----

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| T | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Delaware                                                       | 86-0515678                           |
|----------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| 25 Fairchild Avenue - Suite 250, Plainview, New York | 11803      |
|------------------------------------------------------|------------|
| (Address of principal executive offices)             | (Zip Code) |

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| Large accelerated filer  o                                             | Accelerated filer  o         |
|----------------------------------------------------------------------------------|----------------------------------------|
| Non-accelerated filer  o (Do not check if a smaller reporting company) | Smaller reporting company  T |

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| • | our ability to raise capital to finance our research and development and operations, when needed and on terms advantageous to us; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------|

| • | our ability to manage growth, profitability and marketability of our products; |
|---------|--------------------------------------------------------------------------------|

| • | general economic and business conditions; |
|---------|-------------------------------------------|

| • | the effect on our business of recent credit-tightening throughout the United States and the world, especially with respect to federal, state, local and foreign government procurement agencies, as well as quasi-public, charitable and private emergency response organizations; |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | the effect on our business of recently reported losses within the financial, banking and other industries and the effect of such losses on the income and financial condition of our potential clients; |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | the impact of developments and competition within the industries in which we intend to compete |
|---------|------------------------------------------------------------------------------------------------|

| • | adverse results of any legal proceedings; |
|---------|-------------------------------------------|

| • | the impact of current, pending or future legislation and regulation on water safety, including, but not limited to, changes in zoning and environmental laws and regulations within our target areas of operations; |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | our ability to maintain and enter into relationships with suppliers, vendors and contractors of acceptable quality of goods and services on terms advantageous to us; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | the volatility of our operating results and financial condition; |
|---------|------------------------------------------------------------------|

| • | our ability to attract and retain qualified senior management personnel; and |
|---------|------------------------------------------------------------------------------|

| • | the other risks and uncertainties detailed in this Form 10-K and, from time to time, in our other filings with the Securities and Exchange Commission. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Item 1. | Business. |
|---------|-----------|

----

----

|   | 1. | The first are those which are essentially very large, not very mobile, almost “fixed” installation units used primarily for long term solutions with a significant amount of lead time.  They include:   GE, Siemens, and Severn Trent, all of which manufacture large containerized systems. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | The second group includes those products that are smaller, cheaper, lighter in weight, but still unable to respond quickly because of their limited purification capabilities (the unit needs to be prepared in advance for the type of contamination it will face.)  These are: Ecospheres Technology, Lenntech, Testa/Viwa and Lifekeeper. None of these systems would fall in to the first responder category. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3. | The third group is the  category made up of specialty units designed to be either much lower cost, use only green power (with the significant limitations caused by that), or meet a specialized and limited need.  This list includes Mobile MaxPure, Bi Pure Water and Rodi which, while they have a trailer mounted system, have no on board power source. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 4. | The fourth group includes those companies which have similar claims and design characteristics as PureSafe System but have shortfalls in their application to the first responder market. These companies include: Global Water Group which manufactures different size systems with options which include the trailer, generator, treatment, and salinity options. Nirosoft manufacturers systems capable of processing different sources, but has limitations on fuel storage and output. LifeStream has limitations on the inbound source and has a soft side trailer which provides no security from the elements for the components. Aquapura Tempest has different types of units depending on the source. None of these companies stock units ready to deploy, none have distribution/packaging capability, none have built in redundant systems, and few have the capability of field service training and support. Some require previous source definition and when ordering require additional decisions on option selections which can be complicated and confusing especially when dealing with the unknown. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | • | The Domestic US market. The entry into the US market will be our primary target during the first year of production of the PureSafe FRWS. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | International Markets. The entry into foreign markets will require strategic partnerships with well established companies. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------|

|   | • | Strategic Alliances – We intend to enter into strategic alliances with special advisors and organizations already integrated in the water industry both domestically and internationally. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Direct Marketing and Sales – Richard Pellerito has been appointed Vice President of Technical Sales. Richard has many years of experience in the water industry and will be assembling a highly qualified sales organization in the United States. Chief Peter Hayden (Ret), formerly Chief of the New York City Fire Department, will serve as Vice President-Senior Government Liaison. Chief Hayden has extensive relationships in the first responder communities. The Company will be marketing directly and through representatives to local municipalities, first responders, national public emergency management agencies and military organizations that are responsible for first response emergency situations, including those involved in planning emergency preparedness plans. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Advertising – We plan to advertise in a number of leading trade magazines, such as Fire Chief, Fire House, SIGNAL Magazine, Homeland First Response, Journal and Disaster Management and Response. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | • | Trade Show Participations –We plan to participate in key industry trade shows in the United States, Israel, Europe and other regions throughout the world.  We also plan to participate in Federal Emergency Management Agency (FEMA) and first responders conferences in the United States. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Onsite Demonstration- We plan to conduct onsite demonstrations with potential clients as required and when feasible. The Company has a fully functional prototype unit available for demonstrations and expects to have fully functional production units available for demonstration in the United States by April 30, 2010. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Web Based Marketing – We will utilize pay-per-click as well as natural Search Engine Optimization (SEO) optimization techniques to generate traffic to our website, www.puresafewatersystems.com.  We also plan to publish our website address in our public relations campaigns.  This strategy is expected to generate leads from potential clients for follow up by our direct sales organization.  The contents of our website do not constitute a part of this Annual Report on Form 10-K. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Clear Branding Message – We plan to convey clear differentiating brand marketing messages to highlight our brand and product attributes on our website and in our promotional campaigns.  The marketing messages will be designed for decision makers in our targeted markets. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Public and Investor Relations Campaign – We plan to implement an active public and investor relations campaign as part of our over-all marketing plan.  We recognize that a well coordinated public relations campaign is as valuable as or more valuable than paid advertising with no organized campaign. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | · | On February 1, 2010 the Board approved the request of HEI to convert $ 90,000 of debt to 1,764,706 shares of common stock .The conversion price is. $0.051 which is the closing price published on OTCBB.com on the date of the approval of such request.  As of March 31, 2010, the shares have not been issued. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On February 19, 2010 the Board approved the request of HEI to convert a $ 90,000 promissory note dated September 28, 2009 and $ 5,780.52 of accrued interest into 1,741,464 shares of common stock. The conversion price is $0.055 which is the closing price published on the OTCBB.com on the date of the approval of such request. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 1A. | Risk Factors. |
|----------|---------------|

|   | · | expand and enhance our administrative infrastructure; |
|--------|--------|-------------------------------------------------------|

|   | · | improve our management, financial and information systems and controls; |
|--------|--------|-------------------------------------------------------------------------|

|   | · | expand, train and manage our employees effectively; and |
|--------|--------|---------------------------------------------------------|

|   | · | successfully retain and recruit additional employees. |
|--------|--------|-------------------------------------------------------|

----

----

| Item 1B. | Unresolved Staff Comments. |
|----------|----------------------------|

| Item 2. | Properties. |
|---------|-------------|

| Item 3. | Legal Proceedings. |
|---------|--------------------|

| Item 4. | Reserved. |
|---------|-----------|

| Item 5. | Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
|---------|--------------------------------------------------------------------------------------------------|

----

| Quarter Ended      |   | High Bid Price |   |   | Low Bid Price |   |
|--------------------|--------|----------------|--------|--------|---------------|--------|
| March 31, 2008     |   | $              | 0.14   |   |          | $      | 0.03 |   |
| June 30, 2008      |   |           | 0.11   |   |          |   | 0.08 |   |
| September 30, 2008 |   |           | 0.08   |   |          |   | 0.04 |   |
| December 31, 2008  |   |           | 0.05   |   |          |   | 0.02 |   |
|               |   |           |   |   |          |   |   |   |
| March 31, 2009     |   |           | 0.05   |   |          |   | 0.02 |   |
| June 30, 2009      |   |           | 0.08   |   |          |   | 0.04 |   |
| September 30, 2009 |   |           | 0.08   |   |          |   | 0.04 |   |
| December 31, 2009  |   |           | 0.07   |   |          |   | 0.04 |   |

| Plan Category                                              |   | Number of securities to be issued upon exercise of outstanding options, warrants and rights(A) |       |   | Weighted-average exercise price of outstanding options, warrants and rights(B) |   |   | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))(C) |   |
|------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------|------------|--------|--------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Equity compensation plans approved by security holders     |   |                                                                                           | 6,750,000  |   |                                                                           | $      | 0.0413 |                                                                                                                                           |   |   | 18,500,000 |   |
|                                                       |   |                                                                                           |       |   |                                                                           |   |   |                                                                                                                                           |   |   |   |   |
| Equity compensation plans not approved by security holders |   |                                                                                           | 17,656,666 |   |                                                                           | $      | 0.0951 |                                                                                                                                           |   |   | 0 |   |
|                                                       |   |                                                                                           |       |   |                                                                           |   |   |                                                                                                                                           |   |   |   |   |
| Total                                                      |   |                                                                                           | 24,406,666 |   |                                                                           | $      | 0.0798 |                                                                                                                                           |   |   | 18,500,000 |   |

----

| Date of Grant/Issuance |   | Number of Warrants Granted |   | Exercise Price |   | Expiration Date |   | Name of Holder, if a Director or Executive Officer |
|------------------------|--------|----------------------------|--------|----------------|--------|-----------------|--------|----------------------------------------------------|
| 03/29/07               |   | 2,000,000                  |   | 0.1100         |   | 03/29/10        |   | President & CEO                                |
| 03/29/07               |   | 2,000,000                  |   | 0.1175         |   | 03/29/10        |   |                                               |
| 05/16/07               |   | 2,000,000                  |   | 0.1100         |   | 05/16/10        |   |                                               |
| 05/23/07               |   | 1,100,000                  |   | 0.1100         |   | 05/23/10        |   | Ronald Hart (formal director)                      |
| 09/28/07               |   | 2,000,000                  |   | 0.0700         |   | 09/28/10        |   | Director and CFO                                   |
| 12/14/07               |   | 3,000,000                  |   | 0.0540         |   | 12/14/11        |   |                                               |
| 04/23/07               |   | 2,000,000                  |   | 0.1100         |   | 04/23/10        |   |                                               |
| 02/12/08               |   | (2,000,000) Cancellation   |   | 0.1100         |   |            |   |                                               |
| 02/12/08               |   | 666,666                    |   | 0.1100         |   | 04/23/10        |   |                                               |
| 03/14/08               |   | 500,000                    |   | 0.0667         |   | 03/14/11        |   | Malcolm Hoenlein, director                         |
| 04/16/08               |   | 45,000                     |   | 0.0853         |   | 04/16/11        |   |                                               |
| 04/16/08               |   | 45,000                     |   | 0.0853         |   | 04/16/11        |   |                                               |
| 07/30/08               |   | 50,000                     |   | 0.0580         |   | 07/30/11        |   |                                               |
| 07/30/08               |   | 250,000                    |   | 0.0580         |   | 07/30/11        |   |                                               |
| 04/17/09               |   | 4,000,000                  |   | 0.0410         |   | 04/17/2014      |   | President & CEO                                |

