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<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Nature of Operations and Continuance of Operations</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">BioDrain Medical, Inc. (the "Company") was incorporated under the laws of the State of Minnesota in 2002. The Company has developed an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care. The Company also makes ongoing sales of our proprietary cleaning fluid to users of our systems. In April 2009, the Company received 510(k) clearance from the FDA to authorize the Company to market and sell its STREAMWAY™ FMS products.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a stockholders’ deficit. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p>
<p style="text-align: justify; text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Since inception to March 31, 2013, the Company has raised approximately $5,619,000 in equity and $2,412,000 in debt financing, including $1,000,000 in equity and $300,000 in convertible debt in 2013. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Recent Accounting Developments</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of our operations.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0px; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <b>Valuation of Intangible Assets</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">We review identifiable intangible assets for impairment in accordance with ASC 350- <i>Intangibles</i> – <i>Goodwill and Other,</i> whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management's best estimate of the related risks and return at the time the impairment assessment is made.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Our accounting estimates and assumptions bear various risks of change, including the length of the current economic downturn facing the United States, the expansion of the slowdown in consumer spending in the U.S. medical markets despite the early expressed opinions of financial experts that the medical market would not be as affected as other markets and failure to gain acceptance in the medical market.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Accounting Policies and Estimates</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Presentation of Taxes Collected from Customers</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from customers and remits the entire amounts to the governmental authorities. The Company’s accounting policy is to exclude the taxes collected and remitted from revenues and expenses.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Shipping and Handling</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Shipping and handling charges billed to
customers are recorded as revenue. Shipping and handling costs are recorded within cost of goods sold on the statement of operations.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Advertising</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Advertising costs are expensed as incurred. There were no advertising expenses in the three months ended March 31, 2013 and March 31, 2012.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Research and Development</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Research and development costs are charged to operations as incurred. Research and development expenses were $58,277 in the three months ended March 31, 2013 and $0 for March 31, 2012.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Revenue Recognition</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 Revenue Recognition and ASC 605-Revenue Recognition.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. The Company’s standard terms specify that shipment is FOB BioDrain and the Company will, therefore, recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of the STREAMWAY FMS units as well as shipments of cleaning solution kits. When these conditions are satisfied, the Company recognizes gross product revenue, which is the price it charges generally to its customers for a particular product. Under the Company’s standard terms and conditions, there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to the Company’s standard one-year warranty whereby the Company replaces or repairs, at its option, and it would be rare that the STREAMWAY FMS unit or significant quantities of cleaning solution kits may be returned. Additionally, since the Company buys both the STREAMWAY FMS units and cleaning solution kits from “turnkey” suppliers, the Company would have the right to replacements from the suppliers if this situation should occur.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Receivables</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company provides for probable uncollectible amounts through charges to earnings and credits to the valuation based on management’s assessment of the current status of individual accounts, changes to the valuation allowance have not been material to the financial statements.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Inventories</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">March 31,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Finished goods</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">103,677</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">91,008</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Raw materials</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">35,340</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">39,543</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Work-In-Process</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,430</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom:
1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">14,658</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">141,447</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">145,209</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Property and Equipment</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Estimated useful asset life by classification is as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;">Years</td>
</tr>
<tr>
<td style="text-align: left; width: 87%;">Computers and office equipment</td>
<td style="width: 1%;"> </td>
<td style="text-align: center; width: 12%;">3</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Furniture and fixtures</td>
<td> </td>
<td style="text-align: center;">5</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Intangible Assets</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Intangible assets consist of patent costs. These assets are not subject to amortization until the property patented is in production. The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified. No impairment losses have been identified by management.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Income Taxes</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company accounts for income taxes in accordance with ASC 740- Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Tax years subsequent to 2009 remain open to examination by federal and state tax authorities.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Patents and Intellectual Property</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In June 2008, the Company completed and executed an agreement to secure exclusive ownership of the patent from an inventor, Marshall Ryan. Mr. Ryan received a combination of cash and warrants, and he will receive a 4% royalty on STREAMWAY FMS (the Product) sales for the life of the patent. At the signing of the agreement, Mr. Ryan received $75,000 in exchange for the exclusive assignment of the patent. In addition, on June 30, 2009, Mr. Ryan, through his Mid-State Stainless, Inc. entity, was entitled to receive $100,000 as payment (currently recorded as an approximately $22,000 account payable with the Company) for past research and development activities. Should Mr. Ryan be utilized in the future for additional product development activities, he will be compensated at a rate of $95.00 per hour.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Mr. Ryan also received a warrant, with immediate vesting, to purchase 150,000 shares of the Company's common stock at a price of $.35 per share. The warrant has a five-year term ending on June 30, 2013.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Subsequent Events</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p
style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On May 7, 2013, the holders of convertible notes converted the aggregate principal balance of $156,243 and the aggregate interest balance of $11,169 into an aggregate 1,116,082 shares of common stock at the conversion price of $.15 per share. One of the noteholders was Dr. Samuel Herschkowitz, a related party. Dr. Herschkowitz received 357,163 shares in connection with his conversion of the principal balance and interest of $53,574.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has evaluated all other subsequent events through the date of this filing. The Company does not believe there are any other subsequent events that required disclosure.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Interim Financial Statements</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s financial position, the results of its operations and its cash flows for the interim periods. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Form 10-K filed with the SEC on March 22, 2013. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 2 – DEVELOPMENT STAGE OPERATIONS</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company was formed April 23, 2002. Since inception to May 7, 2013, 122,152,832 shares of common stock have been issued between par value and $1.67. Operations since incorporation have been devoted to raising capital, obtaining financing, development of the Company’s product, and administrative services.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 3 – STOCKHOLDERS’ DEFICIT, STOCK OPTIONS AND WARRANTS</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In connection with the financing completed in October 2008, the Company has affected two reverse stock splits, one on June 6, 2008 and another on October 20, 2008. In accordance with SAB Topic 4C, all stock options and warrants and their related exercise prices are stated at their post-reverse stock split values.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has an equity incentive plan, which allows issuance of incentive and non-qualified stock options to employees, directors and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the Board of Directors. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to three years. Options under this plan have terms ranging from three to ten years.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><i>Accounting for share-based payment</i></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has adopted ASC 718- Compensation-Stock Compensation ("ASC 718"). Under ASC 718 stock-based employee compensation cost is recognized using the fair value based method for all new awards granted after January 1, 2006 and unvested awards outstanding at January 1, 2006. Compensation costs for unvested stock options and non-vested awards that were outstanding at January 1, 2006, are being recognized over the requisite service period based on the grant-date fair value of those options and awards, using a straight-line method. We elected the modified-prospective method under which prior periods are not retroactively restated.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model or other acceptable means. The Company uses the Black-Scholes option valuation model which requires the input of significant assumptions including an estimate of the average period of time employees will retain vested stock options before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and, consequently, the related expense recognized. The assumptions the Company uses in calculating the fair value of stock-based payment awards represent the Company's best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based compensation expense could be materially different in the future.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Since the Company's common stock has no significant public trading history, and the Company has experienced no significant option exercises in its history, the Company is required to take an alternative approach to estimating future volatility and estimated life and the future results could vary significantly from the Company's estimates. The Company compiled historical volatilities over a period of 2 to 7 years of 15 small-cap medical companies traded on major exchanges and 10 mid-range medical companies on the OTC Bulletin Board and combined the results using a weighted average approach. In the case of ordinary options to employees the Company determined the expected life to be the midpoint between the vesting term and the legal term. In the case of options or warrants granted to non-employees, the Company estimated the life to be the legal term unless there was a compelling reason to make it shorter.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">When an option or warrant is granted in place of cash compensation for services, the Company deems the value of the service rendered to be the value of the option or warrant. In most cases, however, an option or warrant is granted in addition to other forms of compensation and its separate value is difficult to determine without utilizing an option pricing model. For that reason the Company also uses the Black-Scholes option-pricing model to value options and warrants granted to non-employees, which requires the input of significant assumptions including an estimate of the average period the investors or consultants will retain vested stock options and warrants before exercising them, the estimated volatility of the Company's common stock price over the expected term, the number of options and warrants that will ultimately be forfeited before completing vesting requirements, the expected dividend rate and the risk-free interest rate. Changes in the assumptions can materially affect the estimate of fair value of stock-based consulting and/or compensation and, consequently, the related expense recognized.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Since the Company has limited trading history in its stock and no first-hand experience with how its investors and consultants have acted in similar circumstances, the assumptions the Company uses in calculating the fair value of stock-based payment awards represent its best estimates, which involve inherent uncertainties and the application of management's judgment. As a result, if factors change and the Company uses different assumptions, the Company's equity-based consulting and interest expense could be materially different in the future.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><i>Valuation and accounting for options and warrants</i></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times
