bottom: 2.5pt; text-align: left">$</td>
<td style="padding-bottom: 2.5pt; text-align: right">0.32</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="text-align: left">(1) Initially issued to employees below fair value during the period of July 2003 through February 2004.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: left">(2) Initially issued to directors below fair value during the period of February 2004 through September 2005.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: left">(3) Issued to consultants at fair value.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify">(4) Issued to directors and employees at fair value, or above fair value for those individuals with greater than 10% beneficial ownership.</td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify">(5) The exercise price reflects the repricing of stock options as approved by the Compensation Committee on April 24, 2010.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>The 2009 Stock Compensation Plan</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On June 4, 2009, the Board of Directors adopted
the 2009 Stock Compensation Plan (“2009 Plan) which provides for the grant or issuance of up to an aggregate of 20,000,000
shares of the Company’s common stock pursuant to non-qualified stock options (“NQSOs”), restricted stock awards
(“RSAs”), restricted stock rights (“RSRs”), or common stock awards (“Common Stock Awards”)
(a NQSO, RSA, RSR or Common Stock Award, individually, an “Award;” collectively, “Awards”). Our Board of
Directors has delegated its authority to administer the 2009 Plan to the Compensation Committee.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The purpose of the 2009 Plan is to foster our success
and the success of our subsidiaries and affiliates by providing incentives to employees, directors, officers and consultants to
promote our long-term financial success.  The Plan complements our 2003 Amended and Restated Stock Incentive Plan (the
“2003 Plan”) and provides greater flexibility to us in that it permits us to compensate and award employees, directors,
officers and consultants through the issuance of certain options, RSAs, RSRs, and stock awards in addition, or as an alternative,
to the incentive and non-qualified stock options that may be awarded under the 2003 Plan. The 2009 Plan terminates on June 4, 2019,
and no award may be made after that date, however, awards made before that date may extend beyond that date.  If an award
under the 2009 Plan is cancelled, expires, forfeited, settled in cash or otherwise terminates without being exercised in full,
the shares of common stock not acquired pursuant to the award will again become available for issuance under the 2009 Plan. The
Board may amend, terminate, or modify the 2009 Plan at any time, without shareholder approval, unless required by the Internal
Revenue Code of 1986, pursuant to Section 16 under the Securities Exchange Act of 1934, as amended, or by any national securities
exchange or system on which our common stock is then listed or reported, or by any regulatory body.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subject to the provisions of the 2009 Plan, the
Compensation Committee has the power to:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Prescribe, amend, and rescind rules and regulations relating to the 2009 Plan and to define terms not otherwise defined therein;</td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Determine which persons are eligible to participate, to which of such participants, if any, awards shall be granted, and the timing of any such awards;</td></tr>
</table>
<p style="font: 10pt Verdana, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Grant awards to participants and determine the terms and conditions thereof, including the number of shares subject to awards and the exercise or purchase price of such shares and the circumstances under which awards become exercisable or vested or are forfeited or expire;</td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Establish any performance goals or other conditions applicable to the grant, issuance, exercisability, vesting and/or ability to retain any award;</td></tr>
</table>
<p style="font: 10pt Verdana, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Prescribe and amend the terms of the agreements or other communications evidencing awards made under the 2009 Plan (which need not be identical) and the terms or form of any document or notice required to be delivered to us by participants under the 2009 Plan;</td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Determine the appropriate adjustment, if any, required as a result of any reorganization, reclassification, combination of shares, stock split, reverse stock split, spin-off or dividend (other than regular, quarterly cash dividends), or other changes in the number or kind of outstanding shares or any stock or other securities into which such shares shall have been exchanged;</td></tr>
</table>
<p style="font: 10pt Verdana, Helvetica, Sans-Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 96px; text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Interpret and construe the 2009 Plan, any rules and regulations under the 2009 Plan and the terms and conditions of any award granted thereunder, and to make exceptions to any such provisions in good faith and for the benefit of the Company; and</td></tr>
<tr style="vertical-align: top">
<td style="text-align: justify; font-family: Verdana, Helvetica, Sans-Serif">·  </td>
<td style="text-align: justify">Make all other determinations deemed necessary or advisable for the administration of the 2009 Plan.</td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Unless the Board expressly provides otherwise prior
to a change of control or in an award agreement, in the event of a change of control of the Company, all outstanding options under
the 2009 Plan vest and become exercisable on the date immediately before the change of control and all restrictions under RSAs
and RSRs shall lapse or be deemed satisfied on the date immediately prior to the change of control.  A change of control
is deemed to have occurred upon the occurrence of one of the following events: (i) any person or group of persons becomes the beneficial
owner of shares of the Company to which 50% or more of the total number of votes for the election of directors may be cast; (ii)
as a result of a cash tender offer, exchange offer, merger or other business combination, sale of assets or contested election,
persons who were directors immediately prior to the event cease to constitute a majority of the board; (iii) stockholders approve
an agreement providing either that the Company will cease to be an independent publicly owned corporation or for sale or other
disposition of all or substantially all the assets of the Company; or (iv) a tender offer or exchange offer is made for shares
of our common stock (other than one made by us) and shares of common stock are acquired.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Compensation Committee determines all awards
to non-employee directors and such awards are not subject to management’s discretion. From time to time, the committee will
set the amount and the type of award that will be granted to non-employee directors on a periodic, nondiscriminatory basis, including
pursuant to any plan adopted by the Compensation Committee or Board for the compensation of non-employee directors. The committee
may set additional awards to be granted to non-employee directors also on a periodic, nondiscriminatory basis based on one or more
of the following criteria: (i) service as the chair of a Board committee; (ii) service as chairman of the Board; (iii) the
number or type of Board committees on which a director serves; or (iv) the first selection or appointment of an individual
to the Board.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Non-qualified stock options may be granted pursuant
to non-qualified stock option award agreements and certificates adopted by the Board, as amended by the Compensation Committee.
The Compensation Committee determines the terms of each stock option granted under the 2009 Plan, including the number of shares
covered by an option, exercise price and means of payment, the vesting and exercisability of the option, and restrictions on transfer
and the term.  The exercise price of an option granted under the Plan may not be less than the fair market value on the
date of option grant and may only be exercised at such times as may be specified by the Committee and provided for in an award
agreement. The options expire on the earliest of ten years after the date of grant, 90 days after the death or disability of the
recipient, immediately upon termination of employment or service other than by death or disability, or such date as the Compensation
Committee determines. The Compensation Committee, in its sole discretion, may change by agreement the post-termination rights of
a recipient, including accelerating the date or dates on which the option becomes vested and is exercisable following termination
of employment or service, or extend the period.  Options granted under the plan may be exercised by delivering cash,
a cashless exercise, or by delivering to us the proceeds of shares of our common stock issuable under an option.  Compensation
expense for non-qualified stock options is recognized over the period they vest.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An award of restricted stock consists of a specified
number of shares of our common stock that are, or may be, subject to restrictions, forfeiture conditions, and any other terms and
conditions for periods determined by the Committee. The Compensation Committee has discretion to determine the terms of any award
of restricted stock, including the number of shares subject to the award, and the minimum period over which the award may vest,
and the acceleration of any vesting in the event of death, disability or change of control.  RSAs are not transferable
or assignable unless provided otherwise by the Compensation Committee with respect to certain specified family-related transfers.  Unless
the Committee determines otherwise, once the restricted stock vests, the shares of common stock specified in the Award will be
free of restriction, subject to any applicable lock up period.  Prior to the termination of the restrictions under a
RSA, a participant may vote and receive dividends on the restricted stock unless the Committee determines otherwise, but may not
sell or otherwise transfer the shares until such time as the restrictions of the award have been satisfied. Compensation expense
for restricted stock awards is recognized over the period they vest.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">An award of restricted stock rights entitles a
participant to receive a specified number of shares of our common stock that are, or may be, subject to restrictions, forfeiture
conditions, and any other terms and conditions for periods determined by the Committee. It may also include the right to dividend
equivalents if and as so determined by the committee. The Compensation Committee has discretion to determine the terms of any award
of restricted stock or RSRs, including the number of shares subject to the award, and the minimum period over which the award may
vest, and the acceleration of any vesting in the event of death, disability or change of control.  RSRs are not transferable
or assignable unless provided otherwise by the Compensation Committee with respect to certain specified family-related transfers.