| • | select the persons to whom awards will be granted, |
|---------|----------------------------------------------------|

| • | grant awards, |
|---------|---------------|

| • | determine the number of shares to be covered by each award, |
|---------|-------------------------------------------------------------|

| • | determine the type, nature, amount, pricing, timing and other terms of each award, and |
|---------|----------------------------------------------------------------------------------------|

| • | interpret, construe and implement the provisions of the 2008 Plan, including the authority to adopt rules and regulations. |
|---------|----------------------------------------------------------------------------------------------------------------------------|

| • | employees, including officers, |
|---------|--------------------------------|

| • | directors, |
|---------|------------|

| • | consultants and |
|---------|-----------------|

| • | advisors. |
|---------|-----------|

| • | stock options, |
|---------|----------------|

| • | stock bonuses, |
|---------|----------------|

| • | restricted stock, |
|---------|-------------------|

| • | stock appreciation rights, commonly referred to as “SARs,” |
|---------|------------------------------------------------------------------------|

| • | performance grants and |
|---------|------------------------|

| • | other types of awards. |
|---------|------------------------|

| Item 6. | Selected Financial Data. |
|---------|--------------------------|

----

| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
|---------|----------------------------------------------------------------------------------------------|

|   | · | Capability of delivering 30,000 gallons of potable water per day rather than the 10,000 capacity of the prototype. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------|

|   | · | Significant advancement on maintenance requirement.  Maintenance personnel can step into the unit to change filters and provide other maintenance services. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Automatic water bagging machine integrated into the system.  The FRWS can now produce 1,800 1⁄2 liter bags of water automatically. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Filling station integrated into the system.  The bottle filling capability is now inside the system to prevent any type of external damage.  The prototype had a drop down table for this purpose. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Integrated diesel generator.  The diesel generator is an integral part of the system and can operate for up to 90 hours without refueling. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Raising $5 million in capital in two tranches, $2.5 million within the first six months of 2010 and an additional $2.5 million in the fourth quarter of 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The completion of 45 commercial PureSafe FRWS units, with full operational capability.  We believe that with acceptable levels of capital, 45 units can be produced of which 35 will be sold and ten will remain in inventory. The ramp up to full production capability of 20 units per month is targeted for the third quarter of 2010. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expand production capability to meet the expected demand for the FRWS domestically by a combination of expanding the production facility of PureSafe Manufacturing and Research Corporation, and outsourcing to an identified facility. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Identify strategic partners in specific overseas markets that have the production, distribution, maintenance and training capability to produce, distribute, maintain and train personnel in the operation of our system. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | To have the first two production units certified by the WQA (Water Quality Association) and UL (Underwriters Laboratory). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | To enter into a pilot program with Nassau County New York to field test the units. |
|--------|--------|------------------------------------------------------------------------------------|

|   | · | Filing of all required foreign patent applications for the PureSafe FRWS.  We will identify all the potential markets in which we need patent protection. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Following our Operating Business Plan (OBP) to achieve the results anticipated in the OBP and our Cash Flow Projections. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | Initial penetration into target markets; we are participating in water industry conferences.  Our special advisors are contacting strategic potential customers and we are starting to identify strategic partners for selected international markets. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To follow our marketing and sales projections by hiring a Vice President of Marketing to achieve sales by the second quarter of 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Chief Peter Hayden will become a full time Vice President – Senior Government Liaison and will identify first responder users of our system. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Honorable Michael Balboni, former New York State Senator and Deputy Secretary  of Public Safety for the State of new York joined us as a Special Advisor in October 2009.  We expect to make full use of Mr. Balboni’s knowledge and contacts. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Locating additional board members. Henry (Bob) Hidell will be joining the Board.  We are seeking two additional outside Board members who can bring a level of professionalism, independence, recognized success either in business or academia and an unquestionable level of ethical behavior. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Recognizing revenue produced by sales of PureSafe FRWS units. We believe that, as the production process moves in tandem with our marketing initiatives, we shall start to receive orders for the FRWS. Richard Pellerito has become Vice President of Technical Sales.  We expect that the extent of his knowledge and experience will move us in the direction of achieving sales. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | a. | We paid approximately $360,000 to Bircon Ltd for research and development for our prototype in the nine months ended September 30, 2008 and made no such payments in the same period of 2009; |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | Our Chief Executive Officer, Chief Financial Officer and some of our consultants agreed to defer their compensation since August 2008 so we can utilize the limited funds in a more productive way. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                    |   | Years Ended December 31, |
|-------------------------|--------|--------------------------|
|                    |   | 2009                     |   | 2008 |
| Risk-free interest rate |   |                     | 2 | % |   |   | 3 | % |
| Expected life, in years |   |                     | 3 |   |   |   | 3 |   |
| Expected volatility     |   |                     | 83 | % |   |   | 83 | % |

----

----

| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk. |
|----------|-------------------------------------------------------------|

| Item 8. | Financial Statements and Supplementary Data. |
|---------|----------------------------------------------|

| Item                                                                                                                | Page * |
|---------------------------------------------------------------------------------------------------------------------|--------|
| Report of Independent Registered Public Accounting Firm                                                             | 24     |
| Consolidated Balance Sheets as of December 31, 2009 and 2008                                                        | 25-26  |
| Consolidated Statements of Operations for the Years Ended December 31, 2009 and 2008                                | 27     |
| Consolidated Statements of Changes in Stockholders’ Deficiency for the Years Ended December 31, 2009 and 2008 | 28-34  |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2008 and 2007                                | 35-36  |
| Notes to Consolidated Financial Statements                                                                          | 37-59  |

----

----

|                                                                                                                                                                                                                                           |   | December 31, |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|
|                                                                                                                                                                                                                                           |   | 2009         |        |   | 2008 |   |
| ASSETS                                                                                                                                                                                                                                         |   |
| Current Assets:                                                                                                                                                                                                                                |   |         |        |   |   |   |
| Cash                                                                                                                                                                                                                                           |   | $            | 107,424     |   |   | $ | 29,411 |   |
| Inventories                                                                                                                                                                                                                                    |   |         | 97,115      |   |   |   | -- |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                      |   |         | 120,083     |   |   |   | 53,890 |   |
| Total Current Assets                                                                                                                                                                                                                           |   |         | 324,622     |   |   |   | 83,301 |   |
|                                                                                                                                                                                                                                           |   |         |        |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation of $33,356 and $17,130, at December 31, 2009 and 2008, respectively                                                                                                                    |   |         | 115,551     |   |   |   | 142,437 |   |
| Patents and trademarks, net of accumulated amortization of $23,504 and $17,882, at December 31, 2009 and 2008, respectively                                                                                                                    |   |         | 68,980      |   |   |   | 62,044 |   |
| Other assets                                                                                                                                                                                                                                   |   |         | 20,500      |   |   |   | 26,860 |   |
| TOTAL ASSETS                                                                                                                                                                                                                                   |   | $            | 529,653     |   |   | $ | 314,642 |   |
|                                                                                                                                                                                                                                           |   |         |        |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                                                                                                                                                                                       |   |
| Current Liabilities:                                                                                                                                                                                                                           |   |         |        |   |   |   |   |   |
| Accounts payable and accrued expenses                                                                                                                                                                                                          |   | $            | 656,242     |   |   | $ | 410,925 |   |
| Accrued compensation                                                                                                                                                                                                                           |   |         | 84,000      |   |   |   | 155,000 |   |
| Accrued consulting and director fees                                                                                                                                                                                                           |   |         | 140,000     |   |   |   | 178,000 |   |
| Convertible notes payable to officer and director (including accrued interest of $14,685 and $12,171 and net of debt discount of $14,706 and $0, at December 31, 2009 and 2008, respectively)                                                  |   |         | 99,979      |   |   |   | 186,891 |   |
| Convertible promissory note (including accrued interest of $9,194 and $208 and net of debt discount of $104,214 and $19,283, at December 31, 2009 and 2008, respectively)                                                                      |   |         | 279,980     |   |   |   | 30,925 |   |
| Promissory notes payable (including accrued interest of $127,221 and $269,833, at December 31, 2009 and 2008, respectively)                                                                                                                    |   |         | 285,443     |   |   |   | 553,056 |   |
| Fair value of detachable warrants and options                                                                                                                                                                                                  |   |         | 286,100     |   |   |   | 121,100 |   |
| Fair value of embedded conversion options                                                                                                                                                                                                      |   |         | 197,900     |   |   |   | 164,900 |   |
| Accrued dividends payable                                                                                                                                                                                                                      |   |         | 190,328     |   |   |   | 190,328 |   |
| Total Current Liabilities                                                                                                                                                                                                                      |   |         | 2,219,972   |   |   |   | 1,991,125 |   |
|                                                                                                                                                                                                                                           |   |         |        |   |   |   |   |   |
| Long Term Liabilities:                                                                                                                                                                                                                         |   |         |        |   |   |   |   |   |
| Notes Payable                                                                                                                                                                                                                                  |   |         | 284,624     |   |   |   | -- |   |
| Notes payable to officers and directors                                                                                                                                                                                                        |   |         | 239,000     |   |   |   | -- |   |
| Total Long Term Liabilities                                                                                                                                                                                                                    |   |         | 523,624     |   |   |   | -- |   |
| TOTAL LIABILITIES                                                                                                                                                                                                                              |   |         | 2,743,596   |   |   |   | 1,991,125 |   |
|                                                                                                                                                                                                                                           |   |         |        |   |   |   |   |   |
| Stockholders' Deficiency:                                                                                                                                                                                                                      |   |         |        |   |   |   |   |   |
| Preferred stock $.001 par value; 10,000,000 shares authorized; 184,144  shares issued and outstanding at December 31, 2009 and 2008, (liquidation preference $2,592,250 and $2,483,950, at December 31, 2009 and 2008, respectively) |   |         | 184         |   |   |   | 184 |   |
| Common stock, $.001 par value; 450,000,000 authorized; 272,162,945 shares issued and 272,158,545 shares outstanding at December 31, 2009; 244,850,034 shares issued and 244,845,634 outstanding at  December 31, 2008                |   |         | 272,162     |   |   |   | 244,849 |   |
| Additional paid-in capital                                                                                                                                                                                                                     |   |         | 30,086,795  |   |   |   | 28,528,973 |   |
| Treasury Stock, at cost, 4,400 shares of common stock                                                                                                                                                                                          |   |         | (5,768      | ) |   |   | (5,768 | ) |
| Subscriptions receivable - related party  (including accrued interest of $33,076 and $12,914, at December 31, 2009 and 2008, respectively)                                                                                           |   |         | (370,276    | ) |   |   | (350,114 | ) |
| Accumulated deficit (including $17,665,444 and $15,563,011 of deficit accumulated during development stage at December 31, 2009 and December 31, 2008, respectively)                                                                           |   |         | (32,197,040 | ) |   |   | (30,094,607 | ) |
| Total Stockholders’ Deficiency                                                                                                                                                                                                           |   |         | (2,213,943  | ) |   |   | (1,676,483 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                                                                                                                                                                                 |   | $            | 529,653     |   |   | $ | 314,642 |   |