new roman, times, serif;">The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility and estimated term. For grants issued during 2008, the Company used a 2.0 to 4.5% risk-free interest rate, 0% dividend rate, 53-66% volatility and estimated term of 2.5 to 7.5 years. Values computed using these assumptions ranged from $.102 per share to $.336 per share. Warrants or options awarded for services rendered are expensed over the period of service (normally the vesting period) as compensation expense for employees or an appropriate consulting expense category for awards to consultants and directors. Warrants granted in connection with a common equity financing are included in stockholders’ equity, provided that there is no re-pricing provision that requires them to be treated as a liability (See Note 8) and warrants granted in connection with a debt financing are treated as a debt discount and amortized using the interest method as interest expense over the term of the debt.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Warrants issued in connection with the $100,000 convertible debt that closed March 1, 2007 created a debt discount of $40,242 that is being amortized as additional interest over its 5-year term. Warrants issued in connection with the $170,000 convertible “bridge” debt that closed in July 2007 created a calculated debt discount of $92,700 that was fully expensed over its loan term that matured April 30, 2008.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company issued $100,000 in convertible debt in October 2009 and issued a warrant, in connection with the debt, for 200,000 shares of common stock at $.65 per share. The Company determined that the warrant had an initial value of $30,150 that was treated as a debt discount and amortized as additional interest expense over the 24-month term of the note.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company also issued $200,000 in convertible debt in June 2010 and issued a warrant, in connection with the debt, to purchase 1,111,112 shares of common stock at $.46 per share. The Company determined that the value of the June 2010 warrant is $96,613.This value is treated as a debt discount and amortized as additional interest expense over the 22-month term of the note.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company also issued $32,000 in convertible debt in September 2010 and issued a warrant to purchase 320,000 shares of common stock at $.18 per share.  The Company determined that this warrant has a value of $15,553 that was treated as a debt discount and amortized as additional interest expense over the 18-month term of the note.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company also issued $16,800 in convertible debt in December 2010 and issued a warrant to purchase 200,000 shares of common stock at $.084 per share. The Company determined that this warrant has a value of $7,232 that was treated as a debt discount and amortized as additional interest expense over the 24- month term of the note.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In January 2011, the Company issued three convertible notes of $50,000 each and also issued warrants to purchase 1,595,239 common shares at $.20 per share. The value of the warrants was determined to be $47,908 and is being treated as a debt discount and amortized as additional interest expense over the 24-month term of the notes.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">For grants of stock options and warrants in 2011 the Company used a 0.34 to 2.44% risk-free interest rate, 0% dividend rate, 54-66% volatility and estimated term of 3 to 10 years. Values computed using these assumptions ranged from $0.0126 to $0.3412 per share. </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In November 2012, the Company issued four convertible notes of $27,500, $27,500, $51,243 and $50,000, respectively. The note holders were issued shares of our common stock at $.10 per share value as bonus equity in consideration for the notes. Though short term the value of the notes are being treated as a debt discount with an aggregate discount of $33,469 and amortized as additional interest expense over the six month term of the notes.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">For grants of stock options and warrants in 2012 the Company used a 0.33% to 1.80% risk-free interest rate, 0% dividend rate, 54%, 59% or 66% volatility and estimated term of 3, 5 or 10 years. Value computed using these assumptions ranged from $0.0111 to $0.096 per share.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In January 2013, in connection with a private placement offering we issued 8% convertible one year promissory notes in an aggregate principal amount of $300,000 convertible into 2,500,000 shares of common stock assuming a conversion rate of $.12 per share and five year warrants to purchase up to an aggregate of 2,500,000 shares of the corporation’s common stock at an exercise price of $.15 per share. The value of the notes are being treated as a debt discount with an aggregate discount of $77,644, and amortized as an additional interest expense over the twelve month term of the notes. In addition, we issued to the placement agent for these sales five year warrants to purchase an aggregate of 200,000 shares of common stock at an exercise price of $.12 per share.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In January and March 3013, in connection with a separate and new private placement offering we issued 7,142,857 shares of common stock at $.07 per share and warrants to purchase 7,142,857 shares of common stock at
$.15 per share to 5 investors in return for their $500,000 investment in the Company.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 15, 2013 the Company completed the private sale of 7,142,858 shares of the Company’s common stock, par value $.01 per share, at $.07 per share for an aggregate purchase price of $500,000, warrants to purchase 7,142,858 shares of common stock at an exercise price of $.08 per share, and warrants to purchase 3,571,429 shares of common stock at an exercise price of $.15 per share.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">For grants of stock options and warrants in 2013 the Company used a 0.33% to 1.80% risk-free interest rate, 0% dividend rate, 59% volatility and estimated term of 5 years. Value computed using these assumptions ranged from $0.014261 to $0.036616 per share.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following summarizes transactions for stock options and warrants for the periods indicated:</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Stock Options (1)</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Warrants (1)</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number of <br />Shares</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Average <br />Exercise <br />Price</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number of <br />Shares</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Average <br />Exercise <br />Price</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 40%;">Outstanding at December 31, 2005</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">17,956</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">1.67</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">20,950</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">2.62</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Issued</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">23,942</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1.67</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">71,826</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.85</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Outstanding at December 31, 2006</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">41,898</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.67</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">92,776</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align:
left;"> </td>
<td style="text-align: right;">1.25</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Issued</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">5,984</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1.67</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">28,502</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.35</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Outstanding at December 31, 2007</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">47,882</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.67</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">121,278</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.04</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,243,292</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.20</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,075,204</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.45</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(11,971</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3.76</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2008</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,291,174</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.26</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,184,511</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.45</td>
<td
style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Issued</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">205,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.37</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,188,302</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.65</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,496,174</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.27</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,372,813</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.49</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,210,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.17</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,435,662</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.34</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Expired</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(207,956</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.43</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(8,979</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.67</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Exercised</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(128,571</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.46</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align:
bottom;">
<td>Outstanding at December 31, 2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,498,218</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.19</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">10,670,925</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.44</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,483,334</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.01</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,222,243</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Expired</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(83,941</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.73</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(2,010,917</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.48</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Exercised</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(100,000</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.01</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,797,611</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.11</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">26,882,251</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.23</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,514,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.08</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">11,688,166</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.15</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Expired</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(2,235,368</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.11</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(3,366,455</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.50</td>
<td
style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Exercised</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(412,963</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.01</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(71,826</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.01</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2012</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">12,663,566</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.09</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">35,132,136</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.13</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">16,560,508</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.076</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">21,128,572</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.12</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(1,274,550</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.26</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Outstanding at March 31, 2013</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,224,074</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.08</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,986,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.15</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.5in;">(1)</td>
<td>Adjusted for the reverse stock splits in total at June 6, 2008 and October 20, 2008.</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">At March 31, 2013, 25,839,492 stock options are fully vested and currently exercisable with a weighted average exercise price of $0.08 and a weighted average remaining term of 8.83 years. All warrants are fully vested and exercisable. Stock-based
compensation recognized for the three months ending March 2013 and March 2012 was $1,329,735 and $60,463, respectively. The Company has $244,494 of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over a weighted average period of approximately 16 months.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following summarizes the status of options and warrants outstanding at March 31, 2013:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="3" nowrap="nowrap">Range of Exercise Prices</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Weighted <br />Average <br />Remaining <br />Life</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td colspan="2">Options:</td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 22%;">0.01</td>
<td style="width: 40%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 15%;">1,414,280</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 15%;">3.26</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.065</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">20,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.95</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.07</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">214,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.44</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.075</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">14,400,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.96</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.079</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,740,508</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.97</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.08</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,300,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.38</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.088</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">400,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8.82</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.15</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,210,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">$</td>
<td style="text-align: right; padding-bottom: 1pt;">0.35</td>
<td> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">525,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">0.33</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;" colspan="2"><font style="font-size: 10pt;">Total</font></td>
<td> </td>
<td style="text-align: left;
padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,224,074</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="text-align: right; padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;" colspan="2"><font style="font-size: 10pt;">Warrants:</font></td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.01</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">200,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.69</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.075</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8,657,746</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.09</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.08</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,714,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4.96</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.10</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,228,572</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.58</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.12</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">700,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.13</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">631,429</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.15</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">25,348,285</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4.50</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.16</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">500,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.02</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.17</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,882,353</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.02</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.18</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">200,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.86</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.20</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,532,739</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.83</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color:
#ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.25</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,375,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.49</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.35</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">150,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.25</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.46</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,685,748</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.67</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">$</td>
<td style="text-align: right; padding-bottom: 1pt;">0.65</td>
<td> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">180,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">0.05</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;" colspan="2"><font style="font-size: 10pt;">Total</font></td>
<td> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,986,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="text-align: right; padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Stock options and warrants expire on various dates from April 2013 to March 2023.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Under the terms of the Company's agreement with investors in the October 2008 financing, 1,920,000 shares of common stock were the maximum number of shares allocated to the Company's existing shareholders at the time of the offering (also referred to as the original shareholders or the "Founders"). Since the total of the Company's fully diluted shares of common stock was greater than 1,920,000 shares, in order for the Company to proceed with the offering, the Board of Directors approved a reverse stock split of 1-for-1.2545. After this split was approved, additional options and warrants were identified, requiring a second reverse stock split in order to reach the 1,920,000 shares. The second reverse stock split on the reduced 1-for-1.2545 balance was determined to be 1-for-1.33176963. Taken together, if only one reverse stock split was performed, the number would have been a reverse stock split of 1-for-1.670705.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On June 6, 2008, the Board of Directors approved the first reverse stock split. The authorized number of shares of common stock of 20,000,000 was proportionately divided by 1.2545 to arrive at 15,942,607.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On October 20, 2008, the Board of Directors (i) approved the second reverse stock split pursuant to which the authorized number of shares of common stock of 15,942,607 was proportionately divided by 1.33177 to arrive at 11,970,994 shares and (ii) approved a resolution to increase the number of authorized shares of the Company's common stock from 11,970,994 to 40,000,000, which was approved by the Company’s shareholders holding a majority of the shares entitled to vote thereon at a special meeting of shareholders held on December 3, 2008.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The shareholders approved an increase in authorized shares to 80 million shares in an annual shareholder meeting held on June 22, 2010 and approved an increase in authorized shares to 200 million shares in a special shareholder meeting held on September 7, 2011.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The shareholders approved an increase in authorized shares to 300 million shares in a special shareholder meeting held on January 15, 2013.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The shareholders approved an amendment of the Company’s 2012 Stock Incentive Plan to increase the reserve of shares authorized for issuance to 50 million shares and to increase the threshold of limitation on certain grants to 20 million shares on April 15, 2013.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Stock Options and Warrants Granted by the Company</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following
table is the listing of stock options and warrants as of March 31, 2013 by year of grant:</p>
<p style="text-align: left; text-indent: 0px; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Stock Options:</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Year</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Price</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">2008</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">993,292</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">$ .01-.35</font></td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">75,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">.35</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,210,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">.15</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">870,988</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">.01</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2012</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,514,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.07 - .08</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">16,560,508</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">.065 - .088</font></td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"> Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,224,074</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">.01-.35</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; text-indent: 0px; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="text-align: left; margin-top: 0pt; font: 10pt times new roman, times, serif; margin-bottom: 0pt;">Warrants:</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Year</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Price</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">2008</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">1,592,858</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">$   .13-.46</font></td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">193,207</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.13-.46</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,261,112</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.01-.65</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,222,243</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size:
10pt;">.075-.25</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2012</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">11,688,166</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.10 - .20</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">21,128,572</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;"><u>.08 - .15</u></font></td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,986,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 10pt; text-underline-style: double;"><u>$ .01-.65</u></font></td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 4 - LOSS PER SHARE</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table presents the shares used in the basic and diluted loss per common share computations:</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; padding-bottom: 1pt; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">Period from April 23,<br />2002 (Inception) to<br />March 31,</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">2013</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">2012</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">2013</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Numerator:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: 0px; padding-left: 0in; width: 55%; padding-right: 0px; color: black; padding-top: 0px;">Net loss available in basic and diluted calculation</td>
<td style="width: 1%; color: black;"> </td>
<td style="text-align: left; width: 1%; color: black;">$</td>
<td style="text-align: right; width: 15%; color: black;">(2,101,525</td>
<td style="text-align: left; width: 1%; color: black;">)</td>
<td style="width: 1%; color: black;"> </td>
<td style="text-align: left; width: 1%; color: black;">$</td>
<td style="text-align: right; width: 15%; color: black;">(713,367</td>
<td style="text-align: left; width: 1%; color: black;">)</td>
<td style="width: 1%; color: black;"> </td>
<td style="text-align: left; width: 1%; color: black;">$</td>
<td style="text-align: right; width: 15%; color: black;">(21,392,636</td>
<td style="text-align: left; width: 1%; color: black;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Denominator:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Weighted average common shares outstanding-basic</td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">107,824,939</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">32,664,003</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">13,955,057</td>
<td style="text-align: left; color: black;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;
text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Effect of diluted stock options and warrants (1)</td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">-</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">-</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">-</td>
<td style="text-align: left; color: black;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt; text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Weighted average common shares outstanding-basic</td>
<td style="padding-bottom: 1pt; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;">107,824,939</td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"> </td>
<td style="padding-bottom: 1pt; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;">32,664,003</td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"> </td>
<td style="padding-bottom: 1pt; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;">13,955,057</td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Loss per common share-basic and diluted</td>
<td style="padding-bottom: 2.5pt; color: black;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;">(0.02</td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;">)</td>
<td style="padding-bottom: 2.5pt; color: black;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;">(0.02</td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;">)</td>
<td style="padding-bottom: 2.5pt; color: black;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;">(1.53</td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;">)</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">(1) The number of shares underlying options and warrants outstanding as of March 31, 2013 and March 31, 2012 are 84,210,232 and 31,736,049 respectively. The effect of the shares that would be issued upon exercise of such options and warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 5 – INCOME TAXES</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods.  Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">There is no income tax provision in the accompanying statements of operations due to the cumulative operating losses that indicate a 100% valuation allowance for the deferred tax assets and state income taxes is appropriate.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Federal and state income tax return operating loss carryovers as of March 31, 2013, were approximately $10,242,000 and will begin to expire in 2017.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The valuation allowance has been recorded due to the uncertainty of realization of the benefits associated with the net operating losses. Future events and changes in circumstances could cause this valuation allowance to change.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The components of deferred income taxes at March 31, 2013 and December 31, 2012 are as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">March 31,</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">December 31,</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">2013</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">2012</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Deferred Tax Asset:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">Net Operating Loss</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">2,390,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">2,209,000</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Other</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">44,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">73,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Total Deferred Tax Asset</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,434,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,282,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Less Valuation Allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,434,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,282,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Net Deferred Income Taxes</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 6 – LONG-TERM DEBT</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Long-term debt is as follows:</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"><font style="font-size: 10pt;"><b>March 31, </b></font><br /><font style="font-size: 10pt;"><b>2013</b></font></td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"><font style="font-size: 10pt;"><b>December 31,</b></font><br /><font style="font-size: 10pt;"><b>2012</b></font></td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt; width: 70%;"><font style="font-size: 10pt;">Note payable issued on October 26, 2009 to the parents of one the Company’s directors, with interest at 8% to March 31, 2012 and convertible into shares of common stock at $.35 per share. The note was renegotiated in February 2013.</font></td>
<td style="width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">-</font></td>
<td style="width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">100,000</font></td>
<td style="width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued on June 12, 2010 to the parents of one of the Company's directors, with interest at 12% to March 31, 2012, and convertible into common stock at $.18 per share. The note was renegotiated in February 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">200,000</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued on December 23, 2010 to the parents of one of our directors, net of a discount with interest at 12%, matures December 23, 2012 and is convertible into common stock at $.084 per share. The note was renegotiated in February 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">16,800</font></td>
<td> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued on September 21, 2010 to the parents of one of our directors, net of a discount, with interest at 12%, matures December 23, 2012 and is convertible into common stock at $.18 per share. The note was renegotiated in February 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">32,000</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued January 1, 2011 to a law firm that accepted this note in full payment of their past due legal fees.  The Note bears interest at 6%, matures December 31, 2014 and is convertible into common stock at $.15 per share. The note was renegotiated in March 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">89,300</font></td>
<td> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">On November 6, 2012 the Company issued four convertible notes at 20% interest, each, net of an aggregate discounts of $0 and $21,138; due on April 6, 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">156,243</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">122,774</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">In January 2013, in connection with a private placement offering we issued 8% convertible one year promissory notes in an aggregate principal amount of $300,000 convertible into 2,500,000 shares of common stock assuming a conversion rate of $.12 per share and five year warrants to purchase up to an aggregate of 2,500,000 shares of the corporation’s common stock at an exercise price of $.15 per share. The value of the notes are net discounts of $77,644 in 2013; due in January 2014.  In addition, we issued to the placement agent for these sales five year warrants to purchase an aggregate of 200,000 shares of common stock at an exercise price of $.15 per share.</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">222,356</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td><font style="font-size: 10pt;">Total</font></td>
<td> </td>
<td><font style="font-size: 10pt;">$</font></td>
<td style="text-align: right;"><font style="font-size: 10pt;">378,599</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt;">$</font></td>
<td style="text-align: right;"><font style="font-size: 10pt;">560,874</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;"><font style="font-size: 10pt;">Less amount due
within one year</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">378,599</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">471,574</font></td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"><font style="font-size: 10pt;">Long-Term Debt</font></td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.25pt double;"><font style="font-size: 10pt;">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.25pt double;"><font style="font-size: 10pt;">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right;"><font style="font-size: 10pt;">89,300</font></td>