Unless the committee determines otherwise, once a RSR vests, the shares of common stock specified in the award will be issued to
the participant. A participant who has been awarded RSRs may not vote the shares of common stock subject to the rights until the
shares are issued. Until the vesting period applicable to a RSRs award expires and the shares are issued, the participant also
may not transfer or encumber any interest in the RSRs or in any related dividend equivalents. Compensation expense for restricted
stock rights is recognized over the period they vest.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Compensation Committee may also make stock
awards of common stock without restrictions, except that if the award is in lieu of salary, service fee, cash bonus or other cash
compensation, the number of shares covered by an award shall be based on the fair market value of such shares on the date of grant.  Common
Stock Awards under the plan may be issued free of restriction and may vest immediately; however, the Committee may impose vesting
and other restrictions related to the grant of such common stock awards.  Compensation expense for common stock awards
is recognized over the period they vest, although generally the awards vest immediately.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a summary of the number and type
of awards granted to, or exercised or forfeited by, employees, non-employee members of the Board of Directors and consultants pursuant
to the Company’s 2009 Stock Compensation Plan for the nine months ended September 30, 2012:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid; text-align: left; font-weight: bold">Fiscal Year and Activity</td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Weighted-Average Grant or Exercise Price Per Share</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Number of Shares</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Reserved for future issuance as of December 31, 2011</td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">13,334,507</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Fiscal 2012 activity:</td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 76%; text-align: left">  Common stock awards</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.06</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">4,816,174</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">  Restricted stock awards</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">  Restricted stock rights</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left">  Non-qualified stock options</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">    Issued during 2012</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.06</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">4,816,174</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: left">Reserved for future issuance as of September 30, 2012</td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">8,518,333</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 2.5pt; text-align: left">Stock options or restricted stock rights outstanding</td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"><i>Stock Issued under the 2009 Plan</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 24, 2012 and June 5, 2012, the Company
issued to two consultants an aggregate of 246,749 shares of common stock as compensation in lieu of cash for services rendered.  The
shares were issued under the 2009 Stock Compensation Plan.  Common stock was increased by $247 for the par value of the
shares and paid-in capital was increased by approximately $10,044. Stock compensation expense of $10,291 was also recorded.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During January through September 2012, employees
converted accrued and unpaid wages for 3,919,425 shares of common stock.  The shares were issued under the 2009 Stock
Compensation Plan.  Common stock was increased by $3,919 for the par value of the shares, paid-in capital was increased
by $166,099, and accrued wages was reduced by the fair value of the stock of $170,018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February and March, the Company agreed to
convert outstanding accounts payable to a consultant for an aggregate of 400,000 shares of common stock under the 2009 Stock Compensation
Plan.  The conversion price was $0.25. Common stock was increased in the aggregate of $400 for the par value of the shares,
paid-in capital was increased in the aggregate of $99,600, and accounts payable was reduced by the outstanding amount of $100,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Property and Equipment</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are carried at cost less
accumulated depreciation. For financial statement purposes, depreciation is provided on the straight-line method over the estimated
useful life of the asset ranging from 3 to 10 years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-weight: bold"> </td>
<td colspan="2" style="text-align: center; font-weight: bold">(Unaudited)</td>
<td nowrap="nowrap" style="text-align: left; font-weight: bold"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold">Asset (Useful Life)</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">September 30, 2012</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">December 31, 2011</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; text-align: left">Software (3 years)</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">84,224</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">84,224</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Computer equipment (3 to 5 years)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">329,861</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">329,861</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Furniture and fixtures (7 to 10 years)</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">488,239</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">488,239</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">Equipment (7 to 10 years)</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">80,727</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">80,727</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">983,051</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">983,051</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">Less accumulated depreciation</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">808,522</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">760,127</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">   Equipment, net</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">174,529</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">222,924</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Depreciation expense for property and equipment
was $48,396 and $55,434 in the nine months ended September 30, 2012 and 2011, respectively, and is reflected in selling, general
and administrative expenses in the accompanying condensed consolidated statements of operations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"><b><i>Goodwill and Other Intangible Assets</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Intangible Assets – </i>Intangible assets
consist of acquired software and patents. Under ASC 350, “Goodwill and Other Intangible Assets,” such assets acquired
including software technology is considered to have a finite life.  Management has estimated the useful life of acquired
software technology to be 5 years and amortized such costs on a straight-line basis over this period. In addition, ASC 985-20,
“Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,” requires the Company to
consider whether or not the software technology is impaired using a net realizable value analysis based on projected discounted
cash flows. The Company prepared this analysis as of September 30, 2012, and concluded that the intangible assets are not impaired.  Patent
acquisition costs pertaining to the Company’s 3i technology that covers its PinPoint™ and Signature Mapping™
intellectual property (technology not acquired through acquisition), have been capitalized as of the date incurred, and are being
amortized over the 20-year legal life of the patents. The Company has been granted by the United States Patent & Trademark
Office (“USPTO”) six patents related to its 3i technology. The Company evaluates the periods of amortization continually
to determine whether later events or circumstances require revised estimates of useful lives. The Company’s intangible acquired
software technology was fully amortized as of December 31, 2009. Therefore, there was no amortization costs associated with acquired
software during the nine months ended September 30, 2012 and 2011, respectively. Amortization expense for patent acquisition costs
was $24,683 and $17,328 during the nine months ended September 30, 2012 and 2011, respectively, and is reflected in selling, general
and administrative expenses in the accompanying condensed consolidated statements of operations. The Company anticipates incurring
additional patent acquisition costs during 2012.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="14" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Nine Months Ended September 30, 2012</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td rowspan="2" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" rowspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Beginning Period Cost</td>
<td nowrap="nowrap" rowspan="2" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td colspan="2" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td rowspan="2" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" rowspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Net Book Value</td>
<td nowrap="nowrap" rowspan="2" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Additions</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Reductions</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left">Intangibles with finite lives:</td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left; text-indent: 9pt">Patent acquisition costs</td>
<td style="text-align: left"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">363,599</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">475</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">24,683</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left">$</td>
<td style="text-align: right">339,391</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Excess of Purchase Price over Net Assets Acquired
(Goodwill) –</i> The Company follows the provisions of ASC 805-10, “Business Combinations” and ASC 350-10, “Goodwill
and Other Intangible Assets.” These statements establish financial accounting and reporting standards for acquired goodwill.  Specifically,
the standards address how acquired intangible assets should be accounted for both at the time of acquisition and after they have
been recognized in the financial statements. Effective January 1, 2002, with the adoption of ASC 350-10, goodwill must be evaluated
for impairment and is no longer amortized. Excess of purchase price over net assets acquired (“goodwill”) represents
the excess of acquisition purchase price over the fair value of the net assets acquired. To the extent possible, a portion of the
excess purchase price is assigned to identifiable intangible assets. There was no goodwill on the consolidated balance sheet of
the Company during Fiscal 2011 and the nine months ended September 30, 2012, as a net realizable value analysis was made for goodwill
in prior years and such asset was considered fully impaired during those prior years. Therefore, there was no amortization expense
of goodwill during the nine months ended September 30, 2012, or during the same period in 2011.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Impairment of Excess Purchase Price over Net
Assets Acquired – </i>The Company follows the provisions of ASC 350-10 “Goodwill and Other Intangible Assets”
for the impairment of goodwill. The Company determines impairment by comparing the fair value of the goodwill, using the undiscounted
cash flow method, with the carrying amount of that goodwill. Impairment is tested annually or whenever indicators of impairment
arise.  There was no goodwill on the consolidated balance sheet of the Company during Fiscal 2011 and the nine months
ended September 30, 2012, as a net realizable value analysis was made for goodwill in prior years and such asset was considered
fully impaired during those prior years.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Impairment of Long-Lived Assets – </i>The
Company evaluates the carrying value of long-lived assets for impairment, whenever events or changes in circumstances indicate
that the carrying value of an asset within the scope of ASC 360-10, “Accounting of the Impairment or Disposal of Long-Lived
Assets” may not be recoverable. The Company’s assessment for impairment of assets involves estimating the undiscounted
cash flows expected to result from use of the asset and its eventual disposition. An impairment loss recognized is measured as
the amount by which the carrying amount of the asset exceeds the fair value of the asset, and considers year-end the date for its
annual impairment testing.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Recently Adopted Accounting Pronouncement</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2010, the FASB amended its authoritative
guidance related to business combinations entered into by an entity that are material on an individual or aggregate basis. 
These amendments clarify existing guidance that if an entity presents comparative financial statements that include a material
business combination, the entity should disclose revenue and earnings of the combined entity as though the business combination
that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period.  The
amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring
pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. 