----

|                                                                                                                                                                                                                     |   | Years Ended December 31, |        |   | January 1, 2002 to December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|-------------|--------|------------------------------------------------|--------|
|                                                                                                                                                                                                                     |   | 2009                     |        |   | 2008                                           |   |   |   |
| Sales                                                                                                                                                                                                                    |   | $                        | --          |   |                                           | $      | -- |   |   | $ | 471,290 |   |
| Costs and expenses (income):                                                                                                                                                                                             |   |                     | --          |   |                                           |   | -- |   |   |   |   |   |
| Cost of Sales                                                                                                                                                                                                            |   |                     | --          |   |                                           |   | -- |   |   |   | 575,680 |   |
| Selling, general and administrative, including stock-based compensation of $716,313 and $490,689 for the years ended December 31, 2009 and  2008 and $3,378,807 for the period January 1, 2002 to Dec 31, 2009 |   |                     | 1,897,639   |   |                                           |   | 1,909,982 |   |   |   | 10,821,567 |   |
| Non-dilution agreement termination costs                                                                                                                                                                                 |   |                     | --          |   |                                           |   | -- |   |   |   | 2,462,453 |   |
| Research and development                                                                                                                                                                                                 |   |                     | 179,919     |   |                                           |   | 270,405 |   |   |   | 885,687 |   |
| Interest expense - including interest expense to a related party of $86,992 and $7,008 for the years ended December 31, 2009 and 2008, respectively, and $220,765 for the period Jan 1, 2002 to December 31, 2009        |   |                     | 144,592     |   |                                           |   | 93,092 |   |   |   | 1,661,312 |   |
| Financing costs - extension of warrants                                                                                                                                                                                  |   |                     | --          |   |                                           |   | -- |   |   |   | 74,700 |   |
| Interest expense - conversion provision                                                                                                                                                                                  |   |                     | --          |   |                                           |   | -- |   |   |   | 113,000 |   |
| (Gain) loss on settlement of debt                                                                                                                                                                                        |   |                     | (202,717    | )      |                                           |   | (384,114 | ) |   |   | 2,027,186 |   |
| Change in fair value of warrants and embedded conversion option                                                                                                                                                          |   |                     | 83,000      |   |                                           |   | (151,751 | ) |   |   | (484,851 | ) |
| Total costs and expenses                                                                                                                                                                                                 |   |                     | 2,102,433   |   |                                           |   | 1,737,614 |   |   |   | 18,136,734 |   |
| Net (loss)                                                                                                                                                                                                               |   |                     | (2,102,433  | )      |                                           |   | (1,737,614 | ) |   |   | (17,665,444 | ) |
| Deemed dividend on preferred stock                                                                                                                                                                                       |   |                     | --          |   |                                           |   | -- |   |   |   | (2,072,296 | ) |
| Preferred stock dividends                                                                                                                                                                                                |   |                     | (108,300    | )      |                                           |   | (108,357 | ) |   |   | (834,423 | ) |
|                                                                                                                                                                                                                     |   |                     | (108,300    | )      |                                           |   | (108,357 | ) |   |   | (2,906,719 | ) |
| Net loss attributable to common stockholders                                                                                                                                                                             |   | $                        | (2,210,733  | )      |                                           | $      | (1,845,971 | ) |   | $ | (20,572,163 | ) |
| Net loss attributable to common stockholders per common share - Basic and diluted                                                                                                                                        |   | $                        | (0.01       | )      |                                           | $      | (0.01 | ) |   |   |   |   |
| Weighted average number of shares outstanding - Basic and diluted                                                                                                                                                        |   |                     | 262,016,546 |   |                                           |   | 235,494,015 |   |   |   |   |   |

----

|                                                  |   | Preferred Stock |    |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |   |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|-------------------------------------------------------|--------|-----------------|---------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|--------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                                  |   | Shares          |    |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |   |   |                |   |       |                                 |   |   |
| BALANCE - JANUARY 1, 2002                             |   |            | 145,500 |   |         | $      | 146    |                       |   |   | 86,614,286              |   |   | $                       | 86,614 |   |                | $      | 12,339,469 |                                 |   | $ | (5,768 | ) |   | $ | (67,500 | ) |   | $ | (14,531,596 | ) |   | $ | (2,178,635 | ) |
| Extension of life of warrants                         |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 111,000    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 111,000 |   |
| Proceeds from sale preferred stock ($1.00 per share)  |   |            | 125,000 |   |         |   | 125    |                       |   |   | --                      |   |   |                    | --     |   |                |   | 117,375    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 117,500 |   |
| Proceeds from sale of common stock ($0.025 per share) |   |            | --      |   |         |   | --     |                       |   |   | 2,500,000               |   |   |                    | 2,500  |   |                |   | 97,500     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| Common stock issued for services ($0.08 per share)    |   |            | --      |   |         |   | --     |                       |   |   | 450,000                 |   |   |                    | 450    |   |                |   | 35,550     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 36,000 |   |
| Collection of subscription receivable                 |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --     |   |                |   | --         |                                 |   |   | -- |   |   |   | 30,200 |   |   |   | -- |   |   |   | 30,200 |   |
| Net loss                                              |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --     |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (1,589,746 | ) |   |   | (1,589,746 | ) |
| BALANCE - DECEMBER 31, 2002                           |   |            | 270,500 |   |         | $      | 271    |                       |   |   | 89,564,286              |   |   | $                       | 89,564 |   |                | $      | 12,700,894 |                                 |   | $ | (5,768 | ) |   | $ | (37,300 | ) |   | $ | (16,121,342 | ) |   | $ | (3,373,681 | ) |
|                                                  |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |   |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of preferred stock:                |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |   |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2003 ($1.00-$2.00 per share)                |   |            | 62,500  |   |         |   | 63     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 74,937     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 75,500 |   |
| June 30, 2003 ($0.50 per share)                       |   |            | 75,000  |   |         |   | 75     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 37,425     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 37,500 |   |
| September 30, 2003 ($1.00-$2.40 per share)            |   |            | 163,281 |   |         |   | 163    |                       |   |   | --                      |   |   |                    | --     |   |                |   | 228,346    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 228,509 |   |
| December 31, 2003 ($1.33-$2.80 per share)             |   |            | 145,450 |   |         |   | 145    |                       |   |   | --                      |   |   |                    | --     |   |                |   | 258,717    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 258,862 |   |
| Preferred stock issued for services:                  |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |   |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2003 ($1.00 per share)                      |   |            | 30,000  |   |         |   | 30     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 29,970     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 30,000 |   |
| June 30, 2003 ($1.00 per share)                       |   |            | 51,250  |   |         |   | 51     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 51,199     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 51,250 |   |
| September 30, 2003 ($1.00 per share)                  |   |            | 67,035  |   |         |   | 67     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 66,968     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 67,035 |   |
| December 31, 2003 ($1.88-$4.00 per share)             |   |            | 22,150  |   |         |   | 22     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 65,378     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 65,400 |   |
| Collection of subscription receivable                 |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --     |   |                |   | --         |                                 |   |   | -- |   |   |   | 15,500 |   |   |   | -- |   |   |   | 15,500 |   |
| Write-off of subscription receivable                  |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --     |   |                |   | --         |                                 |   |   | -- |   |   |   | 21,800 |   |   |   | -- |   |   |   | 21,800 |   |
| Net loss                                              |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --     |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (3,535,479 | ) |   |   | (3,535,479 | ) |
| BALANCE - DECEMBER 31, 2003                           |   |            | 887,166 |   |         | $      | 887    |                       |   |   | 89,564,286              |   |   | $                       | 89,564 |   |                | $      | 13,513,834 |                                 |   | $ | (5,768 | ) |   | $ | -- |   |   | $ | (19,656,821 | ) |   | $ | (6,058,304 | ) |
|                                                  |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |   |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of preferred stock:                |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |   |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2004 ($2.40-$4.80 per share)                |   |            | 130,077 |   |         |   | 130    |                       |   |   | --                      |   |   |                    | --     |   |                |   | 400,126    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 400,256 |   |
| June 30, 2004 ($0.80 per share)                       |   |            | 15,625  |   |         |   | 16     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 12,484     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 12,500 |   |
| Preferred stock issued for services:                  |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |   |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2004 ($2.00-$4.80 per share)                |   |            | 49,433  |   |         |   | 49     |                       |   |   | --                      |   |   |                    | --     |   |                |   | 158,483    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 158,532 |   |