<td style="padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Cash payments for interest were $26,408 for the three months ended March 31, 2013 and $0 for the three months ended March 31, 2012.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Principal payments required during the 12 month periods ended March 31:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 85%;">2014</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">378,599</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 7 – RENT OBLIGATION</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company leases its principal office under a lease that can be cancelled after three years with proper notice per the lease and an amortized schedule of adjustments that will be due to the landlord. The lease extends five years and expires January 2018. In addition to rent, the Company pays real estate taxes and repairs and maintenance on the leased property. Rent expense was $17,690 and $13,110 through the three months ended March 31, 2013 and March 31, 2012, respectively.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s rent obligation for the next five years is as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 82%;">2014</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 15%;">36,000</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2015</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">37,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2016</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">38,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2017</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">39,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2018</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">3,600</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 8 – LIABILITY FOR EQUITY-LINKED FINANCIAL INSTRUMENTS</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company adopted ASC 815- Derivatives and Hedging (“ASC 815”) on January 1, 2009. ASC 815 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity's own stock. It was effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, which was the Company's first quarter of 2009. Many of the warrants issued by the Company contain a strike price adjustment feature, which upon adoption of ASC 815, changed the classification (from equity to liability) and the related accounting for warrants with a $479,910 estimated fair value of as of January 1, 2009. An adjustment was made to remove $486,564 from paid-in capital (the cumulative values of the warrants on their grant dates), a positive adjustment of $6,654 was made to accumulated deficit, representing the gain on valuation from the grant date to January 1, 2009, and $479,910 was booked as a liability. The warrants issued in 2011 do not contain a strike price adjustment feature and, therefore, are not treated as a liability.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The January 1, 2009 valuation was computed using the Black-Scholes valuation model based upon a 2.5-year expected term, an expected volatility of 63%, an exercise price of $.46 per share, a stock price of $.35, a zero dividend rate and a 1.37% risk free interest rate. Subsequent to January 1, 2009 these warrants were re-valued at the end of each quarter and a gain or loss was recorded based upon their increase or decrease in value during the quarter. Likewise, new warrants that were issued during 2009 and 2010 were valued, using the Black-Scholes valuation model on their date of grant and an entry was made to reduce paid-in capital and increase the liability for equity-linked financial instruments. These warrants were also re-valued at the end of each quarter based upon their expected life, the stock price, the exercise price, assumed dividend rate, expected volatility and risk free interest rate. A significant reduction in the liability was realized in 2010 primarily due to a reduction from $.50 to $.22 per share in the underlying stock price. The Company realized a slight increase in the liability for existing warrants during the first quarter of 2012. In the first quarter of 2013 there was a decrease in the liability primarily due to current expirations and the amount of warrants reaching expiration in the near term.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The inputs to the Black-Scholes model during 2009, 2010, 2011, 2012 and 2013 were as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: top;">
<td style="width: 80%;"><font style="font-size: 10pt;">Stock price</font></td>
<td style="width: 2%;"> </td>
<td style="text-align: center; width: 18%;"><font style="font-size: 10pt;">$ .05 to $.50</font></td>
</tr>
<tr style="background-color: white; vertical-align: top;">
<td><font style="font-size: 10pt;">Exercise price</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">$ .01 to $.65</font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: top;">
<td><font style="font-size: 10pt;">Expected life</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">2.0 to 6.5 years</font></td>
</tr>
<tr style="background-color: white; vertical-align: top;">
<td><font style="font-size: 10pt;">Expected volatility</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">54% to 66%</font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: top;">
<td><font style="font-size: 10pt;">Assumed dividend rate</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">- %</font></td>
</tr>
<tr style="background-color: white; vertical-align: top;">
<td><font style="font-size: 10pt;">Risk-free interest rate</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">.13% to 2.97%</font></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The original valuations, annual gain/(loss) and end of year valuations are shown below:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt; padding-left: 0px; padding-right: 0px;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at </font><br /><font style="font-size: 7pt;">12/31/09</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2010 Gain (Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at </font><br /><font style="font-size: 7pt;">12/31/10</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;"
colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2011 Gain (Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at</font><br /><font style="font-size: 7pt;">12/31/2011</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2012</font><br /><font style="font-size: 7pt;">Gain </font><br /><font style="font-size: 7pt;">(Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at</font><br /><font style="font-size: 7pt;">12/31/2012</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2013 Gain </font><br /><font style="font-size: 7pt;">(Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at </font><br /><font style="font-size: 7pt;">3/31/2013</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 0px; padding-left: 0px; padding-right: 0px;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: center;" colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 0px; padding-left: 0px; width: 19%; padding-right: 0px; color: black;"><font style="font-size: 7pt;">January 1, 2009 adoption</font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">870,278</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">868,772</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">1,506</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">(88,290</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">89,796</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%;
color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">(21,856</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">111,652</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">14,080</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">97,572</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 6/30/2009</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">149,007</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">147,403</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">1,604</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(4,689</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,293</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,293</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 9/30/2009</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">40,481</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">40,419</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">62</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(1,562</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">1,624</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td
style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">910</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">714</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">681</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">33</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 12/31/2009</font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">12,081</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">12,053</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">28</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">(724</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">752</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">78</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">337</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">337</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: right; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Subtotal</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">1,071,847</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font
style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 3/31/2010</font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">25,014</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">539</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(5,571</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,109</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">3,701</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">2,408</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">2,408</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 6/30/2010</font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">30,740</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">592</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(6,122</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,714</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font
style="font-size: 7pt;">6,083</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">631</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">631</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 9/30/2010</font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">20,811</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">10,615</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">(44,160</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">54,775</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">1,338</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">53,437</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">1,622</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">51,815</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: right; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Total</font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">1,071,847</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">1,145,212</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color:
black;"><font style="font-size: 7pt;">14,946</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">(151,118</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">166,063</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">(3,453</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">169,179</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">19,422</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">149,757</font></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 9 – RELATED PARTY TRANSACTIONS</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Audit Committee has the responsibility to review and approve all transactions to which a related party and the Company may be a party prior to their implementation, to assess whether such transactions meet applicable legal requirements.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company entered into agreements, in 2008, with our Chairman of the Board, Lawrence Gadbaw, and in 2009 with a board member, Peter Morawetz, to pay Mr. Gadbaw $25,000 and Mr. Morawetz $30,000 upon the Company raising $3 million in new equity. Mr. Gadbaw received 277,778 shares at $.09 per share in June 2012 as compensation in lieu of the $25,000 cash for raising $3 million in new equity. Mr. Gadbaw was paid the balance due under his separation agreement from 2008. This amount was $46,000 upon signing the agreement in 2008 payable at $2,000 per month; the payments to Mr. Gadbaw are complete. Mr. Gadbaw is due $10,000 in accounts payable as of December 31, 2012 pertaining to his monthly fee as Chairman of the Board of Directors. Mr. Gadbaw also received a warrant for 30,000 shares at $.15 per share in June 30, 2012 as compensation for service as Chairman.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 28, 2012, the Company, entered into a Convertible Note Purchase Agreement, dated as of March 28, 2012 (the “SOK Purchase Agreement”) with SOK Partners, LLC (“SOK Partners”), an investment partnership. Josh Kornberg, who is a member of the Company’s Board of Directors, and Dr. Samuel Herschkowitz are affiliates of the manager of SOK Partners and Ricardo Koenigsberger, a director, is a holder of membership units of SOK Partners. Pursuant to the SOK Purchase Agreement, the Company issued a 20.0% convertible note due August 2012 in the principal amount of up to $600,000. Principal and accrued interest on the note is due and payable on August 28, 2012. The Company’s obligations under the note are secured by the grant of a security interest in substantially all tangible and intangible assets of the Company. The SOK Purchase Agreement and the note include customary events of default that include, among other things, non-payment defaults, covenant defaults, inaccuracy of representations and warranties, cross-defaults to other indebtedness and bankruptcy and insolvency defaults. The occurrence of an event of default could result in the acceleration of the Company’s obligations under the note, and interest rate of twenty-four (24%) percent per annum accrues if the note is not paid when due.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 28, 2012, the Company received an advance of $84,657 under the note, including a cash advance of $60,000 net of a prepayment of interest on the first $300,000 in advances under the note. The holder of the note is entitled to convert the note into shares of common stock of the Company at an initial conversion price per share of $0.065 per share, subject to adjustment in the event of (1) certain issuances of common stock or convertible securities at a price lower than the conversion price of the note, and (2) recapitalizations, stock splits, reorganizations and similar events. In addition, the Company is required to issue two installments of an equity bonus to SOK Partners in the form of common stock valued at the rate of $0.065 per share. In March 2012, the Company issued the first equity bonus to SOK Partners, consisting of 4,615,385 shares of common stock, with a second installment due within five business days after SOK Partners has made aggregate advances under the note of at least $300,000. In May 2012 the Company issued the second installment consisting of 4,615,385 shares of common stock subsequent to SOK Partners surpassing the aggregate advances of $300,000. Until the maturity date of the note, if the Company obtains financing from any other source without the consent of SOK Partners, then the Company is required to issue additional bonus equity in an amount equal to $600,000 less the aggregate advances on the note made prior to the breach. The principal balance of the SOK Partners note was $357,282 as of December 31, 2012.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">As long as any amount payable under the note remains outstanding, SOK Partners or its designee is entitled to appoint a new member to the Company’s Board of Directors, who will be appointed upon request. Mr. Koenigsberger was appointed to the Board by SOK Partners on June 25, 2012.