This guidance became effective prospectively for business combinations for which the acquisition date is on or after the first
day of the Company’s fiscal 2012.  This disclosure-only guidance did not have a material impact on the Company’s
results of operations, financial position or cash flows.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2011, the Financial Accounting
Standards Board (“FASB”) amended its authoritative guidance related to testing goodwill for impairment.  Under
the revised guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before performing
Step 1 of the goodwill impairment test.  If entities determine, on the basis of qualitative factors, that the fair value of
the reporting unit is more-likely-than-not less than the carrying amount, the two-step impairment test would be required. 
This guidance became effective in the beginning of the Company’s fiscal 2012, and did not have a material impact on the Company’s
consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2011, the FASB amended its authoritative
guidance related to fair value measurements to provide a consistent definition and measurement of fair value, as well as similar
disclosure requirements between U.S. GAAP and International Financial Reporting Standards (“IFRS”).  This guidance
clarifies the application of existing fair value measurement and expands the existing disclosure requirements.  This guidance
became effective in the beginning of the Company’s fiscal 2012.  This guidance did not have an impact on the Company’s
results of operations, financial position or cash flows.  As a result of the adoption of this guidance, the Company did
not change its valuation techniques, but may make additional disclosures as needed.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Recently Issued Accounting Pronouncement</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2012, the FASB amended its authoritative
guidance related to testing indefinite-lived intangible assets for impairment.  Under the revised guidance, entities testing
their indefinite-lived intangible assets for impairment have the option of performing a qualitative assessment before performing
further impairment testing.  If entities determine, on the basis of qualitative factors, that it is more-likely-than-not that
the asset is impaired, a quantitative test is required.  The guidance becomes effective in the beginning of the Company's
fiscal 2014, with early adoption permitted.  The Company is currently evaluating the timing of adopting this guidance which
is not expected to have an impact on the Company's consolidated financial statements.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2011, the FASB issued authoritative
guidance that creates new disclosure requirements about the nature of an entity’s rights of offset and related arrangements
associated with its financial instruments and derivative instruments.  This revised guidance helps reconcile differences in
the offsetting requirements under U.S. GAAP and International Financial Reporting Standards (“IFRS”).  These requirements
mandate that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement
of financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. 
This disclosure-only guidance becomes effective for the Company’s fiscal 2013 third quarter, with retrospective application
required.  The Company currently does not hold any financial or derivative instruments that are subject to an enforceable
master netting arrangement.  However, the Company currently utilizes the right of offset when netting certain negative cash
balances in its statement of financial position.  This guidance is not expected to have an impact on the Company’s results
of operations, financial position or cash flows, but may require certain additional disclosures if such balances are material or
if the Company enters into additional arrangements that fall under the provisions of this guidance.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2011, the FASB amended its authoritative
guidance related to the presentation of comprehensive income, requiring entities to present items of net income and other comprehensive
income either in one continuous statement or in two separate consecutive statements.  This guidance also required entities
to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other
comprehensive income on the face of the financial statements.  In December 2011, the FASB issued an update to this guidance
deferring the requirement to present reclassification adjustments on the face of the financial statements.  However, the Company
is still required to present reclassification adjustments on either the face of the financial statement where comprehensive income
is reported or disclose the reclassification adjustments in the notes to the financial statements.  This guidance, including
the deferral, becomes effective for the Company’s fiscal 2013 first quarter, with early adoption permitted and full retrospective
application required.  The Company is currently evaluating the impact of adopting this guidance but believes that it will
result only in changes in the presentation of its consolidated financial statements and will not have a material impact on the
Company’s results of operations, financial position or cash flows.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Other ASU’s that have been issued or proposed
by the FASB ASC that do not require adoption until a future date and are not expected to have a material impact on the financial
statements upon adoption.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company, previously an operating stage company,
became a development stage company on April 1, 2012, the date of inception as a development stage company for financial reporting.  A
development stage company, as defined by ASC-915-10 “Accounting and Reporting by Development Stage Enterprise”, is
an entity that devotes substantially all of its efforts to establish a business and either of the following conditions exists:
1) the principal operations have not commenced, or 2) the principal operations have commenced, but there has been no significant
revenue therefrom.  During the nine months ended September 30, 2012, Applied Visual Sciences’ revenue generating
activities have not produced sufficient funds for profitable operations and we have incurred operating losses since inception.
In view of these matters, realization of certain of the assets in the accompanying consolidated balance sheet is dependent upon
continued operations, which in turn is dependent upon our ability to meet our financial requirements, raise additional financing
on acceptable terms, and the success of future operations. Our independent registered public accounting firm’s report on
the consolidated financial statements included herein, and in our annual report on Form 10-K for the year ended December 31, 2011,
contains an explanatory paragraph wherein they expressed an opinion that there is substantial doubt about our ability to continue
as a going concern. Accordingly, careful consideration of such opinion should be given in determining whether to continue or become
our stockholder.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2012, we have outstanding trade
and accrued payables of $1,528,494, other accrued liabilities of $55,854, and accrued salaries and related expenses due to our
employees and management of $6,927,496. Also, the Company has an outstanding noninterest-bearing loan from its Chief Executive
Officer of $89,000, and $560,000 short-term notes from five investors.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The principal amount of our outstanding Series
A Debentures of $1,688,205 became due on July 1, 2011, and such amount was not paid.  Therefore, the Company may be considered
in default.  The debentures provide that any default in the payment of principal, which default is not cured within the
five trading days of the receipt of notice of such default or ten trading days after the Company becomes aware of such default,
will be deemed an event of default and may result in enforcement of the debenture holders’ rights and remedies under the
debentures and applicable law.  We are in discussions with the debenture holders to re-negotiate the terms of the debentures,
including the repayment or repurchase of the debentures and/or seek to extend their maturity date, although we have not reached
any agreement with the debenture holders with regard to any such repayment, repurchase or extension.  Our ability to
repay or repurchase the debentures is contingent upon our ability to raise additional financing, of which there can be no assurance.  Also,
as a condition to any such extension, debenture holders may seek to amend or modify certain other terms of the debentures.  If
an event of default occurs under the debentures, the debenture holders may elect to require us to make immediate repayment of the
mandatory default amount, which equals the sum of (i) the greater of either (a) 120% of the outstanding principal amount of the
debentures, or (b) the outstanding principal amount unpaid divided by the conversion price on the date the mandatory default amount
is either (1) demanded or otherwise due or (2) paid in full, whichever has the lower conversion price, multiplied by the variable
weighted average price of the common stock on the date the mandatory default amount is either demanded or otherwise due, whichever
has the higher variable weighted average price, and (ii) all other amounts, costs, expenses, and liquidated damages due under the
debentures.  In anticipation of such election by the debenture holders, due to the nonpayment of principal amount on
the due date of July 1, 2011, we measured the mandatory default at approximately $337,641 and subsequently on each balance sheet
date, which is reflected in the carrying value of the debentures and also recognized as interest expense.  We remeasured
the mandatory default amount as of September 30, 2012 at approximately $337,641. As of the date of this report, the debenture holders
have not made an election requiring immediate repayment of the mandatory amount, although there can be no assurance they will not
do so.<b> </b>The Company currently has insufficient funds to repay the outstanding amount in the event the debenture holders
make a demand for payment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended September 30, 2012,
the Company issued promissory notes to four accredited investors in the aggregate principal amount of $160,000 ($157,300, net of
accrued commissions and expenses in the amount of $2,700), of which $100,000 matures on December 31, 2012, $50,000 matures on January
24, 2013, and $10,000 matures on April 11, 2013.  The short-term notes accrue interest at a rate of 12% per annum.  The
Company also issued to the note holders an aggregate of 285,000 shares of common stock, and 10,800 shares of common stock to a
placement agent in exchange for cash compensation of $2,700. On March 15, 2012, we received $25,000 from an accredited investor,
and issued an aggregate of 100,000 shares of common stock and 300,000 Class Q Warrants. The Class Q Warrants are exercisable at
a price of $0.25 per share; contain a conditional call provision if the market price of each share exceeds $3.00, certain anti-dilution
and other customary provisions.  The warrants expire three years after the date of issuance.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2012, we had a cash balance
of $4,296. Management believes these funds to be insufficient to fund our operations for the next twelve months absent any cash
flow from operations or funds from the sale of our equity or debt securities. Currently, we are spending or incurring (and accruing)
expenses of approximately $205,000 per month on operations and the continued research and development of our 3i technologies and
products, including with regard to salaries and consulting fees. Management believes that we will require an aggregate of approximately
$2,460,000 to fund our operations for the next 12 months and to repay certain outstanding trade payables and accrued expenses.  This
assumes that holders of our outstanding debentures convert such debt into shares of our common stock or that we are able to extend
the term of the debentures, of which there can be no assurance.  In the event we are unable to extend the term of the
debentures beyond their new maturity date, the debenture holders do not convert such debt or require payment of principal, partially
convert such debt, or effect the buy-in provision related to the warrants and the debentures, we shall be required to raise additional
financing.  Also, this assumes that we are able to continue to defer the amounts due to our employees for accrued and
unpaid salaries and that we are able to continue to extend or defer payment of certain amounts due to our trade creditors, of which
there can be no assurance.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In view of our limited revenues to date, the Company
has relied and continues to rely substantially upon equity and debt financing to fund its ongoing operations, including the research
and development conducted in connection with its products and conversion of accounts payable for stock. The proceeds from our financings
have been and continue to be insufficient to fund our operations, pay our trade payables, repay our unconverted debentures, or
accrued and unpaid wages to our employees.  Therefore, the debentures holders, our employees, or trade creditors may
seek to enforce payment of amounts due to them, and our results of operations and financial condition could be materially and adversely
affected and we may be unable to continue our operations.  Also, in the event we continue to be unable to pay our employees,
we may suffer further employee attrition.  There can be no assurances that we will be successful in our efforts to raise
any additional financing, any bank borrowing, and research or grant funding.  Moreover, in view of the current market
price of and limited trading volume in our stock, we may have limited or no access to the capital markets.  Furthermore,
under the terms of our agreements with the debenture holders, we are subject to restrictions on our ability to engage in any transactions
in our securities in which the conversion, exercise or exchange rate or other price of such securities is below the current conversion
price or is based upon the trading price of our securities after initial issuance or otherwise subject to re-set.  In
view of the foregoing, we may be required to curtail operations significantly, or obtain funds through entering into arrangements
with collaborative partners or others that may require us to relinquish rights to certain of our technologies or products.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended September 30, 2012,
our total stockholders’ deficit increased by $1,231,511 to $11,057,318, and our consolidated net loss for the period was
$1,552,068. Notwithstanding the foregoing discussion of management’s expectations regarding future cash flows, Applied Visual
Sciences’ insolvency continues to increase the uncertainties related to its continued existence.  Both management