----

|                                                 |   | Preferred Stock |     |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |    |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|------------------------------------------------------|--------|-----------------|----------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|---------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                                 |   | Shares          |     |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |    |   |                |   |       |                                 |   |   |
| Proceeds from sale of common stock:                  |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |
| September 30,2004 ($0.03-$0.15 per share)            |   |            | --       |   |         |   | --     |                       |   |   | 2,541,595               |   |   |                    | 2,541   |   |                |   | 205,059    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 207,600 |   |
| December 31, 2004 ($0.05-$0.10 per share)            |   |            | --       |   |         |   | --     |                       |   |   | 2,487,500               |   |   |                    | 2,488   |   |                |   | 187,512    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 190,000 |   |
| Common stock issued for services:                    |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2004 ($0.05 per share)                     |   |            | --       |   |         |   | --     |                       |   |   | 477,133                 |   |   |                    | 477     |   |                |   | 23,380     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 23,857 |   |
| September 30,2004 ($0.05-$0.15 per share)            |   |            | --       |   |         |   | --     |                       |   |   | 1,857,800               |   |   |                    | 1,858   |   |                |   | 126,792    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 128,650 |   |
| December 31, 2004 ($0.08-$0.10 per share)            |   |            | --       |   |         |   | --     |                       |   |   | 532,500                 |   |   |                    | 533     |   |                |   | 40,968     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 41,501 |   |
| Preferred stock dividend                             |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (81,034    | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (81,034 | ) |
| Common stock issued for satisfaction of liabilities: |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June 30, 2004 ($0.15 per share)                      |   |            | --       |   |         |   | --     |                       |   |   | 37,786,629              |   |   |                    | 37,787  |   |                |   | 5,635,934  |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 5,673,721 |   |
| December 31, 2004 ($0.134 per share)                 |   |            | --       |   |         |   | --     |                       |   |   | 411,100                 |   |   |                    | 411     |   |                |   | 54,839     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 55,250 |   |
| Preferred stock converted to common stock:           |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| June 30, 2004                                        |   |            | (133,250 | )      |         |   | (133   | )                          |   |   | 5,108,332               |   |   |                    | 5,108   |   |                |   | (4,975     | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| September 30, 2004                                   |   |            | (269,263 | )      |         |   | (269   | )                          |   |   | 12,103,854              |   |   |                    | 12,104  |   |                |   | (11,835    | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| December 31, 2004                                    |   |            | (65,375  | )      |         |   | (65    | )                          |   |   | 3,015,000               |   |   |                    | 3,015   |   |                |   | (2,950     | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Net loss                                             |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (3,757,802 | ) |   |   | (3,757,802 | ) |
| BALANCE - DECEMBER 31, 2004                          |   |            | 614,413  |   |         | $      | 615    |                       |   |   | 155,885,729             |   |   | $                       | 155,886 |   |                | $      | 20,258,617 |                                 |   | $ | (5,768 | ) |   | $ | -- |   |   | $ | (23,414,623 | ) |   | $ | (3,005,273 | ) |
|                                                 |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of common stock:                  |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31,2005 ($0.05 per share)                      |   |            | --       |   |         |   | --     |                       |   |   | 200,000                 |   |   |                    | 200     |   |                |   | 9,800      |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 10,000 |   |
| June 30, 2005 ($0.05-$0.06 per share)                |   |            | --       |   |         |   | --     |                       |   |   | 700,000                 |   |   |                    | 700     |   |                |   | 39,300     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 40,000 |   |
| September 30, 2005 ($0.07-$0.10 per share)           |   |            | --       |   |         |   | --     |                       |   |   | 2,455,357               |   |   |                    | 2,455   |   |                |   | 202,545    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 205,000 |   |
| December 31, 2005 ($0.05-$0.07 per share)            |   |            | --       |   |         |   | --     |                       |   |   | 3,879,283               |   |   |                    | 3,879   |   |                |   | 236,081    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 239,960 |   |
| Common stock issued for services:                    |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2005 ($0.05-$0.10 per share)               |   |            | --       |   |         |   | --     |                       |   |   | 230,000                 |   |   |                    | 230     |   |                |   | 17,770     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 18,000 |   |
| December 31, 2005 ($0.05-$0.06 per share)            |   |            | --       |   |         |   | --     |                       |   |   | 407,500                 |   |   |                    | 408     |   |                |   | 21,219     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 21,627 |   |
| Preferred stock dividend                             |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (66,436    | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (66,436 | ) |
| Extension of 1,666,667 warrants                      |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 74,700     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 74,700 |   |
| Common stock issued for satisfaction of liabilities: |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| September 30, 2005 ($0.07 per share)                 |   |            | --       |   |         |   | --     |                       |   |   | 571,428                 |   |   |                    | 571     |   |                |   | 39,429     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 40,000 |   |

----

|                                                                                          |   | Preferred Stock |     |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |    |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|-----------------------------------------------------------------------------------------------|--------|-----------------|----------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|---------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                                                                          |   | Shares          |     |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |    |   |                |   |       |                                 |   |   |
| December 31, 2005 ($0.142 per share)                                                          |   |            | --       |   |         |   | --     |                       |   |   | 100,000                 |   |   |                    | 100     |   |                |   | 14,100     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 14,200 |   |
| Preferred stock converted to common stock:                                                    |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 31, 2005                                                                                |   |            | (55,970  | )      |         |   | (56    | )                          |   |   | 2,518,800               |   |   |                    | 2,519   |   |                |   | (2,463     | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| June 30, 2005                                                                                 |   |            | (34,020  | )      |         |   | (34    | )                          |   |   | 1,360,800               |   |   |                    | 1,361   |   |                |   | (1,327     | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| September 30, 2005                                                                            |   |            | (286,650 | )      |         |   | (287   | )                          |   |   | 13,382,583              |   |   |                    | 13,383  |   |                |   | (13,096    | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| December 31, 2005                                                                             |   |            | (2,188   | )      |         |   | (2     | )                          |   |   | 87,520                  |   |   |                    | 87      |   |                |   | (85        | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Net loss                                                                                      |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (1,168,328 | ) |   |   | (1,168,328 | ) |
| BALANCE - DECEMBER 31, 2005                                                                   |   |            | 235,585  |   |         | $      | 236    |                       |   |   | 181,779,000             |   |   | $                       | 181,779 |   |                | $      | 20,830,154 |                                 |   | $ | (5,768 | ) |   | $ | -- |   |   | $ | (24,582,951 | ) |   | $ | (3,576,550 | ) |
|                                                                                          |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of common stock:                                                           |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 21, 2006 ($0.07 per share)                                                              |   |            | --       |   |         |   | --     |                       |   |   | 3,600,000               |   |   |                    | 3,600   |   |                |   | 246,400    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 250,000 |   |
| May 8, 2002 ($0.08-$0.10 per share)                                                           |   |            | --       |   |         |   | --     |                       |   |   | 3,769,230               |   |   |                    | 3,769   |   |                |   | 276,231    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 280,000 |   |
| June 28, 2006 ($0.10 per share)                                                               |   |            | --       |   |         |   | --     |                       |   |   | 100,000                 |   |   |                    | 100     |   |                |   | 9,900      |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 10,000 |   |
| August 17, 2006 ($0.07 per share)                                                             |   |            | --       |   |         |   | --     |                       |   |   | 400,000                 |   |   |                    | 400     |   |                |   | 27,600     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 28,000 |   |
| Common stock issued for services:                                                             |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| March 21, 2006 ($0.06 per share)                                                              |   |            | --       |   |         |   | --     |                       |   |   | 250,000                 |   |   |                    | 250     |   |                |   | 14,750     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 15,000 |   |
| May 8, 2006 ($0.05 per share)                                                                 |   |            | --       |   |         |   | --     |                       |   |   | 450,000                 |   |   |                    | 450     |   |                |   | 22,050     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 22,500 |   |
| June 6, 2006 ($0.15 per share)                                                                |   |            | --       |   |         |   | --     |                       |   |   | 166,666                 |   |   |                    | 166     |   |                |   | 24,833     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 24,999 |   |
| Common stock issued for repayment of debt:                                                    |   |            |     |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| February 13, 2006 ($0.11 per share)                                                           |   |            | --       |   |         |   | --     |                       |   |   | 438,785                 |   |   |                    | 439     |   |                |   | 48,046     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 48,485 |   |
| April 3, 2006 ($0.08 per share)                                                               |   |            | --       |   |         |   | --     |                       |   |   | 614,131                 |   |   |                    | 614     |   |                |   | 50,790     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 51,404 |   |
| April 6, 2006 ($0.08 per share)                                                               |   |            | --       |   |         |   | --     |                       |   |   | 1,959,631               |   |   |                    | 1,960   |   |                |   | 154,614    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 156,574 |   |
| June 6, 2006 ($0.10-$0.15 per share)                                                          |   |            | --       |   |         |   | --     |                       |   |   | 3,583,334               |   |   |                    | 3,583   |   |                |   | 390,517    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 394,100 |   |
| Preferred stock converted to common stock:                                                    |   |            | (46,668  | )      |         |   | (47    | )                          |   |   | 1,866,720               |   |   |                    | 1,867   |   |                |   | (1,820     | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   |   |   |
| Reclassification of derivative liabilities upon conversion of debt                            |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 368,800    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 368,800 |   |
| 4,000,000 warrants granted for services, May 18, 2006                                         |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 464,000    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 464,000 |   |
| 2,500,000 warrants granted for services, May 24, 2006                                         |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 241,200    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 241,200 |   |
| Reclassification of warrants and embedded conversion option upon issuance of convertible debt |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (288,900   | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (288,900 | ) |
| Preferred stock dividend                                                                      |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (42,401    | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (42,401 | ) |
| Net loss                                                                                      |   |            | --       |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (2,072,917 | ) |   |   | (2,072,917 | ) |
| BALANCE - DECEMBER 31, 2006                                                                   |   |            | 188,917  |   |         | $      | 189    |                       |   |   | 198,977,497             |   |   | $                       | 198,977 |   |                | $      | 22,836,764 |                                 |   | $ | (5,768 | ) |   | $ | -- |   |   | $ | (26,655,868 | ) |   | $ | (3,625,706 | ) |