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On March 28, 2012, the Company signed an Amended and Restated Note Purchase Agreement, dated as of December 20, 2011, with Dr. Herschkowitz (as amended, the “Herschkowitz Purchase Agreement”). Pursuant to the Herschkowitz Purchase Agreement, the Company issued a 20.0% convertible note due June 20, 2012 in the principal amount of $240,000 for previous advances under the note. The Company’s obligations under the note are secured by the grant of a security interest in substantially all tangible and intangible assets of the Company. The Company has previously issued to Dr. Herschkowitz an equity bonus consisting of 1,546,667 shares of common stock. An additional 7,500,000 shares were transferred to Dr. Herschkowitz effective in April 2012, upon the occurrence of an event of default on the note. On August 13, 2012, the Company entered into a settlement and forbearance agreement described below, relating to the defaults under the note and other matters.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">As long as any amount payable under the note remains outstanding, Dr. Herschkowitz or his designee is entitled to appoint a special advisor to the Company’s Board of Directors, who will be appointed as a member of the Board upon request. Pursuant to this authority, Josh Kornberg was appointed to the Board on March 9, 2012. In addition, pursuant to this authority, Ricardo Koenigsberger was appointed to the Board on June 25, 2012.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Pursuant to a letter dated April 20, 2012, Dr. Herschkowitz advised the Company of the occurrence of numerous events of default under the terms of the Herschkowitz Note and the Herschkowitz Note Purchase Agreement. As a result of such events of default, Dr. Herschkowitz asserted significant rights as a secured creditor of the Company, including his rights as a secured creditor with a security interest in substantially all assets of the Company. Without a settlement relating to the defaults and other matters, Dr. Herschkowitz could have taken action to levy upon the Company’s assets, including patents and other intellectual property.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In addition, the Company and APA were parties to a letter agreement dated March 14, 2012, providing APA and its affiliates (including Dr. Herschkowitz and SOK) with rights to avoid dilution relating to additional issuances of equity securities by the Company through July 14, 2012, evidencing the parties’ intent that APA would be provided with significant protection against dilution. This protection was in recognition of APA’s investments in the Company involving a high degree of risk and the Company’s contemplated need for restructuring its indebtedness, which were anticipated to result, and have resulted, in significant dilution. The parties acknowledged that Dr. Herschkowitz and SOK would not have made their historical cash investments in the Company to the same degree had the dilution protection not been provided, and the investments by these parties have enabled the Company to avoid insolvency. Since the respective dates of the Herschkowitz Note Purchase Agreement and the SOK Note Purchase Agreement, the Company has issued in excess of 16,000,000 shares of common stock to parties other than APA and its affiliates, resulting in significant dilution.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Effective August 15, 2012, the Company entered into a letter agreement with Dr. Herschkowitz, APA and SOK (the “Forbearance Agreement”). Under the Forbearance Agreement, among other things, (i) Dr. Herschkowitz agreed to forbear from asserting his rights as a secured creditor to substantially all of the Company’s assets, resulting from the Company’s defaults; (ii) the Company issued an aggregate 26.5 million shares of common stock to Dr. Herschkowitz and SOK and adjusted the conversion price of their convertible notes to $0.014 per share from $0.065 per share, to satisfy the Company’s obligations to adjust for dilution under the March 14, 2012 letter agreement; (iii) Dr. Herschkowitz and SOK agreed to extend the maturity of their notes to December 31, 2012; (iv) the Company agreed to pay certain compensation to Dr. Herschkowitz upon the achievement of financial milestones and (v) Dr. Herschkowitz clarified and waived certain of his rights, including the right to interest at a penalty rate upon default.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In the Forbearance Agreement, Dr. Herschkowitz agrees to forbear from exercising any of his rights arising under the Herschkowitz Note or the Herschkowitz Note Purchase Agreement with respect to the existing defaults against the Company, subject to the limitations set forth in the letter agreement and without releasing or waiving any future breach of the letter agreement. He further agrees to forbear from exercising any rights with respect to events of default, security interests in the collateral and other similar remedies against the Company or his interests under the Herschkowitz Note or the Herschkowitz Note Purchase Agreement until the occurrence of an event of default in the Herschkowitz Note: (a) that does not constitute an existing default and (b) occurs and accrues after the effective date of the letter agreement.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Dr. Herschkowitz and the Company acknowledge that 7.5 million shares of the Company’s common stock, constituting the “penalty shares” under the Herschkowitz Note Purchase Agreement, were delivered to Dr. Herschkowitz in April 2012 as provided in the Herschkowitz Note Purchase Agreement upon an event of default. Notwithstanding a provision that would have increased the rate of interest from 20% to 24% upon an event of default, Dr. Herschkowitz agreed that the Company would not pay the increased rate of interest but would accrue interest at 20% until a subsequent event of default.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Under the Forbearance Agreement, the Herschkowitz Note and the SOK Note were amended as follows: (i) the due dates of the notes were extended to December 31, 2012, from the previous due dates of June 20, 2012 and August 28, 2012, respectively; (ii) Dr. Herschkowitz will release his security agreement after payment of all currently outstanding promissory notes to parties other than SOK; and (iii) the Herschkowitz Note was amended to add certain events of default relating to judgments against the Company or other creditors taking action with respect to the collateral. In December 2012, Dr. Herschkowitz and SOK Partners agreed to further extend the due dates of the Herschkowitz Note and the SOK Note, respectively, through March 31, 2013. On March 6, 2013 the due date for the convertible notes was extended to April 30, 2103. In consideration of the extension additional milestone fees were revised as described below. On April 25, 2013 the due date for the convertible notes was extended to August 31, 2013 for no additional consideration.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">APA and its affiliates agreed to terminate the letter agreement regarding dilution dated March 14, 2012. In consideration of the various provisions of the letter agreement and in recognition of the understanding of the parties regarding dilution and the agreements of APA and its affiliates to forebear and to extend the due dates of the notes, the Company (i) issued 13,250,000 shares to Dr. Herschkowitz, (ii) issued 13,250,000 shares to SOK, and (iii) the conversion price of the Herschkowitz Note and the SOK Note were changed to $0.014 per share from $0.065 per share.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In the event that the Company consummates the following series of transactions on or prior to June 30, 2013: (i) a merger or similar transaction with a public shell company, (ii) raising between $2 million and $4 million through an offering of the securities of the public shell company concurrent with or subsequent to the shell merger and (iii) listing the Company’s shares on NASDAQ pursuant to an underwritten offering of the Company’s securities resulting in gross proceeds of between $5 million and $30 million then the Company shall deliver to Dr. Herschkowitz the following compensation: (A) $75,000 upon consummating the shell merger, (B) $150,000 upon consummating the qualifying financing round and (C) 3% of the gross proceeds of the NASDAQ underwriting, which payment shall under no circumstances be less than $200,000 or greater than $1,000,000. The Company shall reimburse Dr. Herschkowitz at his actual out-of-pocket cost for reasonable expenses incurred in connection with the shell transactions but in no event in an amount greater than $10,000.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In connection with the extension of the due date for the convertible notes on March 6, 2013, the milestone fees were revised as follows. The following fees are payable to Dr. Herschkowitz in the event that the Company consummates the following series of transactions on or prior to December 31, 2013: (i) financing raising not less than $1 million, compensation of $75,000; (ii) a going private transaction, compensation of $200,000 and (iii) 3% of the gross proceeds of the NASDAQ underwriting, which payment shall under no circumstances be less than $200,000 or greater than $3,000,000.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><i></i>On November 6, 2012, the Company issued and sold convertible promissory notes in the total principal amount of $156,243 to Dr. Herschkowitz and certain of his assignees. The Company issued to these parties an aggregate 1,562,430 shares of common stock in consideration of placement of the notes. The notes bear interest at a rate of 20% per annum and are secured by a security interest in the Company’s accounts receivable, patents and certain patent rights and are convertible into common stock upon certain mergers or other fundamental transactions at a conversion price based on the trading price prior to the transaction. The proceeds from this transaction were used to pay off approximately $155,000 in principal amount of secured indebtedness.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Nature of Operations and Continuance of Operations</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">BioDrain Medical, Inc. (the "Company") was incorporated under the laws of the State of Minnesota in 2002. The Company has developed an environmentally safe system for the collection and disposal of infectious fluids that result from surgical procedures and post-operative care. The Company also makes ongoing sales of our proprietary cleaning fluid to users of our systems. In April 2009, the Company received 510(k) clearance from the FDA to authorize the Company to market and sell its STREAMWAY™ FMS products.</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a stockholders’ deficit. These factors raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Since inception to March 31, 2013, the Company has raised approximately $5,619,000 in equity and $2,412,000 in debt financing, including $1,000,000 in equity and $300,000 in convertible debt in 2013. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Recent Accounting Developments</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of our operations.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Valuation of Intangible Assets</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">We review identifiable intangible assets for impairment in accordance with ASC 350- <i>Intangibles</i>– <i>Goodwill and Other,</i> whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Our intangible assets are currently solely the costs of obtaining trademarks and patents. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant change in the medical device marketplace and a significant adverse change in the business climate in which we operate. If such events or changes in circumstances are present, the undiscounted cash flows method is used to determine whether the intangible asset is impaired. Cash flows would include the estimated terminal value of the asset and exclude any interest charges. If the carrying value of the asset exceeds the undiscounted cash flows over the estimated remaining life of the asset, the asset is considered impaired, and the impairment is measured by reducing the carrying value of the asset to its fair value using the discounted cash flows method. The discount rate utilized is based on management's best estimate of the related risks and return at the time the impairment assessment is made.</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Our accounting estimates and assumptions bear various risks of change, including the length of the current economic downturn facing the United States, the expansion of the slowdown in consumer spending in the U.S. medical markets despite the early expressed opinions of financial experts that the medical market would not be as affected as other markets and failure to gain acceptance in the medical market.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Accounting Policies and Estimates</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Presentation of Taxes Collected from Customers</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Sales taxes are imposed on the Company’s sales to nonexempt customers. The Company collects the taxes from customers and remits the entire amounts to the governmental authorities. The Company’s accounting policy is to exclude the taxes collected and remitted from revenues and expenses.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Shipping and Handling</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Shipping and handling charges billed to customers are recorded as revenue. Shipping and handling costs are recorded within cost of goods sold on the statement of operations.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Advertising</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Advertising costs are expensed as incurred. There were no advertising expenses in the three months ended March 31, 2013 and March 31, 2012.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Research and Development</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Research and development costs are charged to operations as incurred. Research and development expenses were $58,277 in the three months ended March 31, 2013 and $0 for March 31, 2012.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Revenue Recognition</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 Revenue Recognition and ASC 605-Revenue Recognition.</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectability is probable. Delivery is considered to have occurred upon either shipment of the product or arrival at its destination based on the shipping terms of the transaction. The Company’s standard terms specify that shipment is FOB BioDrain and the Company will, therefore, recognize revenue upon shipment in most cases. This revenue recognition policy applies to shipments of the STREAMWAY FMS units as well as shipments of cleaning solution kits. When these conditions are satisfied, the Company recognizes gross product revenue, which is the price it charges generally to its customers for a particular product. Under the Company’s standard terms and conditions, there is no provision for installation or acceptance of the product to take place prior to the obligation of the customer. The customer’s right of return is limited only to the Company’s standard one-year warranty whereby the Company replaces or repairs, at its option, and it would be rare that the STREAMWAY FMS unit or significant quantities of cleaning solution kits may be returned. Additionally, since the Company buys both the STREAMWAY FMS units and cleaning solution kits from “turnkey” suppliers, the Company would have the right to replacements from the suppliers if this situation should occur.</p>