and the Board of Directors are carefully monitoring the Company’s cash flows and financial position in consideration of these
increasing uncertainties and the needs of both creditors and stockholders.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"><i>Issuance of Common Stock and Related Common
Stock Warrants</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 15, 2012, the Company sold to accredited
investor an aggregate of 100,000 shares of common stock and 300,000 Class Q Warrants for gross proceeds of $25,000. The Class Q
Warrants are exercisable at a price of $0.25 per share; contain a conditional call provision if the market price of each share
exceeds $3.00, certain anti-dilution and other customary provisions. The warrants expire three years after the date of issuance.
Common stock was increased by $100 for the par value of the shares and $24,900 to paid-in capital.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Other Common Stock Issued Including Exercises
of Warrants and Options</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended September, 30, 2012,
the Company issued promissory notes to four accredited investors in the aggregate principal amount of $160,000, of which $100,000
matures on December 31, 2012, $50,000 matures on January 24, 2013, and $10,000 matures on April 11, 2013. The notes accrue interest
at a rate of 12% per annum. The Company also issued to the note holders an aggregate of 285,000 shares of common stock.  The
relative fair value of the common stock of $11,715 was recorded as a discount to the notes payable and will be amortized over the
term of the notes.  Common stock was increased by $285 for the par value of the shares, $11,430 was applied to paid-in-capital,
and $10,405 was recorded to other expense for the amortization of the debt discount during 2012. The Company also issued 10,800
shares of common stock to a broker as a placement fee for the issuance of short-term notes.  Common stock was increased
by $11 for the par value of the shares, paid-in capital was increased by $2,689 for the fair value of the shares, and $2,700 was
charged to interest expense.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended September 30, 2012,
company employees converted accrued and unpaid wages for an aggregate of 3,919,425 shares of common stock.  The shares
were issued under the 2009 Stock Compensation Plan.  Common stock was increased by $3,919 for the par value of the shares,
paid-in capital was increased by $166,099, and accrued wages was reduced by the fair value of the stock of $170,018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 24, 2012 and June 5, 2012, the Company issued
to two consultants an aggregate of 246,749 shares of common stock as compensation in lieu of cash for services rendered.  The
shares were issued under the 2009 Stock Compensation Plan.  Common stock was increased by $247 for the par value of the
shares and paid-in capital was increased by approximately $10,044.  Stock compensation expense of $10,291 was also recorded.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February and March, the Company agreed to convert
outstanding accounts payable to a consultant for an aggregate of 400,000 shares of common stock under the 2009 Stock Compensation
Plan.  The conversion price was $0.25. Common stock was increased in the aggregate of $400 for the par value of the shares,
paid-in capital was increased in the aggregate of $99,600, and accounts payable was reduced by the outstanding amount of $100,000.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Other Common Stock Purchase Warrants Issued,
Expired, or Forfeited</i></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the nine months ended September 30, 2012,
an aggregate of 4,862,385 common stock purchase warrants and related placement agent warrants expired, of which 47,564 were placement
agent warrants, 3,012,523 Series D warrants, 864,798 Class E warrants, and 937,500 Class G warrants.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has issued warrants as compensation
to its note holders, placement agents and other consultants, as well as to incentivize investors in each of the Company’s
private placement financings.  The table below shows by category, the warrants issued and outstanding at September 30,
2012.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Common Stock Purchase Warrants</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Number of Warrants Outstanding and Exercisable</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold"> Date Warrants are Exercisable</td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Exercise Price</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Date Warrants Expire</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 31%; text-align: left">Note and debenture holders</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 9%; text-align: right">10,000</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 21%; text-align: left">December 2007</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">0.70</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 24%; text-align: left">December 2012</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">18,293</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.41</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">150,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">January 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">January 2015</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">78,750</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">September 2010</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.25</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">September 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">257,043</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Private placement investors</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,500,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2008</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.70</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2013</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">214,285</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">March 2008</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.75</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">March 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,142,850</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">April 2008</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.70</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">April 2013</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,682,553</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Sept to Dec 2008</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.41</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Sept to December 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">4,358,981</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Jan to April 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.41</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Jan to April 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">800,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">June to July 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">June to July 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,881,973</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">July to August 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">214,285</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">September 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.41</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2012</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,099,007</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Oct to Dec 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Oct to December 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">400,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">November 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">800,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">March to May 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,499,568</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">March to June 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">March to June 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">150,752</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">August 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,731,155</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">July to Sept 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">July to September 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">5,301,345</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Oct to Dec 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Oct to December 2015</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">400,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Nov to Dec 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.50</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">Nov to December 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">800,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2011</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">600,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2011</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2016</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">88,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">October 2011</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">October 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">300,000</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">March 2012</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.25</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">March 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">32,964,754</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Placement agents</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">272,827</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">June 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.45</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">June 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">108,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">July 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">July 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">205,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.28</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">72,000</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">February 2011</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.25</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">February 2016</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">657,827</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Consultants</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">60,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2008</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.54</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">February 2013</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">200,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">December 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">63,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">June to Aug 2009</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">June to August 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">14,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">August 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.25</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">August 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">14,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">September 2010</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0.28</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left">September 2015</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">128,000</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">December 2010</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right">0.50</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left">December 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">479,000</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Total Warrants Issued/Outstanding</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left"> </td>
<td style="border-bottom: black 2.25pt double; text-align: right">34,358,624</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of September 30, 2012, approximately 11,296,906
of the above warrants may be exercised pursuant to the cashless exercise provisions of such warrants and, if so exercised, the
shares may be subsequently resold under the provisions of Rule 144 under the Securities Act. Increased sales volume of the Company’s
common stock could cause the market price of the Company’s common stock to drop.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Subsequent events are reported by the Company to
disclose events that have occurred after the balance sheet date, but before the financial statements are issued. Such events may
be to provide additional information about conditions that existed at the date of the balance sheet, or conditions that did not
exist at the balance sheet date. The Company has evaluated subsequent events through the date of this report.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 22, 2012, the Company was notified that
the TBDx™ manuscript <i>"Proof-of-Concept" Evaluation of an Automated Sputum Smear Microscopy System for Tuberculosis
Diagnosis</i> has been accepted by the Public Library of Science for their publication PLoS ONE.  Public Library of Science
is a nonprofit publisher and advocacy organization whose mission is to lead a transformation in scientific and medical research
communication.  The manuscript reports the findings from the initial evaluation of TBDx™ in 2011, and is expected
to be available by January 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 19, 2012, the TBDx™ protocol,
drafted by the South African National Health Laboratories Service - Center for Tuberculosis, the Aurum Institute, and the Company,
was approved by the Ethics Committee of the London School of Tropical Medicine.  The evaluation of TBDx™ for a
1,600 patient case is scheduled to begin in Johannesburg, South Africa, on or about November 26, 2012, and is expected to be completed
during December 2012.  The performance of TBDx™ will be compared against standard microscopy, and with culture
as a reference standard. Evaluation results are not expected to be known until the end of January 2013.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During October 2012, the company has exchanged
TBDx™ performance information with the Head of Bacteriology with the Research Institute for Tuberculosis (RIT). This Institute
is a part of the Japan Anti-Tuberculosis Association. Dr. Satoshi Mitarai has reviewed the TBDx™ technology and performance
on panel slides and has expressed a keen interest in evaluating the technology in Japan. As a member of the World Health Organization
and the Technical Advisory Group, Dr. Mitarai has noted that sputum microscopy remains a vital technology in the fight against