----

|                                       |   | Preferred Stock |    |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |    |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|--------------------------------------------|--------|-----------------|---------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|---------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                       |   | Shares          |    |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |    |   |                |   |       |                                 |   |   |
| Proceeds from sale of common stock:        |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |
| May 10, 2007 ($0.090 per share)            |   |            | --      |   |         |   | --     |                       |   |   | 1,111,112               |   |   |                    | 1,111   |   |                |   | 98,889     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| May 10, 2007 ($0.083 per share)            |   |            | --      |   |         |   | --     |                       |   |   | 2,409,640               |   |   |                    | 2,409   |   |                |   | 197,591    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 200,000 |   |
| May 31, 2007 ($0.090 per share)            |   |            | --      |   |         |   | --     |                       |   |   | 555,555                 |   |   |                    | 555     |   |                |   | 49,445     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| June 26, 2007 ($0.083 per share)           |   |            | --      |   |         |   | --     |                       |   |   | 1,203,080               |   |   |                    | 1,203   |   |                |   | 98,797     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| October 26, 2007 ($0.063 per share)        |   |            | --      |   |         |   | --     |                       |   |   | 3,159,558               |   |   |                    | 3,159   |   |                |   | 196,841    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 200,000 |   |
| November 7, 2007 ($0.059 per share)        |   |            | --      |   |         |   | --     |                       |   |   | 1,675,978               |   |   |                    | 1,676   |   |                |   | 98,324     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| December 5, 2007 ($0.051 per share)        |   |            | --      |   |         |   | --     |                       |   |   | 1,948,052               |   |   |                    | 1,948   |   |                |   | 98,052     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| December 12, 2007 ($0.050 per share)       |   |            | --      |   |         |   | --     |                       |   |   | 1,973,684               |   |   |                    | 1,974   |   |                |   | 98,026     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| December 13, 2007 ($0.051 per share)       |   |            | --      |   |         |   | --     |                       |   |   | 1,948,052               |   |   |                    | 1,948   |   |                |   | 98,052     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| December 20, 2007 ($0.044 per share)       |   |            | --      |   |         |   | --     |                       |   |   | 2,255,639               |   |   |                    | 2,256   |   |                |   | 97,744     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| Stock for compensation:                    |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   |   |   |
| May 2, 2007 ($0.110 per share)             |   |            | --      |   |         |   | --     |                       |   |   | 2,500,000               |   |   |                    | 2,500   |   |                |   | 272,500    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 275,000 |   |
| December 14, 2007 ($0.040 per share)       |   |            | --      |   |         |   | --     |                       |   |   | 1,000,000               |   |   |                    | 1,000   |   |                |   | 39,000     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 40,000 |   |
| Common stock issued in repayment of debt:  |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| February 26, 2007 ($0.132 per share)       |   |            | --      |   |         |   | --     |                       |   |   | 195,212                 |   |   |                    | 195     |   |                |   | 25,534     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 25,729 |   |
| March 8, 2007 ($0.111 per share)           |   |            | --      |   |         |   | --     |                       |   |   | 234,165                 |   |   |                    | 234     |   |                |   | 25,571     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 25,805 |   |
| March 14, 2007 ($0.111 per share)          |   |            | --      |   |         |   | --     |                       |   |   | 256,643                 |   |   |                    | 257     |   |                |   | 25,587     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 25,844 |   |
| March 19, 2007 ($0.099 per share)          |   |            | --      |   |         |   | --     |                       |   |   | 262,650                 |   |   |                    | 263     |   |                |   | 25,608     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 25,871 |   |
| March 23, 2007 ($0.097 per share)          |   |            | --      |   |         |   | --     |                       |   |   | 806,583                 |   |   |                    | 807     |   |                |   | 76,867     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 77,674 |   |
| April 4, 2007 ($0.095 per share)           |   |            | --      |   |         |   | --     |                       |   |   | 546,901                 |   |   |                    | 547     |   |                |   | 51,354     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 51,901 |   |
| May 1, 2007 ($0.086 per share)             |   |            | --      |   |         |   | --     |                       |   |   | 908,885                 |   |   |                    | 909     |   |                |   | 77,345     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 78,254 |   |
| Stock for late payment penalty:            |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   |   |   |
| May 22, 2007 ($0.100 per share)            |   |            | --      |   |         |   | --     |                       |   |   | 100,000                 |   |   |                    | 100     |   |                |   | 9,900      |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 10,000 |   |
| Preferred stock converted to common stock: |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   | -- |   |   |   |   |   |   |   |   |   |   |   |   |   |
| February 16, 2007                          |   |            | (2,848  | )      |         |   | (3     | )                          |   |   | 113,920                 |   |   |                    | 114     |   |                |   | (111       | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| May 4, 2007                                |   |            | (250    | )      |         |   | --     |                       |   |   | 10,000                  |   |   |                    | 10      |   |                |   | (10        | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| December 12, 2007                          |   |            | (625    | )      |         |   | (1     | )                          |   |   | 25,000                  |   |   |                    | 25      |   |                |   | (24        | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Cancellation of debt for no consideration  |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 1,327,321  |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 1,327,321 |   |
| Surrender and cancellation of common stock |   |            | --      |   |         |   | --     |                       |   |   | (20,000,000             | )      |   |                    | (20,000 | )      |                |   | 20,000     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Reclassification of derivative liability   |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (227,300   | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (227,300 | ) |
| Amortization of warrants for services      |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 311,916    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 311,916 |   |
| Common stock to be issued                  |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 100,000    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| Preferred stock dividend                   |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (399       | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (399 | ) |
| Net loss                                   |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (1,701,125 | ) |   |   | (1,701,125 | ) |
| BALANCE - DECEMBER 31, 2007                |   |            | 185,194 |   |         | $      | 185    |                       |   |   | 204,177,806             |   |   | $                       | 204,177 |   |                | $      | 26,129,184 |                                 |   | $ | (5,768 | ) |   | $ | -- |   |   | $ | (28,356,993 | ) |   | $ | (2,029,215 | ) |

----

|                                                                                                |   | Preferred Stock |   |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |    |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|-----------------------------------------------------------------------------------------------------|--------|-----------------|--------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|---------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                                                                                |   | Shares          |   |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |    |   |                |   |       |                                 |   |   |
| Proceeds from sale of common stock:                                                                 |   |            |   |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |
| $0.0357 per share - February 29, 2008                                                               |   |            | --     |   |         |   | --     |                       |   |   | 1,401,869               |   |   |                    | 1,402   |   |                |   | 48,598     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.0350 per share - March 7, 2008                                                                   |   |            | --     |   |         |   | --     |                       |   |   | 2,857,142               |   |   |                    | 2,857   |   |                |   | 97,143     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| $0.0350 per share - March 13, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 1,428,571               |   |   |                    | 1,429   |   |                |   | 48,571     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.0343 per share - March 13, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 2,912,622               |   |   |                    | 2,913   |   |                |   | 97,087     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| $0.0900 per share - March 26, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 1,666,667               |   |   |                    | 1,667   |   |                |   | 148,333    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 150,000 |   |
| $0.1083 per share - March 26, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 461,538                 |   |   |                    | 462     |   |                |   | 49,538     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.1000 per share - April 11, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 1,000,000               |   |   |                    | 1,000   |   |                |   | 99,000     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| $0.1083 per share - May 5, 2008                                                                     |   |            | --     |   |         |   | --     |                       |   |   | 923,077                 |   |   |                    | 923     |   |                |   | 99,077     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| $0.0917 per share - May 15, 2008                                                                    |   |            | --     |   |         |   | --     |                       |   |   | 545,455                 |   |   |                    | 545     |   |                |   | 49,455     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.0963 per share - May 15, 2008                                                                    |   |            | --     |   |         |   | --     |                       |   |   | 519,031                 |   |   |                    | 519     |   |                |   | 49,481     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.0963 per share - May 12, 2008                                                                    |   |            | --     |   |         |   | --     |                       |   |   | 1,557,094               |   |   |                    | 1,557   |   |                |   | 148,443    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 150,000 |   |
| $0.1000 per share - May 23, 2008                                                                    |   |            | --     |   |         |   | --     |                       |   |   | 500,000                 |   |   |                    | 500     |   |                |   | 49,500     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.0840 per share - June 30, 2008                                                                   |   |            | --     |   |         |   | --     |                       |   |   | 833,333                 |   |   |                    | 833     |   |                |   | 69,167     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 70,000 |   |
| $0.0730 per share - July 25, 2008                                                                   |   |            | --     |   |         |   | --     |                       |   |   | 1,369,863               |   |   |                    | 1,370   |   |                |   | 98,630     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| Stock for receivables:                                                                              |   |            |   |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.0843 per share - May 12, 2008                                                                    |   |            | --     |   |         |   | --     |                       |   |   | 17,000,000              |   |   |                    | 17,000  |   |                |   | 1,416,100  |                                 |   |   | -- |   |   |   | (1,433,100 | ) |   |   | -- |   |   |   | -- |   |
| $0.0843 per share - August 31, 2008                                                                 |   |            | --     |   |         |   | --     |                       |   |   | (13,000,000             | )      |   |                    | (13,000 | )      |                |   | (1,082,900 | )                                    |   |   | -- |   |   |   | 1,095,900 |   |   |   | -- |   |   |   | -- |   |
| Accrued interest                                                                                    |   |            | --     |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | --         |                                 |   |   | -- |   |   |   | (12,914 | ) |   |   | -- |   |   |   | (12,914 | ) |
| Stock for compensation:                                                                             |   |            |   |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.0500 per share - March 13, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 1,000,000               |   |   |                    | 1,000   |   |                |   | 49,000     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.0400 per share - March 26, 2008                                                                  |   |            | --     |   |         |   | --     |                       |   |   | 333,333                 |   |   |                    | 333     |   |                |   | 13,000     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 13,333 |   |
| $0.1000 per share - May 29, 2008                                                                    |   |            | --     |   |         |   | --     |                       |   |   | 1,000,000               |   |   |                    | 1,000   |   |                |   | 99,000     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 100,000 |   |
| $0.0500 per share – August 6, 2008                                                            |   |            |   |   |         |   |   |                       |   |   | 100,000                 |   |   |                    | 100     |   |                |   | 4,900      |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 5,000 |   |
| $0.0500 per share - September 19, 2008                                                              |   |            | --     |   |         |   | --     |                       |   |   | 2,050,000               |   |   |                    | 2,050   |   |                |   | 100,450    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 102,500 |   |
| Common stock issued in repayment of debt:                                                           |   |            |   |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.02943 per share - January 9, 2008                                                                |   |            | --     |   |         |   | --     |                       |   |   | 947,119                 |   |   |                    | 947     |   |                |   | 26,927     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 27,874 |   |
| $0.02500 per share - January 17, 2008                                                               |   |            | --     |   |         |   | --     |                       |   |   | 2,146,324               |   |   |                    | 2,146   |   |                |   | 51,512     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 53,658 |   |
| $0.02212 per share - January 17, 2008                                                               |   |            | --     |   |         |   | --     |                       |   |   | 1,250,000               |   |   |                    | 1,250   |   |                |   | 48,750     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 50,000 |   |
| $0.03108 per share - January 22, 2008                                                               |   |            | --     |   |         |   | --     |                       |   |   | 6,899,269               |   |   |                    | 6,899   |   |                |   | 207,530    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 214,429 |   |
| $0.02943 per share - February 1, 2008                                                               |   |            | --     |   |         |   | --     |                       |   |   | 562,282                 |   |   |                    | 562     |   |                |   | 15,986     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 16,548 |   |
| Reclassification of derivative liability                                                            |   |            | --     |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 70,766     |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 70,766 |   |
| Amortization of warrants for services                                                               |   |            | --     |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | 219,856    |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 219,856 |   |
| Issuance of common stock for $100,000 of subscription payable ($0.0443 per share) - January 4, 2008 |   |            | --     |   |         |   | --     |                       |   |   | 2,255,639               |   |   |                    | 2,256   |   |                |   | (2,256     | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |

----

|                                                                              |   | Preferred Stock |    |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |    |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|-----------------------------------------------------------------------------------|--------|-----------------|---------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|---------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                                                              |   | Shares          |    |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |    |   |                |   |       |                                 |   |   |
| Issuance of shares upon exercise of warrants ($0.0850 per share) - March 26, 2008 |   |            | --      |   |         |   | --     |                       |   |   | 110,000                 |   |   |                    | 110     |   |                |   | 9,240      |                                 |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | 9,350 |   |
| Preferred stock converted to common stock                                         |   |            | (1,050  | )      |         |   | (1     | )                          |   |   | 42,000                  |   |   |                    | 42      |   |                |   | (41        | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| Preferred stock dividend                                                          |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | (57        | )                                    |   |   | -- |   |   |   | -- |   |   |   | -- |   |   |   | (57 | ) |
| Net loss                                                                          |   |            | --      |   |         |   | --     |                       |   |   | --                      |   |   |                    | --      |   |                |   | --         |                                 |   |   | -- |   |   |   | -- |   |   |   | (1,737,614 | ) |   |   | (1,737,614 | ) |
| BALANCE - DECEMBER 31, 2008                                                       |   |            | 184,144 |   |         | $      | 184    |                       |   |   | 244,850,034             |   |   | $                       | 244,849 |   |                | $      | 28,528,973 |                                 |   | $ | (5,768 | ) |   | $ | (350,114 | ) |   | $ | (30,094,607 | ) |   | $ | (1,676,483 | ) |
|                                                                              |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from sale of common stock:                                               |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.0330 per share – January 16, 2009                                        |   |            |    |   |         |   |   |                       |   |   | 757,576                 |   |   |                    | 758     |   |                |   | 24,242     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
| $0.0320 per share – January 30, 2009                                        |   |            |    |   |         |   |   |                       |   |   | 1,562,500               |   |   |                    | 1,563   |   |                |   | 48,437     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
| $0.0320 per share – February 9, 2009                                        |   |            |    |   |         |   |   |                       |   |   | 640,625                 |   |   |                    | 641     |   |                |   | 19,859     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 20,500 |   |
| $0.0299 per share – February 13, 2009                                       |   |            |    |   |         |   |   |                       |   |   | 1,672,241               |   |   |                    | 1,672   |   |                |   | 48,328     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
| $0.0290 per share – February 17, 2009                                       |   |            |    |   |         |   |   |                       |   |   | 1,724,138               |   |   |                    | 1,724   |   |                |   | 48,276     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
| $0.0410 per share – April 29, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 609,756                 |   |   |                    | 610     |   |                |   | 24,390     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
| $0.0440 per share – May 28, 2009                                            |   |            |    |   |         |   |   |                       |   |   | 568,182                 |   |   |                    | 568     |   |                |   | 24,432     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
| $0.0420 per share – June 3, 2009                                            |   |            |    |   |         |   |   |                       |   |   | 595,238                 |   |   |                    | 595     |   |                |   | 24,405     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
| $0.0600 per share – June 17, 2009                                           |   |            |    |   |         |   |   |                       |   |   | 416,667                 |   |   |                    | 416     |   |                |   | 24,584     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
| $0.0700 per share – June 23, 2009                                           |   |            |    |   |         |   |   |                       |   |   | 714,286                 |   |   |                    | 714     |   |                |   | 49,286     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
| $0.0720 per share – August 3, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 277,778                 |   |   |                    | 278     |   |                |   | 19,722     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 20,000 |   |
| $0.0720 per share – August 3, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 694,444                 |   |   |                    | 694     |   |                |   | 49,306     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
| $0.0730 per share – August 4, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 1,369,863               |   |   |                    | 1,370   |   |                |   | 98,630     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 100,000 |   |
| $0.0379 per share – October 5, 2009                                         |   |            |    |   |         |   |   |                       |   |   | 659,631                 |   |   |                    | 660     |   |                |   | 24,340     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
|                                                                              |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock issued in repayment of debt:                                         |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.0547 per share – March 14, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 500,000                 |   |   |                    | 500     |   |                |   | 26,868     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 27,368 |   |
| $0.0390 per share – April 17, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 2,694,438               |   |   |                    | 2,694   |   |                |   | 102,391    |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 105,085 |   |
| $0.040 per share – April 17, 2009                                           |   |            |    |   |         |   |   |                       |   |   | 2,605,548               |   |   |                    | 2,606   |   |                |   | 101,613    |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 104,219 |   |
| $0.059 per share – December 29, 2009                                        |   |            |    |   |         |   |   |                       |   |   | 1,250,000               |   |   |                    | 1,250   |   |                |   | 72,500     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 73,750 |   |
|                                                                              |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock Based Compensation:                                                         |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $0.0200 per share – February 23, 2009                                       |   |            |    |   |         |   |   |                       |   |   | 1,000,000               |   |   |                    | 1,000   |   |                |   | 19,000     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 20,000 |   |
| $0.0410 per share – April 17, 2009                                          |   |            |    |   |         |   |   |                       |   |   | 4,750,000               |   |   |                    | 4,750   |   |                |   | 190,000    |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 194,750 |   |
| $0.0350 per share – May 6, 2009                                             |   |            |    |   |         |   |   |                       |   |   | 250,000                 |   |   |                    | 250     |   |                |   | 8,500      |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 8,750 |   |
| $0.0500 per share – December 1, 2009                                        |   |            |    |   |         |   |   |                       |   |   | 2,000,000               |   |   |                    | 2,000   |   |                |   | 98,000     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 100,000 |   |
|                                                                              |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification of derivative liability                                          |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   | 17,900     |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 17,900 |   |

----

|                                                                                        |   | Preferred Stock |    |   | Common Stock |   |   | Additional Paid-In Capital |   |   | Treasury Stock, at Cost |   |   | Subscription Receivable |    |   | Accumulated Deficit |   |       | Total Stockholders’ Deficiency |   |
|---------------------------------------------------------------------------------------------|--------|-----------------|---------|--------|--------------|--------|--------|----------------------------|--------|--------|-------------------------|--------|--------|-------------------------|---------|--------|---------------------|--------|------------|--------------------------------------|--------|
|                                                                                        |   | Shares          |    |   | Amount       |   |   | Shares                     |   |   | Amount                  |   |   |                    |    |   |                |   |       |                                 |   |   |
| Stock for receivables                                                                       |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   | (20,162 | ) |   |   |   |   |   |   | (20,162 | ) |
|                                                                                        |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of warrants and option over the vesting period for employees and non-employees |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   | 392,813    |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 392,813 |   |
|                                                                                        |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                        |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                                                                    |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   | (2,102,433 | ) |   |   | (2,102,433 | ) |
|                                                                                        |   |            |    |   |         |   |   |                       |   |   |                    |   |   |                    |    |   |                |   |       |                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| BALANCE – DECEMBER 31, 2009                                                           |   |            | 184,144 |   |         |   | 184    |                       |   |   | 272,162,945             |   |   |                    | 272,162 |   |                |   | 30,086,795 |                                 |   |   | (5,768 | ) |   |   | (370,276 | ) |   |   | (32,197,040 | ) |   |   | (2,113,943 | ) |

----

|                                                                                                                                                                          |   | Years EndedDecember 31, |       |   | For the Period From January 1, 2002 through December 31, 2009 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-------------------------------------------------------------------------|--------|
| Cash Flows from Operating Activities:                                                                                                                                         |   | 2009                    |       |   | 2008                                                                    |   |   |   |
| Net loss                                                                                                                                                                      |   | $                       | (2,102,433 | )      |                                                                    |   | (1,737,614 | ) |   | $ | (17,665,444 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities -                                                                                                  |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Loss on Sale of Property and Equipment                                                                                                                                        |   |                    | 8,177      |   |                                                                    |   |   |   |   |   | 8,177 |   |
| Depreciation and amortization                                                                                                                                                 |   |                    | 22,769     |   |                                                                    |   | 15,067 |   |   |   | 39,899 |   |
| Amortization of patents and trademarks                                                                                                                                        |   |                    | 5,622      |   |                                                                    |   | 4,607 |   |   |   | 22,122 |   |
| Interest expense - amortization of deferred financing                                                                                                                         |   |                    | --         |   |                                                                    |   | 2,510 |   |   |   | 22,530 |   |
| Stock based compensation                                                                                                                                                      |   |                    | 716,313    |   |                                                                    |   | 490,689 |   |   |   | 3,389,007 |   |
| Interest expense - conversion provision                                                                                                                                       |   |                    | --         |   |                                                                    |   | -- |   |   |   | 113,000 |   |
| Interest receivable                                                                                                                                                           |   |                    | (20,162    | )      |                                                                    |   | (12,914 | ) |   |   | (33,076 | ) |
| Accretion of debt discount                                                                                                                                                    |   |                    | 118,743    |   |                                                                    |   | 71,657 |   |   |   | 687,821 |   |
| Change in fair value of warrants and embedded conversion option                                                                                                               |   |                    | 83,000     |   |                                                                    |   | (151,751 | ) |   |   | (484,851 | ) |
| (Gain)/loss on settlement of debt                                                                                                                                             |   |                    | (202,717   | )      |                                                                    |   | (384,114 | ) |   |   | 2,027,187 |   |
| Non-dilution agreement termination cost                                                                                                                                       |   |                    | --         |   |                                                                    |   | -- |   |   |   | 2,462,453 |   |
| Inventory reserve                                                                                                                                                             |   |                    | --         |   |                                                                    |   | -- |   |   |   | 159,250 |   |
| Write-off of stock subscription receivable                                                                                                                                    |   |                    | --         |   |                                                                    |   | -- |   |   |   | 21,800 |   |
| Financing costs - warrant extension                                                                                                                                           |   |                    | --         |   |                                                                    |   | -- |   |   |   | 74,700 |   |
| Change in assets and liabilities -                                                                                                                                            |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Prepaid expenses and other current assets                                                                                                                                     |   |                    | (66,193    | )      |                                                                    |   | (11,902 | ) |   |   | (69,839 | ) |
| Inventories                                                                                                                                                                   |   |                    | (97,115    | )      |                                                                    |   | -- |   |   |   | (97,115 | ) |
| Other assets                                                                                                                                                                  |   |                    | 6,360      |   |                                                                    |   | (17,441 | ) |   |   | (11,081 | ) |
| Accounts payable, accrued expenses, accrued dividends,  accrued compensation, accrued consulting and director fees, customer deposits and other current liabilities |   |                    | 706,766    |   |                                                                    |   | 152,024 |   |   |   | 2,501,720 |   |
| Net Cash Used in Operating Activities                                                                                                                                         |   |                    | (820,870   | )      |                                                                    |   | (1,579,182 | ) |   |   | (6,831,739 | ) |
|                                                                                                                                                                          |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Cash Flows from Investing Activities:                                                                                                                                         |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Purchase of property and equipment                                                                                                                                            |   |                    | (8,410     | )      |                                                                    |   | (138,517 | ) |   |   | (167,977 | ) |
| Patent costs                                                                                                                                                                  |   |                    | (12,558    | )      |                                                                    |   | (28,326 | ) |   |   | (66,429 | ) |
| Proceeds from sale of property & equipment                                                                                                                                |   |                    | 4,350      |   |                                                                    |   | -- |   |   |   | 4,350 |   |
| Net Cash Used in Investing Activities                                                                                                                                         |   |                    | (16,618    | )      |                                                                    |   | (166,843 | ) |   |   | (230,056 | ) |
|                                                                                                                                                                          |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Cash Flows from Financing Activities:                                                                                                                                         |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Reduction of stock subscription receivable                                                                                                                                    |   |                    | --         |   |                                                                    |   | -- |   |   |   | 65,700 |   |
| Proceeds from sale of preferred stock                                                                                                                                         |   |                    | --         |   |                                                                    |   | -- |   |   |   | 1,130,127 |   |
| Proceeds from sale of common stock                                                                                                                                            |   |                    | 540,500    |   |                                                                    |   | 1,170,000 |   |   |   | 4,401,060 |   |
| Proceeds from exercise of warrants                                                                                                                                            |   |                    | --         |   |                                                                    |   | 9,350 |   |   |   | 9,350 |   |
| Proceeds from sale of common stock to be issued                                                                                                                               |   |                    | --         |   |                                                                    |   | -- |   |   |   | 300,000 |   |
| Deferred financing costs                                                                                                                                                      |   |                    | --         |   |                                                                    |   | -- |   |   |   | (22,530 | ) |
| Proceeds from convertible promissory note                                                                                                                                     |   |                    | 325,000    |   |                                                                    |   | 50,000 |   |   |   | 1,175,000 |   |
| Proceeds from officers and directors convertible loans                                                                                                                        |   |                    | 50,000     |   |                                                                    |   | 200,000 |   |   |   | 350,000 |   |
| Repayment of notes payable                                                                                                                                                    |   |                    | --         |   |                                                                    |   | (69,314 | ) |   |   | (274,999 | ) |
| Net Cash Provided by Financing Activities                                                                                                                                     |   |                    | 915,500    |   |                                                                    |   | 1,360,036 |   |   |   | 7,133,708 |   |
|                                                                                                                                                                          |   |                    |       |   |                                                                    |   |   |   |   |   |   |   |
| Net increase (decrease) in cash                                                                                                                                          |   |                    | 78,012     |   |                                                                    |   | (385,989 | ) |   |   | 71,913 |   |