<p style="text-align: left; margin-top: 0pt; font: 10pt times new roman, times, serif; margin-bottom: 0pt;"><b>Receivables</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Receivables are reported at the amount the Company expects to collect on balances outstanding. The Company provides for probable uncollectible amounts through charges to earnings and credits to the valuation based on management’s assessment of the current status of individual accounts, changes to the valuation allowance have not been material to the financial statements.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Inventories</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">March 31,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Finished goods</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">103,677</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">91,008</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Raw materials</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">35,340</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">39,543</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Work-In-Process</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,430</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">14,658</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">141,447</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">145,209</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Property and Equipment</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the respective assets. Estimated useful asset life by classification is as follows:</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td> </td><td style="padding-bottom: 1pt;"> </td><td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Years</td><td style="padding-bottom: 1pt;"> </td></tr><tr style="vertical-align: bottom;"><td style="text-align: left; width: 85%;">Computers and office equipment</td><td style="width: 1%;"> </td><td style="text-align: left; width: 1%;"> </td><td style="text-align: center; width: 12%;">3</td><td style="text-align: left; width: 1%;"> </td></tr><tr style="vertical-align: bottom;"><td style="text-align: left;">Furniture and fixtures</td><td> </td><td style="text-align: left;"> </td><td style="text-align: center;">5</td><td style="text-align: left;"> </td></tr></table><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Upon retirement or sale, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reflected in operations. Maintenance and repairs are charged to operations as incurred.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Intangible Assets</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Intangible assets consist of patent costs. These assets are not subject to amortization until the property patented is in production. The assets are reviewed for impairment annually, and impairment losses, if any, are charged to operations when identified. No impairment losses have been identified by management.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Income Taxes</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company accounts for income taxes in accordance with ASC 740- Income Taxes (“ASC 740”). Under ASC 740, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and net operating loss and credit carryforwards using enacted tax rates in effect for the year in which the differences are expected to impact taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company reviews income tax positions expected to be taken in income tax returns to determine if there are any income tax uncertainties. The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by taxing authorities, based on technical merits of the positions. The Company has identified no income tax uncertainties.</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Tax years subsequent to 2009 remain open to examination by federal and state tax authorities.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Patents and Intellectual Property</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">In June 2008, the Company completed and executed an agreement to secure exclusive ownership of the patent from an inventor, Marshall Ryan. Mr. Ryan received a combination of cash and warrants, and he will receive a 4% royalty on STREAMWAY FMS (the Product) sales for the life of the patent. At the signing of the agreement, Mr. Ryan received $75,000 in exchange for the exclusive assignment of the patent. In addition, on June 30, 2009, Mr. Ryan, through his Mid-State Stainless, Inc. entity, was entitled to receive $100,000 as payment (currently recorded as an approximately $22,000 account payable with the Company) for past research and development activities. Should Mr. Ryan be utilized in the future for additional product development activities, he will be compensated at a rate of $95.00 per hour.</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Mr. Ryan also received a warrant, with immediate vesting, to purchase 150,000 shares of the Company's common stock at a price of $.35 per share. The warrant has a five-year term ending on June 30, 2013.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Subsequent Events</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On May 7, 2013, the holders of convertible notes converted the aggregate principal balance of $156,243 and the aggregate interest balance of $11,169 into an aggregate 1,116,082 shares of common stock at the conversion price of $.15 per share. One of the noteholders was Dr. Samuel Herschkowitz, a related party. Dr. Herschkowitz received 357,163 shares in connection with his conversion of the principal balance and interest of $53,574.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has evaluated all other subsequent events through the date of this filing. The Company does not believe there are any other subsequent events that required disclosure.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Interim Financial Statements</b></p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has prepared the unaudited interim financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. These interim financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to present fairly the Company’s financial position, the results of its operations and its cash flows for the interim periods. These interim financial statements should be read in conjunction with the annual financial statements and the notes thereto contained in the Form 10-K filed with the SEC on March 22, 2013. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis. Inventory balances are as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">March 31,</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">December 31,</td>
<td> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">2012</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 74%;">Finished goods</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">103,677</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 10%;">91,008</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Raw materials</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">35,340</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">39,543</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Work-In-Process</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,430</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">14,658</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">141,447</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">145,209</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Estimated useful asset life by classification is as follows:</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0"><tr style="vertical-align: bottom;"><td> </td><td style="padding-bottom: 1pt;"> </td><td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Years</td><td style="padding-bottom: 1pt;"> </td></tr><tr style="vertical-align: bottom;"><td style="text-align: left; width: 85%;">Computers and office equipment</td><td style="width: 1%;"> </td><td style="text-align: left; width: 1%;"> </td><td style="text-align: center; width: 12%;">3</td><td style="text-align: left; width: 1%;"> </td></tr><tr style="vertical-align: bottom;"><td style="text-align: left;">Furniture and fixtures</td><td> </td><td style="text-align: left;"> </td><td style="text-align: center;">5</td><td style="text-align: left;"> </td></tr></table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following summarizes transactions for stock options and warrants for the periods indicated:</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Stock Options (1)</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Warrants (1)</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number of <br />Shares</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Average <br />Exercise <br />Price</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Number of <br />Shares</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Average <br />Exercise <br />Price</td>
<td style="font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 40%;">Outstanding at December 31, 2005</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">17,956</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">1.67</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">20,950</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">2.62</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Issued</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">23,942</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1.67</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">71,826</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.85</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Outstanding at December 31, 2006</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">41,898</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.67</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">92,776</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.25</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Issued</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">5,984</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td
style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">1.67</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">28,502</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.35</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Outstanding at December 31, 2007</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">47,882</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.67</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">121,278</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.04</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,243,292</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.20</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,075,204</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.45</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(11,971</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3.76</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2008</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,291,174</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.26</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,184,511</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.45</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Issued</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">205,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom:
black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.37</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,188,302</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.65</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,496,174</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.27</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,372,813</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.49</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,210,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.17</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,435,662</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.34</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Expired</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(207,956</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.43</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(8,979</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.67</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Exercised</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(128,571</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.46</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,498,218</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.19</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">10,670,925</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.44</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align:
left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,483,334</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.01</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,222,243</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Expired</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(83,941</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.73</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(2,010,917</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.48</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Exercised</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(100,000</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.01</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,797,611</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.11</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">26,882,251</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.23</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,514,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.08</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">11,688,166</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.15</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Expired</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(2,235,368</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.11</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(3,366,455</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.50</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Exercised</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(412,963</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.01</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(71,826</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.01</td>
<td style="text-align:
left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Outstanding at December 31, 2012</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">12,663,566</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.09</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">35,132,136</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.13</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Issued</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">16,560,508</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.076</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">21,128,572</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.12</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(1,274,550</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">0.26</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Outstanding at March 31, 2013</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,224,074</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.08</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,986,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.15</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.5in;">(1)</td>
<td>Adjusted for the reverse stock splits in total at June 6, 2008 and October 20, 2008.</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following summarizes the status of options and warrants outstanding at March 31, 2013:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="3" nowrap="nowrap">Range of Exercise Prices</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">Weighted <br />Average <br />Remaining <br />Life</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td colspan="2">Options:</td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 22%;">0.01</td>
<td style="width: 40%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 15%;">1,414,280</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 15%;">3.26</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.065</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">20,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.95</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.07</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">214,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.44</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.075</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">14,400,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.96</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.079</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,740,508</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.97</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.08</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,300,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9.38</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.088</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">400,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8.82</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.15</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,210,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">$</td>
<td style="text-align: right; padding-bottom: 1pt;">0.35</td>
<td> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">525,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">0.33</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;" colspan="2"><font style="font-size: 10pt;">Total</font></td>
<td> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,224,074</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom:
2.5pt;"> </td>