TB, and that molecular tests such as GeneXpert have costs that are simply too high to deploy broadly.  Dr. Mitarai believes
that TBDx™ could prove to be a vital tool in detecting TB and would like to evaluate the technology in his labs.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company records its financial assets and liabilities
at fair value, in accordance with ASC-820 “Fair Value Measurement”, which is defined as the price that would be received
to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an
orderly transaction between market participants at the measurement date.  The accounting for fair value measurements
must be applied to nonfinancial assets and nonfinancial liabilities, which principally consists of assets and liabilities acquired
through business combinations, goodwill, indefinite-lived intangible assets and long-lived assets for the purpose of calculating
potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value.  The three levels of inputs that may be used to measure fair value are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 1: Inputs based on quoted markets prices
for identical assets or liabilities in active markets at the measurement date.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 2: Observable inputs other than quoted prices
included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or
similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Level 3: Inputs reflect management’s best
estimate of what market participants would use in pricing the asset or liability at the measurement date.  The inputs
are unobservable in the market and significant to the instrument’s valuation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table presents the Company’s
hierarchy for its financial assets and liabilities at fair value on a recurring basis as of September 30, 2012:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Level 1</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Level 2</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Level 3</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Total</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; font-weight: bold">Nonderivatives:</td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td colspan="2" style="text-align: left"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; text-align: left">Cash and cash equivalents</td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">4,296</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">4,296</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Current debt</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">89,000</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">89,000</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left; font-weight: bold">Derivatives:</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Convertible debentures</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,025,846</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2,025,846</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">Embedded conversion feature of debentures</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">405,169</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">405,169</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">Common stock issued with notes</td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">556,131</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">556,131</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left">The estimated fair values of the Company’s
financial instruments are as follows:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.25pt; text-align: left; font-weight: bold">Liabilities Measured at Fair Value</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Convertible Notes and Debentures, Net of Discount (1)</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Embedded Conversion Feature of Debentures (2)</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Common Stock Issued with Notes (3)</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center; font-weight: bold">Total</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; text-align: left">Beginning balance as of December 31, 2011</td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">2,025,846</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">270,113</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">371,413</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: left">$</td>
<td style="width: 9%; text-align: right">2,667,372</td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left">  Revaluation (gain)/loss in interest expense</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">135,056</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">135,056</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="text-align: left">  Issuances, net of discount</td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">-</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">148,285</td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">148,285</td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="padding-bottom: 1.25pt; text-align: left">  Amortization of discount</td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">36,433</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td>
<td style="padding-bottom: 1.25pt; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: left"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right">36,433</td>
<td nowrap="nowrap" style="padding-bottom: 1.25pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Ending balance as of September , 2012</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">2,025,846</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">405,169</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">556,131</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">2,987,146</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: left"> </td>
<td style="text-align: right"> </td>
<td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="padding-bottom: 2.5pt; text-align: left">Total (gain)/loss from revaluation of derivatives and event of default included in earnings for the period and reported as an adjustment to interest</td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">-</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">135,056</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">36,433</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td>
<td style="padding-bottom: 2.5pt; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; text-align: left">$</td>
<td style="border-bottom: black 2.25pt double; text-align: right">171,489</td>
<td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: left"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(1) The balance as of September 30, 2012, includes
$1,688,205 for the outstanding convertible debentures issued November 8, 2006 and April 12, 2007, and an additional amount of $337,641
for the event of default provision under the debentures October 15, 2010 amendment agreement.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(2) Represents the conversion feature of outstanding
convertible debentures issued November 8, 2006 and April 12, 2007.  The fair value of the conversion feature since May
20, 2009, the final milestone reset date of the debentures, was determined using market quotation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify">(3) The balance as of September 30, 2012, includes
$560,000 for outstanding short-term notes payable issued October 2011 through August 2012, less the remaining note discount of
$3,869 for issuance of common stock to note holders as inducement for the notes.  The note discount is being amortized
over the life of the notes.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Certain reclassifications of previously
reported amounts have been made to conform to the current period presentation. These classifications had no effect on the previously
reported net loss.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">ASC 280-10, “Disclosures about
Segments of an Enterprise and Related Information,” establishes standards for the manner in which public companies report
information about operating segments in annual and interim financial statements.  It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.  The method for determining what information
to report is based on the way management organizes the operating segments within the Company for making operating decisions and
assessing financial performance.  The Company’s chief operating decision-maker is considered to be the Company’s
chief executive officer (“CEO”).  The CEO reviews financial information presented on an entity level basis
accompanied by disaggregated information about revenues by product type and certain information about geographic regions for purposes
of making operating decisions and assessing financial performance.  The entity level financial information is identical
to the information presented in the accompanying consolidated statements of operations.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has two groups of products
and services - Security (PinPoint™) and Healthcare (Signature Mapping™ Medical Computer Aided Detection (“Medical
CAD”), and operates in three geographic markets. The Company has determined that as of the balance sheet date, it operates
as a single operating unit since the two products make up a slight revenue stream to the Company.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company operates in North America,
and Africa and Asia.  In general, revenues are attributed to the country in which the contract originates. There were
no revenues for the nine months ended September 30, 2012 and $6,589 for the same period in 2011.  Our product and service
categories would include software licenses, research funding, maintenance support, and hardware. The Company continues to focus
efforts in developing the Signature Mapping™ imaging technologies, while at the same time pursuing opportunities for our
security product/services.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are carried at
cost less accumulated depreciation. For financial statement purposes, depreciation is provided on the straight-line method over
the estimated useful life of the asset ranging from 3 to 10 years.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Intangible Assets – </i>Intangible assets consist
of acquired software and patents. Under ASC 350, “Goodwill and Other Intangible Assets,” such assets acquired including
software technology is considered to have a finite life.  Management has estimated the useful life of acquired software
technology to be 5 years and amortized such costs on a straight-line basis over this period. In addition, ASC 985-20, “Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,” requires the Company to consider whether or
not the software technology is impaired using a net realizable value analysis based on projected discounted cash flows. The Company
prepared this analysis as of September 30, 2012, and concluded that the intangible assets are not impaired.  Patent acquisition
costs pertaining to the Company’s 3i technology that covers its PinPoint™ and Signature Mapping™ intellectual
property (technology not acquired through acquisition), have been capitalized as of the date incurred, and are being amortized
over the 20-year legal life of the patents. The Company has been granted by the United States Patent & Trademark Office (“USPTO”)
six patents related to its 3i technology. The Company evaluates the periods of amortization continually to determine whether later
events or circumstances require revised estimates of useful lives. The Company’s intangible acquired software technology
was fully amortized as of December 31, 2009. Therefore, there was no amortization costs associated with acquired software during
the nine months ended September 30, 2012 and 2011, respectively. Amortization expense for patent acquisition costs was $24,683
and $17,328 during the nine months ended September 30, 2012 and 2011, respectively, and is reflected in selling, general and administrative
expenses in the accompanying condensed consolidated statements of operations.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Excess of Purchase Price over Net Assets Acquired (Goodwill)
–</i> The Company follows the provisions of ASC 805-10, “Business Combinations” and ASC 350-10, “Goodwill
and Other Intangible Assets.” These statements establish financial accounting and reporting standards for acquired goodwill.  Specifically,
the standards address how acquired intangible assets should be accounted for both at the time of acquisition and after they have
been recognized in the financial statements. Effective January 1, 2002, with the adoption of ASC 350-10, goodwill must be evaluated
for impairment and is no longer amortized. Excess of purchase price over net assets acquired (“goodwill”) represents
the excess of acquisition purchase price over the fair value of the net assets acquired. To the extent possible, a portion of the
excess purchase price is assigned to identifiable intangible assets. There was no goodwill on the consolidated balance sheet of
the Company during Fiscal 2011 and the nine months ended September 30, 2012, as a net realizable value analysis was made for goodwill
in prior years and such asset was considered fully impaired during those prior years. Therefore, there was no amortization expense
of goodwill during the nine months ended September 30, 2012, or during the same period in 2011.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Impairment of Excess Purchase Price over Net Assets Acquired
– </i>The Company follows the provisions of ASC 350-10 “Goodwill and Other Intangible Assets” for the impairment
of goodwill. The Company determines impairment by comparing the fair value of the goodwill, using the undiscounted cash flow method,
with the carrying amount of that goodwill. Impairment is tested annually or whenever indicators of impairment arise.  There
was no goodwill on the consolidated balance sheet of the Company during Fiscal 2011 and the nine months ended September 30, 2012,
as a net realizable value analysis was made for goodwill in prior years and such asset was considered fully impaired during those
prior years.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"><i>Impairment of Long-Lived Assets – </i>The Company
evaluates the carrying value of long-lived assets for impairment, whenever events or changes in circumstances indicate that the
carrying value of an asset within the scope of ASC 360-10, “Accounting of the Impairment or Disposal of Long-Lived Assets”
may not be recoverable. The Company’s assessment for impairment of assets involves estimating the undiscounted cash flows
expected to result from use of the asset and its eventual disposition. An impairment loss recognized is measured as the amount
by which the carrying amount of the asset exceeds the fair value of the asset, and considers year-end the date for its annual impairment
testing.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2010, the FASB amended its authoritative
guidance related to business combinations entered into by an entity that are material on an individual or aggregate basis. 