----

| Cash at beginning of period                                                   |   |   | 29,411  |   |   |   | 415,400 |   |   |   | 35,511    |   |
|-------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|-----------|--------|
| Cash at end of period                                                         |   | $      | 107,424 |   |   | $      | 29,411  |   |   | $      | 107,424   |   |
|                                                                          |   |   |    |   |   |   |    |   |   |   |      |   |
| Supplemental Disclosure of Cash Flow Information:                             |   |   |    |   |   |   |    |   |   |   |      |   |
| Cash paid during the year for interest                                        |   | $      | 1,190   |   |   | $      | 2,866   |   |   | $      | 371,543   |   |
|                                                                          |   |   |    |   |   |   |    |   |   |   |      |   |
| Non-Cash Investing Activities:                                                |   |   |    |   |   |   |    |   |   |   |      |   |
| Notes Receivable for common stock issued                                      |   | $      | --      |   |   | $      | 337,200 |   |   | $      | 337,200   |   |
|                                                                          |   |   |    |   |   |   |    |   |   |   |      |   |
| Non-Cash Financing Activities:                                                |   |   |    |   |   |   |    |   |   |   |      |   |
| Compensation satisfied by issuance of common stock                            |   | $      | --      |   |   | $      | --      |   |   | $      | 55,250    |   |
| Common stock issued in satisfaction of liabilities                            |   | $      | 310,422 |   |   | $      | 362,509 |   |   | $      | 7,348,293 |   |
| Reclassification of derivative liabilities upon  conversion of debt |   | $      | 17,900  |   |   | $      | 70,766  |   |   | $      | 519,066   |   |
| Cancellation of debt for no consideration                                     |   | $      | --      |   |   | $      | --      |   |   | $      | 1,327,321 |   |

----

|   | · | Raising $5 million in capital in two tranches, $2.5 million within the first six months of 2010 and an additional $2.5 million in the fourth quarter of 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The completion of 45 commercial PureSafe FRWS units, with full operational capability.  The Company believes that with acceptable levels of capital, 45 units can be produced of which 35 will be sold and ten will remain in inventory. The ramp up to full production capability of 20 units per month is targeted for the third quarter of 2010. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Expand production capability to meet the expected demand for the FRWS domestically by a combination of expanding the production facility of PureSafe Manufacturing and Research Corporation, as well as, identifying an outsourcing facility. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | Identify strategic partners in specific overseas markets that have the production, distribution, maintenance and training capability to produce, distribute, maintain and train personnel in the operation of the Company’s system. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | To have the first two production units certified by the WQA (Water Quality Association) and UL (Underwriters Laboratory). |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | To enter into a pilot program with Nassau County, New York to field test the units. |
|--------|--------|-------------------------------------------------------------------------------------|

|   | · | Filing of all required foreign patent applications for the PureSafe FRWS. The Company will identify all the potential markets in which the Company needs patent protection. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Following the Company’s Operating Business Plan (OBP) to achieve the results anticipated in the OBP and theCash Flow Projections. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Initial penetration into target markets; the Company is participating in water industry conferences.  The Company’s special advisors are contacting strategic potential customers and are starting to identify strategic partners for selected international marketsin order to achieve sales by the second quarter of 2010. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Retain Chief Peter Hayden, as Vice President – Senior Government Liaison, who will identify first responder users of our system. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Honorable Michael Balboni, former New York State Senator and Deputy Secretary of Public Safety for New York State joined us as a Special Advisor in October 2009.  The Company expects to make full use of Mr. Balboni’s knowledge and contacts. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                    |   | Years EndedDecember 31, |   |
|-------------------------|--------|-------------------------|--------|
|                    |   | 2009                    |   |   | 2008 |   |
| Assumptions:            |   |                    |   |   |   |   |
| Risk-free interest rate |   |                    | 2.00   | % |   |   | 3.00 | % |
| Expected life           |   | 3 years                 |   |   | 3 years |   |
| Expected volatility     |   |                    | 83     | % |   |   | 83 | % |
| Dividends               |   |                    | 0      | % |   |   | 0 | % |

----

|                           |   | As of December 31, |       |
|--------------------------------|--------|--------------------|------------|
|                           |   | 2009               |       |   | 2008 |   |
| Warrants                       |   |               | 37,803,695 |   |   |   | 30,160,910 |   |
| Convertible debt               |   |               | 11,630,791 |   |   |   | 9,748,787 |   |
| Series F preferred stock       |   |               | 1,545,760  |   |   |   | 1,545,760 |   |
| Total common stock equivalents |   |               | 50,980,246 |   |   |   | 41,455,457 |   |

|   | · | Level 1 – Inputs use quoted prices in active markets for identical assets or liabilities  that the Company has the ability to access. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 2 – Inputs use other inputs that are observable, either directly or indirectly. These inputs include quoted prices for similar assets and liabilities in active markets as well as other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Level 3 – Inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset or liability. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                    |   | Quoted Prices in Active Markets for Identical Liabilities(Level 1) |                                                                                        |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Balance at December 31, 2009 |   |
|-----------------------------------------|--------|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|----------------------------------------------|--------|--------|------------------------------------------|--------|--------|-----------------------------------|--------|
| Embedded conversion feature             |   | $                                                                  | -                                                                                           |   |                                         | $      | -      |                                     |   | $      | 197,900                           |   |   | $ | 197,900 |   |
| Warrant and option  liability |   | $                                                                  |                - |   |                                         | $      | -      |                                     |   | $      | 286,100                           |   |   | $ | 286,100 |   |
| December 31, 2009                       |   | $                                                                  |               -       |   |                                         | $      | -      |                                     |   | $      | 484,000                           |   |   | $ | 484,000 |   |

|                                    |   | Quoted Prices in Active Markets for Identical Liabilities(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |   | Balance at December 31, 2008 |   |
|-----------------------------------------|--------|--------------------------------------------------------------------|--------|--------|----------------------------------------------|--------|--------|------------------------------------------|--------|--------|-----------------------------------|--------|
| Embedded conversion feature             |   | $                                                                  | -      |   |                                         | $      | -      |                                     |   | $      | 121,100                           |   |   | $ | 121,100 |   |
| Warrant and option  liability |   | $                                                                  | -      |   |                                         | $      | -      |                                     |   | $      | 164,900                           |   |   | $ | 164,900 |   |
| December 31, 2008                       |   | $                                                                  | -      |   |                                         | $      | -      |                                     |   | $      | 286,000                           |   |   | $ | 286,000 |   |

|                                 |   | Embedded Conversion Feature |     |   | Warrant Liability |   |     | Total  |   |
|--------------------------------------|--------|-----------------------------|----------|--------|-------------------|--------|----------|--------|--------|
| Balance January, 1, 2008             |   | $                           | 239,300  |   |              | $      | 170,900  |   |   | $ | 410,200 |   |
|                                 |   |                        |     |   |              |   |     |   |   |   |   |   |
| Included in (income) expense         |   |                        | 93,700   |   |              |   | (245,451 | )      |   |   | (151,751 | ) |
| Included in stockholder's equity     |   |                        | (168,100 | )      |              |   | 195,651  |   |   |   | 27,551 |   |
| Transfers in and /or out of Level 3  |   |                        | --       |   |              |   | --       |   |   |   | -- |   |
| Balance December  31, 2008 |   |                        | 121,100  |   |              |   | 164,900  |   |   |   | 286,000 |   |
|                                 |   |                        |     |   |              |   |     |   |   |   |   |   |
| Included in expense                  |   |                        | 29,200   |   |              |   | 53,800   |   |   |   | 83,000 |   |
| Included in stockholder's equity:    |   |                        | (89,600  | )      |              |   | 71,700   |   |   |   | (17,900 | ) |
| Included in liabilities              |   |                        | 93,400   |   |              |   | 39,500   |   |   |   | 132,900 |   |
| Transfers in and /or out of Level 3  |   |                        | --       |   |              |   | --       |   |   |   | -- |   |
| Balance December  31, 2009 |   | $                           | 197,900  |   |              | $      | 286,100  |   |   | $ | 484,000 |   |