<td style="text-align: right; padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;" colspan="2"><font style="font-size: 10pt;">Warrants:</font></td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.01</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">200,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.69</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.075</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8,657,746</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.09</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.08</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">7,714,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4.96</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.10</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,228,572</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.58</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.12</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">700,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.13</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">631,429</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.14</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.15</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">25,348,285</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4.50</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.16</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">500,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.02</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.17</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,882,353</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1.02</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.18</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">200,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.86</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.20</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,532,739</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.83</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.25</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,375,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align:
right;">1.49</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.35</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">150,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.25</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">$</td>
<td style="text-align: right;">0.46</td>
<td> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,685,748</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.67</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">$</td>
<td style="text-align: right; padding-bottom: 1pt;">0.65</td>
<td> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">180,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">0.05</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;" colspan="2"><font style="font-size: 10pt;">Total</font></td>
<td> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,986,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="text-align: right; padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table is the listing of stock options and warrants as of March 31, 2013 by year of grant:</p>
<p style="text-align: left; text-indent: 0px; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Stock Options:</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Year</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Price</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">2008</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">993,292</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">$ .01-.35</font></td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">75,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">.35</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,210,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">.15</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">870,988</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">.01</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2012</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">9,514,286</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.07 - .08</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">16,560,508</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">.065 - .088</font></td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"> Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">29,224,074</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">.01-.35</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: left; text-indent: 0px; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="text-align: left; margin-top: 0pt; font: 10pt times new roman, times, serif; margin-bottom: 0pt;">Warrants:</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Year</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2">Price</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">2008</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;">1,592,858</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">$   .13-.46</font></td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">193,207</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.13-.46</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,261,112</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.01-.65</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,222,243</td>
<td style="text-align: left;"> </td>
<td> </td>
<td
style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.075-.25</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2012</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">11,688,166</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">.10 - .20</font></td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">21,128,572</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;"><u>.08 - .15</u></font></td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,986,158</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;"><font style="font-size: 10pt; text-underline-style: double;"><u>$ .01-.65</u></font></td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table presents the shares used in the basic and diluted loss per common share computations:</p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="text-align: center; padding-bottom: 1pt; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">Period from April 23,<br />2002 (Inception) to<br />March 31,</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">2013</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">2012</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black; font-weight: bold;" colspan="2" nowrap="nowrap">2013</td>
<td style="padding-bottom: 1pt; color: black; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Numerator:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: 0px; padding-left: 0in; width: 55%; padding-right: 0px; color: black; padding-top: 0px;">Net loss available in basic and diluted calculation</td>
<td style="width: 1%; color: black;"> </td>
<td style="text-align: left; width: 1%; color: black;">$</td>
<td style="text-align: right; width: 15%; color: black;">(2,101,525</td>
<td style="text-align: left; width: 1%; color: black;">)</td>
<td style="width: 1%; color: black;"> </td>
<td style="text-align: left; width: 1%; color: black;">$</td>
<td style="text-align: right; width: 15%; color: black;">(713,367</td>
<td style="text-align: left; width: 1%; color: black;">)</td>
<td style="width: 1%; color: black;"> </td>
<td style="text-align: left; width: 1%; color: black;">$</td>
<td style="text-align: right; width: 15%; color: black;">(21,392,636</td>
<td style="text-align: left; width: 1%; color: black;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Denominator:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Weighted average common shares outstanding-basic</td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">107,824,939</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">32,664,003</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">13,955,057</td>
<td style="text-align: left; color: black;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Effect of diluted stock options and warrants (1)</td>
<td style="color: black;"> </td>
<td style="text-align: left;
color: black;"> </td>
<td style="text-align: right; color: black;">-</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">-</td>
<td style="text-align: left; color: black;"> </td>
<td style="color: black;"> </td>
<td style="text-align: left; color: black;"> </td>
<td style="text-align: right; color: black;">-</td>
<td style="text-align: left; color: black;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt; text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Weighted average common shares outstanding-basic</td>
<td style="padding-bottom: 1pt; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;">107,824,939</td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"> </td>
<td style="padding-bottom: 1pt; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;">32,664,003</td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"> </td>
<td style="padding-bottom: 1pt; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;">13,955,057</td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: 0px; padding-left: 0px; padding-right: 0px; padding-top: 0px;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: 0px; padding-left: 0px; padding-right: 0px; color: black; padding-top: 0px;">Loss per common share-basic and diluted</td>
<td style="padding-bottom: 2.5pt; color: black;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;">(0.02</td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;">)</td>
<td style="padding-bottom: 2.5pt; color: black;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;">(0.02</td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;">)</td>
<td style="padding-bottom: 2.5pt; color: black;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;">(1.53</td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;">)</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">(1) The number of shares underlying options and warrants outstanding as of March 31, 2013 and March 31, 2012 are 84,210,232 and 31,736,049 respectively. The effect of the shares that would be issued upon exercise of such options and warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The components of deferred income taxes at March 31, 2013 and December 31, 2012 are as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">March 31,</td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap">December 31,</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">2013</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">2012</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: right;" colspan="2"> </td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Deferred Tax Asset:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">Net Operating Loss</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">2,390,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">2,209,000</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Other</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">44,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">73,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Total Deferred Tax Asset</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,434,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2,282,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Less Valuation Allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,434,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,282,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Net Deferred Income Taxes</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Long-term debt is as follows:</p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"><font style="font-size: 10pt;"><b>March 31, </b></font><br /><font style="font-size: 10pt;"><b>2013</b></font></td>
<td nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td style="text-align: center;" colspan="2" nowrap="nowrap"><font style="font-size: 10pt;"><b>December 31,</b></font><br /><font style="font-size: 10pt;"><b>2012</b></font></td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt; width: 70%;"><font style="font-size: 10pt;">Note payable issued on October 26, 2009 to the parents of one the Company’s directors, with interest at 8% to March 31, 2012 and convertible into shares of common stock at $.35 per share. The note was renegotiated in February 2013.</font></td>
<td style="width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">-</font></td>
<td style="width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: right; width: 12%;"><font style="font-size: 10pt;">100,000</font></td>
<td style="width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued on June 12, 2010 to the parents of one of the Company's directors, with interest at 12% to March 31, 2012, and convertible into common stock at $.18 per share. The note was renegotiated in February 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">200,000</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued on December 23, 2010 to the parents of one of our directors, net of a discount with interest at 12%, matures December 23, 2012 and is convertible into common stock at $.084 per share. The note was renegotiated in February 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">16,800</font></td>
<td> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued on September 21, 2010 to the parents of one of our directors, net of a discount, with interest at 12%, matures December 23, 2012 and is convertible into common stock at $.18 per share. The note was renegotiated in February 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">32,000</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">Note payable issued January 1, 2011 to a law firm that accepted this note in full payment of their past due legal fees.  The Note bears interest at 6%, matures December 31, 2014 and is convertible into common stock at $.15 per share. The note was renegotiated in March 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">89,300</font></td>
<td> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">On November 6, 2012 the Company issued four convertible notes at 20% interest, each, net of an aggregate discounts of $0 and $21,138; due on April 6, 2013.</font></td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">156,243</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right;"><font style="font-size: 10pt;">122,774</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt; text-indent: -9pt; padding-left: 9pt;"><font style="font-size: 10pt;">In January 2013, in connection with a private placement offering we issued 8% convertible one year promissory notes in an aggregate principal amount of $300,000 convertible into 2,500,000 shares of common stock assuming a conversion rate of $.12 per share and five year warrants to purchase up to an aggregate of 2,500,000 shares of the corporation’s common stock at an exercise price of $.15 per share. The value of the notes are net discounts of $77,644 in 2013; due in January 2014.  In addition, we issued to the placement agent for these sales five year warrants to purchase an aggregate of 200,000 shares of common stock at an exercise price of $.15 per share.</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">222,356</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td><font style="font-size: 10pt;">Total</font></td>
<td> </td>
<td><font style="font-size: 10pt;">$</font></td>
<td style="text-align: right;"><font style="font-size: 10pt;">378,599</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 10pt;">$</font></td>
<td style="text-align: right;"><font style="font-size: 10pt;">560,874</font></td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;"><font style="font-size: 10pt;">Less amount due within one year</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size:
10pt;">378,599</font></td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 10pt;">471,574</font></td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"><font style="font-size: 10pt;">Long-Term Debt</font></td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.25pt double;"><font style="font-size: 10pt;">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right;"><font style="font-size: 10pt;">-</font></td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.25pt double;"><font style="font-size: 10pt;">$</font></td>
<td style="border-bottom: black 2.25pt double; text-align: right;"><font style="font-size: 10pt;">89,300</font></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Principal payments required during the 12 month periods ended March 31:</p><p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p><table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0"><tr style="background-color: #ccffcc; vertical-align: bottom;"><td style="text-align: left; width: 87%;">2014</td><td style="width: 1%;"> </td><td style="text-align: left; width: 1%;">$</td><td style="text-align: right; width: 10%;">378,599</td><td style="text-align: left; width: 1%;"> </td></tr></table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s rent obligation for the next five years is as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 82%;">2014</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 15%;">36,000</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2015</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">37,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2016</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">38,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2017</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">39,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2018</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">3,600</td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The inputs to the Black-Scholes model during 2009, 2010, 2011, 2012 and 2013 were as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: top;">