These amendments clarify existing guidance that if an entity presents comparative financial statements that include a material
business combination, the entity should disclose revenue and earnings of the combined entity as though the business combination
that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period.  The
amendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring
pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. 
This guidance became effective prospectively for business combinations for which the acquisition date is on or after the first
day of the Company’s fiscal 2012.  This disclosure-only guidance did not have a material impact on the Company’s
results of operations, financial position or cash flows.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In September 2011, the Financial Accounting Standards
Board (“FASB”) amended its authoritative guidance related to testing goodwill for impairment.  Under the revised
guidance, entities testing goodwill for impairment have the option of performing a qualitative assessment before performing Step
1 of the goodwill impairment test.  If entities determine, on the basis of qualitative factors, that the fair value of the
reporting unit is more-likely-than-not less than the carrying amount, the two-step impairment test would be required.  This
guidance became effective in the beginning of the Company’s fiscal 2012, and did not have a material impact on the Company’s
consolidated financial statements.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2011, the FASB amended its authoritative guidance
related to fair value measurements to provide a consistent definition and measurement of fair value, as well as similar disclosure
requirements between U.S. GAAP and International Financial Reporting Standards (“IFRS”).  This guidance clarifies
the application of existing fair value measurement and expands the existing disclosure requirements.  This guidance became
effective in the beginning of the Company’s fiscal 2012.  This guidance did not have an impact on the Company’s
results of operations, financial position or cash flows.  As a result of the adoption of this guidance, the Company did
not change its valuation techniques, but may make additional disclosures as needed.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In July 2012, the FASB amended its authoritative guidance
related to testing indefinite-lived intangible assets for impairment.  Under the revised guidance, entities testing their
indefinite-lived intangible assets for impairment have the option of performing a qualitative assessment before performing further
impairment testing.  If entities determine, on the basis of qualitative factors, that it is more-likely-than-not that the
asset is impaired, a quantitative test is required.  The guidance becomes effective in the beginning of the Company's fiscal
2014, with early adoption permitted.  The Company is currently evaluating the timing of adopting this guidance which is not
expected to have an impact on the Company's consolidated financial statements.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In December 2011, the FASB issued authoritative guidance
that creates new disclosure requirements about the nature of an entity’s rights of offset and related arrangements associated
with its financial instruments and derivative instruments.  This revised guidance helps reconcile differences in the offsetting
requirements under U.S. GAAP and International Financial Reporting Standards (“IFRS”).  These requirements mandate
that entities disclose both gross and net information about instruments and transactions eligible for offset in the statement of
financial position as well as instruments and transactions subject to an agreement similar to a master netting arrangement. 
This disclosure-only guidance becomes effective for the Company’s fiscal 2013 third quarter, with retrospective application
required.  The Company currently does not hold any financial or derivative instruments that are subject to an enforceable
master netting arrangement.  However, the Company currently utilizes the right of offset when netting certain negative cash
balances in its statement of financial position.  This guidance is not expected to have an impact on the Company’s results
of operations, financial position or cash flows, but may require certain additional disclosures if such balances are material or
if the Company enters into additional arrangements that fall under the provisions of this guidance.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2011, the FASB amended its authoritative guidance
related to the presentation of comprehensive income, requiring entities to present items of net income and other comprehensive
income either in one continuous statement or in two separate consecutive statements.  This guidance also required entities
to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other
comprehensive income on the face of the financial statements.  In December 2011, the FASB issued an update to this guidance
deferring the requirement to present reclassification adjustments on the face of the financial statements.  However, the Company
is still required to present reclassification adjustments on either the face of the financial statement where comprehensive income
is reported or disclose the reclassification adjustments in the notes to the financial statements.  This guidance, including
the deferral, becomes effective for the Company’s fiscal 2013 first quarter, with early adoption permitted and full retrospective
application required.  The Company is currently evaluating the impact of adopting this guidance but believes that it will
result only in changes in the presentation of its consolidated financial statements and will not have a material impact on the
Company’s results of operations, financial position or cash flows.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Other ASU’s that have been issued or proposed by the
FASB ASC that do not require adoption until a future date and are not expected to have a material impact on the financial statements
upon adoption.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has two active equity compensation
plans which include the Amended and Restated 2003 Stock Incentive Plan and the 2009 Stock Compensation Plan (collectively, the
“Plans”). A total of 50,000,000 shares have been reserved for issuance under these Plans in the form of stock-based
awards to employees, non-employee directors and outside consultants of the Company, of which 25,108,586 shares remain available
for issuance thereunder as of September 30, 2012. The grant of awards under the Plans require approval by the Compensation Committee
of the Board of Directors of the Company (or the Board of Directors, in the absence of such a committee) (the “Committee”),
and the Committee is authorized under the Plans to take all actions that it determines to be necessary or appropriate in connection
with the administration of the Plans.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company adopted the provisions of
ASC 718-10, “Share-Based Payment” to account for its share-based payments. ASC 718-10 requires all share-based payments
to employees, or to non-employee directors as compensation for service on the Board of Directors, to be recognized as compensation
expense in the consolidated financial statements based on the estimated fair values of such options as calculated using the Black-Scholes
model, and the related expense is recognized on a straight-line basis over the service period to vesting for each grant, net of
estimated forfeitures. The Company’s estimated forfeiture rates are based on its historical experience within separate groups
of employees. In accordance with ASC 718-10, the Company recognized total stock-based compensation expense for employees and non-employee
members of the Board of Directors for the nine months ended September 30, 2012 of $0, and $164,241 for the same period during 2011.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company accounts for stock options
granted to non-employees in accordance with ASC 718-10 and ASC 505-50, “Accounting For Equity Instruments That Are Issued
To Other Than Employees For Acquiring, Or In Conjunction With Selling, Goods Or Services.” ASC 505-50 establishes the measurement
principles for transactions in which equity instruments are issued in exchange for the receipt of goods or services. The Company
has relied upon the guidance provided under ASC 505-50 to determine the measurement date and the fair value re-measurement principles
to be applied, and recognizes as an expense the estimated fair value of such options as calculated using the Black-Scholes model.
The fair value is remeasured during the service period at each balance sheet date, and is amortized over the remaining service
period to vesting for each option or the remaining term of the recipient’s contractual arrangement, whichever is shorter.
The Company recognizes compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service
period of each vesting tranche of each award. The Company considers voluntary termination behavior as well as trends of actual
option forfeitures when estimating the forfeiture rate.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The following information represents
software license activities, except for the revenue in 2011 of $6,589, which is for hardware activities.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">Cumulative</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">From</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="line-height: 115%; font-weight: bold; text-align: center">Three Months Ended</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="line-height: 115%; font-weight: bold; text-align: center">Nine Months Ended</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">April, 1, 2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold">GEOGRAPHIC DATA</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">(inception date)</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2011</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2011</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">To Sept 30, 2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold">Net revenues</td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%">The Americas</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Africa and Asia</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">6,589</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Total net revenue</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">6,589</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%; font-weight: bold">Cost of sales</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">The Americas</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Africa and Asia</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Total cost of sales</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%; font-weight: bold">Operating (loss)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">The Americas</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">(404,552</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">(515,202</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">(1,330,447</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">(1,967,472</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">(809,295</td>
<td nowrap="nowrap" style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Africa and Asia</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">6,589</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Total operating loss</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(404,552</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(515,202</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(1,330,447</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(1,960,883</td>
<td nowrap="nowrap" style="line-height: 115%">)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">(809,295</td>
<td nowrap="nowrap" style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td colspan="4" style="line-height: 115%; font-weight: bold">Depreciation and amortization</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">The Americas</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">23,716</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">24,354</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">73,079</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">72,762</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">48,398</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Africa and Asia</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Total depreciation and amortz</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">23,716</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">24,354</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">73,079</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">72,762</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">48,398</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%; font-weight: bold">Total assets</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">The Americas</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">530,672</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">614,762</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Africa and Asia</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Total assets</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">530,672</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">614,762</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%; font-weight: bold">Long-lived assets, net</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">The Americas</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">513,920</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">591,257</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Africa and Asia</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Total long-lived assets, net</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">513,920</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">591,257</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">The fair value of each option granted
was estimated using the Black-Scholes model with the following weighted-average assumptions:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold; text-align: center">Black-Scholes Model Assumptions</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">2011</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; line-height: 115%">Risk-free interest rate (1)</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">0.99</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">2.27</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Expected volatility (2)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">163.6</td>
<td nowrap="nowrap" style="line-height: 115%">%</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">136.7</td>
<td nowrap="nowrap" style="line-height: 115%">%</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Dividend yield (3)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.0</td>
<td nowrap="nowrap" style="line-height: 115%">%</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.0</td>
<td nowrap="nowrap" style="line-height: 115%">%</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Expected life (4)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="line-height: 115%; text-align: right">5.4 years</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="line-height: 115%; text-align: right">6.5 years</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="width: 3%; line-height: 115%; text-align: center">(1)</td>
<td style="line-height: 115%">The risk-free interest rate is based on US Treasury debt securities with maturities similar to the expected term of the option.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">(2)</td>
<td style="line-height: 115%">Expected volatility is based on historical volatility of the Company’s stock factoring in daily share price observations.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">(3)</td>
<td style="line-height: 115%; text-align: justify">No cash dividends have been declared on the Company’s common stock since the Company’s inception, and the Company currently does not anticipate paying cash dividends over the expected term of the option.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%; text-align: center">(4)</td>
<td style="line-height: 115%; text-align: justify">The expected term of stock option awards granted is derived from historical exercise experience under the Company’s stock option plan and represents the period of time that stock option awards granted are expected to be outstanding.  The expected term assumption incorporates the contractual term of an option grant, which is usually ten years, as well as the vesting period of an award, which is generally pro rata vesting over two years.</td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Summary of stock option activity under
the 2003 Plan for the nine months ended September 30, 2012 issued to employees, non-employee members of the Board of Directors
and consultants is as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold">Fiscal Year and Activity</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted- Average Exercise Price</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of Options</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; line-height: 115%">Outstanding December 31, 2011</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">0.32</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">14,788,489</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Fiscal 2012 activity</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">  Granted</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">  Exercised</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">  Cancelled</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.30</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">(3,683,042</td>
<td nowrap="nowrap" style="line-height: 115%">)</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">     Outstanding September 30, 2012</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.33</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">11,105,447</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Reserved for future issuance at September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">16,590,253</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The following table summarizes additional information about
the 2003 Plan stock options outstanding at September 30, 2012:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td colspan="12" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Issued and Outstanding</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="6" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Exercisable</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold; text-align: center">Type of Option and Range of Exercise Prices</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of Options</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-Average Remaining Contractual Life (Yrs)</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-Average Exercise Price</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of Options</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-Average Price</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 40%; line-height: 115%">Nonqualified Stock Options   $0.30 (1) (5)</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">850,000</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">1.3</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">0.30</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">850,000</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">0.30</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Nonqualified Stock Options   $0.30 (2) (5)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">44,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2.3</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.30</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">44,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.30</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Incentive Stock Options        $0.15 - $4.05 (3)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">649,300</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">5.2</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.98</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">649,300</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.98</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Incentive Stock Options        $0.15 - $0.30 (4) (5)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">9,562,147</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">5.1</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.29</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">9,562,147</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.29</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">   Total</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">11,105,447</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">4.9</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.32</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">11,105,447</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">0.32</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top">
<td style="line-height: 115%">(1) Initially issued to employees below fair value during the period of July 2003 through February 2004.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%">(2) Initially issued to directors below fair value during the period of February 2004 through September 2005.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%">(3) Issued to consultants at fair value.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%">(4) Issued to directors and employees at fair value, or above fair value for those individuals with greater than 10% beneficial ownership.</td></tr>
<tr style="vertical-align: top">
<td style="line-height: 115%">(5) The exercise price reflects the repricing of stock options as approved by the Compensation Committee on April 24, 2010.</td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The following is a summary of the number and type of awards
granted to, or exercised or forfeited by, employees, non-employee members of the Board of Directors and consultants pursuant to
the Company’s 2009 Stock Compensation Plan for the nine months ended September 30, 2012:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold">Fiscal Year and Activity</td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Weighted-Average Grant or Exercise Price Per Share</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of Shares</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Reserved for future issuance as of December 31, 2011</td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">13,334,507</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Fiscal 2012 activity:</td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="width: 76%; line-height: 115%">  Common stock awards</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">0.06</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">4,816,174</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">  Restricted stock awards</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">  Restricted stock rights</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">  Non-qualified stock options</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">    Issued during 2012</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.06</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">4,816,174</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Reserved for future issuance as of September 30, 2012</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">8,518,333</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Stock options or restricted stock rights outstanding</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">Property and equipment are carried at
cost less accumulated depreciation. For financial statement purposes, depreciation is provided on the straight-line method over
the estimated useful life of the asset ranging from 3 to 10 years.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="line-height: 115%; font-weight: bold; text-align: center">(Unaudited)</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold">Asset (Useful Life)</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">September 30, 2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">December 31, 2011</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 76%; line-height: 115%">Software (3 years)</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">84,224</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">84,224</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Computer equipment (3 to 5 years)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">329,861</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">329,861</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Furniture and fixtures (7 to 10 years)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">488,239</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">488,239</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Equipment (7 to 10 years)</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">80,727</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">80,727</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">983,051</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">983,051</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Less accumulated depreciation</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">808,522</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">760,127</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">   Equipment, net</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">174,529</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">222,924</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The Company anticipates incurring additional patent acquisition
costs during 2012.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="14" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Nine Months Ended September 30, 2012</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td rowspan="2" style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" rowspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Beginning Period Cost</td>
<td nowrap="nowrap" rowspan="2" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td rowspan="2" style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" rowspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Net Book Value</td>