<td style="width: 80%;"><font style="font-size: 10pt;">Stock price</font></td>
<td style="width: 2%;"> </td>
<td style="text-align: center; width: 18%;"><font style="font-size: 10pt;">$ .05 to $.50</font></td>
</tr>
<tr style="background-color: white; vertical-align: top;">
<td><font style="font-size: 10pt;">Exercise price</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">$ .01 to $.65</font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: top;">
<td><font style="font-size: 10pt;">Expected life</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">2.0 to 6.5 years</font></td>
</tr>
<tr style="background-color: white; vertical-align: top;">
<td><font style="font-size: 10pt;">Expected volatility</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">54% to 66%</font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: top;">
<td><font style="font-size: 10pt;">Assumed dividend rate</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">- %</font></td>
</tr>
<tr style="background-color: white; vertical-align: top;">
<td><font style="font-size: 10pt;">Risk-free interest rate</font></td>
<td> </td>
<td style="text-align: center;"><font style="font-size: 10pt;">.13% to 2.97%</font></td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The original valuations, annual gain/(loss) and end of year valuations are shown below:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 1pt; padding-left: 0px; padding-right: 0px;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at </font><br /><font style="font-size: 7pt;">12/31/09</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2010 Gain (Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at </font><br /><font style="font-size: 7pt;">12/31/10</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2011 Gain (Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at</font><br /><font style="font-size: 7pt;">12/31/2011</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2012</font><br /><font style="font-size: 7pt;">Gain </font><br /><font style="font-size: 7pt;">(Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at</font><br /><font style="font-size: 7pt;">12/31/2012</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">2013 Gain </font><br /><font style="font-size: 7pt;">(Loss)</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: center; color: black;" colspan="2" nowrap="nowrap"><font style="font-size: 7pt;">Value at </font><br /><font style="font-size: 7pt;">3/31/2013</font></td>
<td style="padding-bottom: 1pt; color: black;" nowrap="nowrap"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="vertical-align: bottom;">
<td style="padding-bottom: 0px; padding-left: 0px; padding-right: 0px;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: center;" colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td colspan="2"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 0px; padding-left: 0px; width: 19%; padding-right: 0px; color: black;"><font style="font-size: 7pt;">January 1, 2009 adoption</font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td
style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">870,278</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">868,772</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">1,506</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">(88,290</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">89,796</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">(21,856</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">111,652</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">14,080</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="text-align: right; width: 6%; color: black;"><font style="font-size: 7pt;">97,572</font></td>
<td style="text-align: left; width: 1%; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 6/30/2009</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">149,007</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">147,403</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">1,604</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(4,689</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,293</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,293</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom:
0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 9/30/2009</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">40,481</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">40,419</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">62</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(1,562</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">1,624</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">910</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">714</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">681</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">33</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 12/31/2009</font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">12,081</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">12,053</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">28</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">(724</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">752</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">78</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">337</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left;
padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">337</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: right; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Subtotal</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">1,071,847</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 3/31/2010</font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">25,014</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">539</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(5,571</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,109</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">3,701</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">2,408</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">2,408</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font
style="font-size: 7pt;">Warrants issued in quarter ended 6/30/2010</font></td>
<td><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">30,740</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">592</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">(6,122</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,714</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">6,083</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">631</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">631</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: right; color: black;"><font style="font-size: 7pt;">-</font></td>
<td style="text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Warrants issued in quarter ended 9/30/2010</font></td>
<td style="padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right;"><font style="font-size: 7pt;"> </font></td>
<td style="text-align: left; padding-bottom: 1pt;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">20,811</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">10,615</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">(44,160</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">54,775</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">1,338</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">53,437</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">1,622</font></td>
<td style="text-align: left;
padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: left; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 1pt solid; text-align: right; color: black;"><font style="font-size: 7pt;">51,815</font></td>
<td style="text-align: left; padding-bottom: 1pt; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: right; padding-bottom: 0px; padding-left: 0px; padding-right: 0px; color: black;"><font style="font-size: 7pt;">Total</font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">1,071,847</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">1,145,212</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">14,946</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">(151,118</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">166,063</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">(3,453</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;">)</font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">169,179</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">19,422</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
<td style="border-bottom: black 2.5pt double; text-align: left; color: black;"><font style="font-size: 7pt;">$</font></td>
<td style="border-bottom: black 2.5pt double; text-align: right; color: black;"><font style="font-size: 7pt;">149,757</font></td>
<td style="text-align: left; padding-bottom: 2.5pt; color: black;"><font style="font-size: 7pt;"> </font></td>
</tr>
</table>
91008
103677
39543
35340
14658
2430
P5Y
P3Y
1000000
5619000
300000
2412000
0.04
75000
95
150000
0.35
0.65
0.46
0.18
0.084
0.20
0.10
1.67
2013-06-30
0
0
22000
0
58277
100000
122152832
29224074
54986158
200000
1414280
20000
8657746
7714286
214286
2228572
14400000
700000
1740508
631429
25348285
500000
2532739
150000
2685748
200000
1375000
1882353
9300000
400000
1210000
525000
180000
1592858
993292
1243292
75000
193207
2261112
1210000
18222243
870988
11688166
9514286
21128572
16560508
0.01
0.01
0.065
0.075
0.08
0.07
0.1
0.075
0.12
0.079
0.13
0.15
0.16
0.20
0.35
0.46
0.18
0.25
0.17
0.08
0.088
0.15
0.35
0.65
0.102
0.336
0.35
0.01
0.13
0.46
0.35
0.13
0.46
0.01
0.65
0.15
0.0126
0.3412
0.25
0.075
0.01
0.01
0.0111
0.096
0.01
0.35
0.10
0.20
0.08
0.07
0.65
0.014261
0.036616
0.01
0.01
0.35
0.65
0.08
0.15
0.065
0.088
P2Y6M
P7Y6M
P2Y6M
P2Y
P6Y6M
P2Y
P6Y6M
P2Y
P6Y6M
P3Y
P10Y
P2Y
P6Y6M
P3Y
P5Y
P10Y
P2Y8M9D
P3Y3M4D
P2Y
P6Y6M
P9Y11M12D
P1Y1M2D
P4Y11M16D
P9Y5M9D
P1Y6M29D
P9Y11M16D
P5Y
P2Y1M20D
P9Y11M19D
P1Y1M21D
P4Y6M
P1Y7D
P9M29D
P3M
P8M1D
P10M10D
P1Y5M27D
P1Y7D
P9Y4M17D
P8Y9M26D
P2Y1M21D
P3M29D
P18D
0.0200
0.0013
0.0013
0.0013
0.0034
0.0013
0.0013
0.0450
0.0297
0.0297
0.0297
0.0244
0.0297
0.0297
0.0000
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.5300
0.54
0.54
0.54
0.54
0.54
0.54
0.6600
0.66
0.66
0.66
0.66
0.66
0.66
100000
The Company compiled historical volatilities over a period of 2 to 7 years of 15 small-cap medical companies traded on major exchanges and 10 mid-range medical companies on the OTC Bulletin Board and combined the results using a weighted average approach.
P5Y
P24M
P22M
P18M
P24M
P24M
170000
2008-04-30
2014-01-31
2012-03-31
2012-12-23
2012-03-31
2012-12-23
2014-12-31
100000
200000
32000
16800
50000
50000
50000
27500
27500
51243
50000
200000
1111112
320000
200000
1595239
96613
7232
0.0137
0.0033
0.0180
0.0033
0.0180
0.63
0.54
0.59
0.66
0.59
25839492
0.08
P8Y9M29D
244494
P16M
Under the terms of the Company's agreement with investors in the October 2008 financing, 1,920,000 shares of common stock were the maximum number of shares allocated to the Company's existing shareholders at the time of the offering (also referred to as the original shareholders or the "Founders"). Since the total of the Company's fully diluted shares of common stock was greater than 1,920,000 shares, in order for the Company to proceed with the offering, the Board of Directors approved a reverse stock split of 1-for-1.2545. After this split was approved, additional options and warrants were identified, requiring a second reverse stock split in order to reach the 1,920,000 shares. The second reverse stock split on the reduced 1-for-1.2545 balance was determined to be 1-for-1.33176963. Taken together, if only one reverse stock split was performed, the number would have been a reverse stock split of 1-for-1.670705. On June 6, 2008, the Board of Directors approved the first reverse stock split. The authorized number of shares of common stock of 20,000,000 was proportionately divided by 1.2545 to arrive at 15,942,607. On October 20, 2008, the Board of Directors (i) approved the second reverse stock split pursuant to which the authorized number of shares of common stock of 15,942,607 was proportionately divided by 1.33177 to arrive at 11,970,994 shares and (ii) approved a resolution to increase the number of authorized shares of the Company's common stock from 11,970,994 to 40,000,000, which was approved by the Company's shareholders holding a majority of the shares entitled to vote thereon at a special meeting of shareholders held on December 3, 2008.
0.12
21138
300000
2500000
0.065
0.12
0.15
0.15
0.24
0.08
20000000
0.08
0.15
0.15
-713367
-2101525
-21392636
32664003
107824939
13955057
32664003
107824939
13955057
31736049
84210232
2209000
2390000
73000
44000
2282000
2434000
2282000
2434000
0
0
1.00
10242000
2017
560874
16800
100000
200000
32000
89300
122774
0
378599
0
0
0
0
0
156243
222356
471574
378599
378599
2010-06-12
2010-12-23
2009-10-26
2010-09-21
2011-01-01
2012-11-06
0.12
0.12
0.08
0.12
0.06
0.20
0.12
0.18
0.084
0.35
0.18
0.15
2013-04-06
0
26408
February 2013
February 2013
February 2013
February 2013
March 2013
36000
37000
38000
39000
3600
five years
17690
2018-01-31
0.35
0.05
0.50
0.05
0.50
0.05
0.50
0.05
0.50
0.05
0.50
0.46
0.01
0.65
0.01
0.65
0.01
0.65
0.01
0.65
0.01
0.65
1071847
1071847
-3453
169179
1145212
14946
-151118
166063
149757
19422
-21856
868772
-88290
14080
6293
147403
-4689
0
910
40419
-1562
681
78
12053
-724
0
3701
25014
-5571
2408
6083
30740
-6122
631
1338
20811
-44160
1622
870278
111652
1506
89796
97572
149007
0
1604
6293
0
40481
714
62
1624
33
12081
337
28
752
337
2408
539
6109
0
631
592
6714
0
53437
10615
54775
51815
479910
0.22
0.50
486564
6654
25000
3000000
30000
2000
46000
10000
0.20
0.2000
0.20
600000
156243
300000
84657
300000
300000
60000
4615385
4615385
42700000
600000
1546667
7500000
277778
0.09
30000
0.15
26500000
26500000
0.014
0.065
1562430
155000
2013-04-30
2013-08-31
(i) financing raising not less than $1 million, compensation of $75,000; (ii) a going private transaction, compensation of $200,000 and (iii) 3% of the gross proceeds of the NASDAQ underwriting, which payment shall under no circumstances be less than $200,000 or greater than $3,000,000.
25000
0.065
0
597282
0
15000
0
497902
0
15000
15000
156243
357163
53574
16000000
0.20
0.24
0.20
2000000
4000000
listing the Company's shares on NASDAQ pursuant to an underwritten offering of the Company's securities resulting in gross proceeds of between $5 million and $30 million then the Company shall deliver to Dr. Herschkowitz the following compensation: (A) $75,000 upon consummating the shell merger, (B) $150,000 upon consummating the qualifying financing round and (C) 3% of the gross proceeds of the NASDAQ underwriting, which payment shall under no circumstances be less than $200,000 or greater than $1,000,000. The Company shall reimburse Dr. Herschkowitz at his actual out-of-pocket cost for reasonable expenses incurred in connection with the shell transactions but in no event in an amount greater than $10,000.
Founders shares, 1,000,000 pre-split
23,492 (40,000 pre-split) shares valued at $.0167 per share as compensation for loan guarantees by management
Compensation for loan guarantees by management
Conversion of convertible notes by management
Investment, "October 2008 financing"
Investment including 670 shares issued as a 10% finder's fee
For payment of patent legal fees
For vendor contractual consideration
Employment agreements
Investment
Adjusted for the reverse stock splits in total at June 6, 2008 and October 20, 2008.
The shares reduce by 1/3 yearly and are returned to the Company as the debt is paid.
The Company purchased shares previously issued to a former officer equal to the cost of withholding taxes advanced by the Company. The value here represents the net pay from the transaction that was retained by the Company.
The number of shares underlying options and warrants outstanding as of March 31, 2013 and March 31, 2012 are 84,210,232 and 31,736,049 respectively. The effect of the shares that would be issued upon exercise of such options and warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.
21138
185299
0001446159bior:SokPartnersMember2012-12-31
240000
357282
13110
00014461592013-04-012013-04-30
2013-08-31