<td nowrap="nowrap" rowspan="2" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Additions</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Reductions</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%">Intangibles with finite lives:</td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%; text-indent: 9pt">Patent acquisition costs</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">363,599</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">475</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">24,683</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%">$</td>
<td style="line-height: 115%; text-align: right">339,391</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="font: 8pt/115% Times New Roman, Times, Serif; margin: 0 0 10pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The table below shows by category, the warrants issued and
outstanding at September 30, 2012.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Common Stock Purchase Warrants</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Number of Warrants Outstanding and Exercisable</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center"> Date Warrants are Exercisable</td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Exercise Price</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Date Warrants Expire</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 31%; line-height: 115%">Note and debenture holders</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 9%; line-height: 115%; text-align: right">10,000</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 21%; line-height: 115%">December 2007</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">0.70</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 24%; line-height: 115%">December 2012</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">18,293</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.41</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">150,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">January 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">January 2015</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">78,750</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">September 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">September 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">257,043</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Private placement investors</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">1,500,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2008</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.70</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2013</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">214,285</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March 2008</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.75</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2,142,850</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">April 2008</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.70</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">April 2013</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2,682,553</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Sept to Dec 2008</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.41</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Sept to December 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">4,358,981</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Jan to April 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.41</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Jan to April 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">800,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">June to July 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">June to July 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">3,881,973</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">July to August 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">214,285</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">September 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.41</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2012</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2,099,007</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Oct to Dec 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Oct to December 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">400,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">November 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">800,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March to May 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2,499,568</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March to June 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March to June 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">150,752</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">August 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2016</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">3,731,155</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">July to Sept 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">July to September 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">5,301,345</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Oct to Dec 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Oct to December 2015</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">400,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Nov to Dec 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.50</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">Nov to December 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">800,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2011</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">600,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2011</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2016</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">88,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">October 2011</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">October 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">300,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March 2012</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">March 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">32,964,754</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Placement agents</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">272,827</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">June 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.45</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">June 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">108,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">July 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">July 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">205,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.28</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">72,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2011</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2016</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">657,827</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Consultants</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">60,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2008</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.54</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">February 2013</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">200,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2014</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">63,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">June to Aug 2009</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">June to August 2014</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">14,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">August 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.25</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">August 2015</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">14,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">September 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.28</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">September 2015</td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">128,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2010</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">0.50</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%">December 2013</td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">479,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td></tr>
<tr style="background-color: #CCEEFF">
<td style="vertical-align: bottom; line-height: 115%">Total Warrants Issued/Outstanding</td>
<td style="vertical-align: bottom; line-height: 115%; text-align: right"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%"> </td>
<td style="vertical-align: bottom; border-bottom: black 2.25pt double; line-height: 115%; text-align: right">34,358,624</td>
<td nowrap="nowrap" style="vertical-align: bottom; line-height: 115%"> </td>
<td style="vertical-align: bottom; line-height: 115%"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="font: 8pt/115% Times New Roman, Times, Serif; margin: 0 0 10pt"></p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The following table presents the Company’s hierarchy
for its financial assets and liabilities at fair value on a recurring basis as of September 30, 2012:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Level 1</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Level 2</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Level 3</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td>
<td style="line-height: 115%; font-weight: bold"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Total</td>
<td nowrap="nowrap" style="line-height: 115%; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold">Nonderivatives:</td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td colspan="2" style="line-height: 115%"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; line-height: 115%">Cash and cash equivalents</td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">4,296</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">4,296</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Current debt</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">89,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">89,000</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%; font-weight: bold">Derivatives:</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Convertible debentures</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2,025,846</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">2,025,846</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">Embedded conversion feature of debentures</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">405,169</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">405,169</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Common stock issued with notes</td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">556,131</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">556,131</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">The estimated fair values of the Company’s financial
instruments are as follows:</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<table cellspacing="0" cellpadding="0" style="font: 8pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td style="line-height: 115%; font-weight: bold">Liabilities Measured at Fair Value</td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Convertible Notes and Debentures, Net of Discount (1)</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Embedded Conversion Feature of Debentures (2)</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Common Stock Issued with Notes (3)</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; line-height: 115%; font-weight: bold; text-align: center">Total</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 52%; line-height: 115%">Beginning balance as of December 31, 2011</td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">2,025,846</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">270,113</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">371,413</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td>
<td style="width: 1%; line-height: 115%; text-align: right"> </td>
<td style="width: 1%; line-height: 115%">$</td>
<td style="width: 9%; line-height: 115%; text-align: right">2,667,372</td>
<td nowrap="nowrap" style="width: 1%; line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">  Revaluation (gain)/loss in interest expense</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">135,056</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">135,056</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">  Issuances, net of discount</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">148,285</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right">148,285</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%">  Amortization of discount</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">36,433</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%"> </td>
<td style="border-bottom: black 1.5pt solid; line-height: 115%; text-align: right">36,433</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Ending balance as of September , 2012</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">2,025,846</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">405,169</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">556,131</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">2,987,146</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: white">
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="line-height: 115%">Total (gain)/loss from revaluation of derivatives and event of default included in earnings for the period and reported as an adjustment to interest</td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">-</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">135,056</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">36,433</td>
<td nowrap="nowrap" style="line-height: 115%"> </td>
<td style="line-height: 115%; text-align: right"> </td>
<td style="border-bottom: black 2.25pt double; line-height: 115%">$</td>
<td style="border-bottom: black 2.25pt double; line-height: 115%; text-align: right">171,489</td>
<td nowrap="nowrap" style="line-height: 115%"> </td></tr>
</table>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">(1) The balance as of September 30, 2012,
includes $1,688,205 for the outstanding convertible debentures issued November 8, 2006 and April 12, 2007, and an additional amount
of $337,641 for the event of default provision under the debentures October 15, 2010 amendment agreement.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify">(2) Represents the conversion feature
of outstanding convertible debentures issued November 8, 2006 and April 12, 2007.  The fair value of the conversion feature
since May 20, 2009, the final milestone reset date of the debentures, was determined using market quotation.</p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 8pt/normal Times New Roman, Times, Serif; margin: 0">(3) The balance as of September 30, 2012, includes $560,000
for outstanding short-term notes payable issued October 2011 through August 2012, less the remaining note discount of $3,869 for
issuance of common stock to note holders as inducement for the notes.  The note discount is being amortized over the
life of the notes.</p>
556131
556131
405169
405169
2025846
2025846
89000
89000
4296
4296
36433
36433
148285
148285
135056
135056
2667372
2987146
2025846
2025846
270113
405169
371413
556131
1688205
November 8, 2006 and April 12, 2007
337641
560000
October 2011 through August 2012
3869
0.32
0.33
23716
24354
73079
72762
23716
24354
73079
72762
48398
48398
530672
614762
530672
614762
513920
591257
513920
591257
0.0099
0.0227
1.636
1.367
0
0
P5Y4M24D
P6Y6M
14788489
11105447
850000
44000
649300
9562147
P4Y10M24D
P1Y3M18D
P2Y3M18D
P5Y2M12D
P5Y1M6D
0.32
0.3
0.3
0.98
0.29
11105447
850000
44000
649300
9562147
0.32
0.3
0.3
0.98
0.29
13334507
8518333
4816174
4816174
0.6
0.6
363599
475
24683
6589
50000000
25108586
0
164241
16590253
48396
55434
24683
17328
1528494
55854
6927496
89000
560000
337641
4296
1231511
1552068
171489
135056
36433
0
0
3683042
16590253
0
0
0.30
11125
229035
34358624
10000
18293
150000
78750
257043
1500000
214285
2142850
2682553
800000
3881973
2099007
400000
800000
2499568
150752
3731155
5301345
400000
800000
600000
88000
300000
32964754
4358981
214285
272827
108000
205000
72000
657827
60000
200000
63000
14000
14000
128000
479000
0.7
0.41
0.25
0.25
0.7
0.75
0.7
0.41
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.25
0.5
0.25
0.25
0.25
0.25
0.41
0.41
0.45
0.25
0.28
0.25
0.54
0.25
0.25
0.25
0.28
0.5
DECEMBER 2007
FEBRUARY 2009
JANUARY 2010
SEPTEMBER 2010
FEBRUARY 2008
MARCH 2008
APRIL 2008
SEPT TO DEC 2008
JUNE TO JULY 2009
JULY TO AUGUST 2009
OCT TO DEC 2009
NOVEMBER 2009
MARCH TO MAY 2010
MARCH TO JUNE 2010
AUGUST 2010
JULY TO SEPT 2010
OCT TO DEC 2010
NOV TO DEC 2010
FEBRUARY 2011
FEBRUARY 2011
OCTOBER 2011
MARCH 2012
JAN TO APRIL 2009
SEPTEMBER 2009
JUNE 2009
JULY 2009
DECEMBER 2009
FEBRUARY 2011
FEBRUARY 2008
DECEMBER 2009
JUNE TO AUG 2009
AUGUST 2010
SEPTEMBER 2010
DECEMBER 2010
December 2012
February 2014
January 2015
September 2015
February 2013
March 2013
April 2013
Sept to December 2013
June to July 2014
December 2016
Oct to December 2014
December 2016
December 2016
March to June 2015
December 2016
July to September 2015
Oct to December 2015
Nov to December 2013
February 2014
February 2016
October 2014
March 2015
Jan to April 2014
December 2012
June 2014
July 2014
December 2014
February 2016
February 2013
December 2014
June to August 2014
August 2015
September 2015
December 2013