----

----

----

|                                  |   | 2009   |    |   | 2008   |   |
|---------------------------------------|--------|--------|---------|--------|--------|--------|
| Furniture and fixtures                |   | $      | 34,374  |   |   | $      | 34,374 |   |
| Leasehold improvement                 |   |   | 74,755  |   |   |   | 74,755 |   |
| Equipment                             |   |   | 39,778  |   |   |   | 50,438 |   |
|                                  |   |   | 148,907 |   |   |   | 159,567 |   |
| Accumulated depreciation amortization |   |   | (33,356 | )      |   |   | (17,130 | ) |
| Property and equipment, net           |   | $      | 115,551 |   |   | $      | 142,437 |   |

|                        |   | 2009   |    |   | 2008   |   |
|-----------------------------|--------|--------|---------|--------|--------|--------|
| Patents                     |   | $      | 89,764  |   |   | $      | 77,446 |   |
| Trademarks                  |   |   | 2,720   |   |   |   | 2,480 |   |
| Total cost                  |   |   | 92,484  |   |   |   | 79,926 |   |
| Accumulated amortization    |   |   | (23,504 | )      |   |   | (17,882 | ) |
| Patents and trademarks, net |   | $      | 68,980  |   |   | $      | 62,044 |   |

| Year Ended December 31, |   |   |   |
|-------------------------|--------|--------|--------|
| 2010                    |   | $      | 5,267  |   |
| 2011                    |   |   | 5,267  |   |
| 2012                    |   |   | 5,267  |   |
| 2013                    |   |   | 5,267  |   |
| 2014                    |   |   | 5,267  |   |
| 2015 and thereafter     |   |   | 42,648 |   |
|                    |   | $      | 68,983 |   |

----

|                   |   | December 31, |     |
|------------------------|--------|--------------|----------|
|                   |   | 2009         |     |   | 2008 |   |
|                   |   | $            | 210,443  | (a) |   | $ | 201,589 | (a) |
|                   |   |         | 75,000   | (b) |   |   | 351,467 | (b) |
|                   |   |         | 284,624  | (c) |   |   | -- |   |
|                   |   |         | 570,067  |   |   |   | 553,056 |   |
| Less long term portion |   |         | (284,624 | ) |   |   | -- |   |
| Current Portion        |   |         | 285,443  |   |   |   | 553,056 |   |

| (a) | These are unsecured notes bearing interest at rates ranging from 10% to 15% per annum, and have no specific due date for repayment.  The outstanding amounts  include accrued and unpaid interest of $127,221 and $118,367 as of December 31, 2009 and 2008, respectively.  No demands for repayment have been made by the note holder. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | In April 2001, the Company issued a $400,000 promissory note bearing interest at the rate of 2% per month.  In consideration for the issuance of this note, 500,000 shares of common stock were issued to the note holder and a $74,000 debt discount was recorded and fully amortized in the year ended December 31, 2001.  The principal balance and accrued interest was payable on September 1, 2001.  The Company did not make such payment and was required to issue an additional 100,000 shares to the note holder as a penalty.  The Company recorded additional interest expense of $12,300 related to the issuance of these penalty shares. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | In September 2009, the Company entered into agreements with three of the Company’s consultants and vendors to defer a total in the aggregate of $284,624 in compensation owed to them.  In return, the Company issued to the three vendors each a promissory note for the deferment.  The notes mature in January 2011 and interest will be accrued at 10% per annum compounded monthly. Accordingly, the Company reclassified $284,624 from current liabilities to long term liabilities. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|            |   | December 31, |     |
|-----------------|--------|--------------|----------|
|            |   | 2009         |     |   | 2008 |   |
|            |   | $            | 55,208   | (a) |   |   | 50,208 | (a) |
|            |   |         | 328,986  | (b) |   |   | -- | (b) |
|            |   |         | 384,194  |   |   |   | 50,208 |   |
| Debt discount   |   |         | (104,214 | ) |   |   | (19,283 | ) |
| Current Portion |   |         | 279,980  |   |   | $ | 30,925 |   |

| (a) | On December 17, 2008, the Company sold and issued a convertible promissory note in the principal amount of $50,000 bearing interest at 10% per annum and warrants to purchase 285,714 shares of common stock at an exercise price of $0.042 per share.  The convertible note matures on December 17, 2009.  The holder of the note is entitled to convert all or a portion of the convertible note plus any unpaid interest, at the lender’s sole option, into shares of common stock at a conversion price of $0.035 per share. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (b) | From October through December 2009, the Company raised $325,000 through debt financing from multiple lenders.  The Company issued each lender a convertible promissory note in the principal amount of money lender loaned to the Company.  The promissory note matures in one year and bears interest at 10% per annum and is convertible at the option of the holder in to shares of common stock. The conversion prices range from $0.044 to $0.07. In addition the Company granted 1,482,547 warrants to the note holders. The warrants have a life of 5 years and are fully vested on the date of the grant, the exercise price of the warrants ranges from $0.0528 to $0.0840. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| For the YearsEnding December 31, |   |   |    |
|----------------------------------|--------|--------|---------|
| 2010                             |   | $      | 64,000  |   |
| 2011                             |   |   | 66,000  |   |
| 2012                             |   |   | 68,000  |   |
| 2013                             |   |   | 70,000  |   |
| Thereafter                       |   |   | 72,000  |   |
|                             |   | $      | 340,000 |   |

|   | Rent expense during the years ended December 31, 2009 and 2008 was approximately$114,300 and $85,800, respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------|

|   | · | On February 1, 2010 the Board approved the request of HEI to convert $ 90,000 of debt to 1,764,706 shares of common stock .The conversion price is ($0.051) equals the fair value of the common stock on the date of the approval of such request. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On February 19, 2010 the Board approved the request of HEI to convert a $ 90,000 promissory note dated September 28, 2009 and $ 5,780.52 of accrued interest into 1,741,464 shares of common stock. The conversion price ($0.055) was the fair value of the common stock on the date of the approval of such request. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|   | • | 1,000,000 shares of common stock to a consultant incurring a stock-based compensation charge of $50,000; |
|--------|---------|----------------------------------------------------------------------------------------------------------|

|   | •. | 100,000 shares of common stock and three-year warrants to purchase an additional 250,000 shares, at $0.058 per share, to a consultant incurring stock-based compensation charges of $5,000 and $8,100, respectively; |
|--------|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 333,333 shares of common stock to an employee pursuant to a termination agreement, dated February 12, 2008, incurring a stock-based compensation charge of $13,333; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 1,000,000 shares of common stock to the Company’s Chief Financial Officer in connection with entering into an employment agreement with the officer, incurring a stock-based compensation charge of $100,000; and |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | 50,000 shares of common stock and three-year warrants to purchase an additional 50,000 shares, at $0.058 per share, to an employee incurring a stock-based compensation charge of $2,500 and $1,600, respectively. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 1. | 1,000,000 shares of common stock to a consultant pursuant to the term of a consulting agreement entered into in October 2007.  The Company recorded $20,000 of stock-based compensation in connection with this issuance; |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | 500,000 shares of common stock and granted a five-year option to purchase an additional 500,000 shares of common stock to the Company’s Director of Production.  The option was made fully vested and exercisable as of its grant date and has an exercise price of $0.041 per share.  Such stock and option were granted under the Company’s 2008 Equity Incentive Plan. The Company recorded stock-based compensations of $20,500 and $14,200, respectively; |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | 250,000 shares of common stock and granted a five-year option to purchase an additional 250,000 shares of common  stock to the Company’s controller.  The option was made fully vested and exercisable as of its grant date and has an exercise price of $0.041 per share.  Such stock and option were granted under the Company’s 2008 Equity Incentive Plan. The Company recorded stock-based compensations of $10,250 and $7,100, respectively |
|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     |   | Authorized Shares |      |   | Outstanding Shares |   |    | Par Value |   |   | Current Annual Dividend Requirement |   |   | Total Dividend Arrearage |    |   | Dividend Arrearage Per Share |   |      | Liquidation Preference (Including Dividend Arrearage) |   |
|----------|--------|-------------------|-----------|--------|--------------------|--------|---------|-----------|--------|--------|-------------------------------------|--------|--------|--------------------------|---------|--------|------------------------------|--------|-----------|-------------------------------------------------------|--------|
| Series A |   |              | 400,000   |   |               |   | 52,500  |      |   | $      | 53                                  |   |   | $                        | 52,500  |   |                         | $      | 780,100   |                                                  |   | $ | 14.86 |   |   | $ | 1,305,100 |   |
| Series D |   |              | 2,000,000 |   |               |   | 93,000  |      |   |   | 93                                  |   |   |                     | 55,800  |   |                         |   | 752,400   |                                                  |   |   | 8.09 |   |   |   | 1,287,150 |   |
| Series F |   |              | 1,000,000 |   |               |   | 38,644  |      |   |   | 39                                  |   |   |                     | --      |   |                         |   | 190,328   |                                                  |   |   | -- |   |   |   | -- |   |
|     |   |              |      |   |               |   | 184,144 |      |   | $      | 185                                 |   |   | $                        | 108,300 |   |                         | $      | 1,722,828 |                                                  |   |   |   |   |   | $ | 2,592,250 |   |

|     |   | Authorized Shares |      |   | Outstanding Shares |   |    | Par Value |   |   | Current Annual Dividend Requirement |   |   | Total Dividend Arrearage |    |   | Dividend Arrearage Per Share |   |      | Liquidation Preference (Including Dividend Arrearage) |   |
|----------|--------|-------------------|-----------|--------|--------------------|--------|---------|-----------|--------|--------|-------------------------------------|--------|--------|--------------------------|---------|--------|------------------------------|--------|-----------|-------------------------------------------------------|--------|
| Series A |   |              | 400,000   |   |               |   | 52,500  |      |   | $      | 53                                  |   |   | $                        | 52,500  |   |                         | $      | 727,600   |                                                  |   | $ | 13.86 |   |   | $ | 1,252,600 |   |
| Series D |   |              | 2,000,000 |   |               |   | 93,000  |      |   |   | 93                                  |   |   |                     | 55,800  |   |                         |   | 696,000   |                                                  |   |   | 7.48 |   |   |   | 1,231,350 |   |
| Series F |   |              | 1,000,000 |   |               |   | 38,644  |      |   |   | 39                                  |   |   |                     | --      |   |                         |   | 190,328   |                                                  |   |   | -- |   |   |   | -- |   |
|     |   |              |      |   |               |   | 184,144 |      |   | $      | 185                                 |   |   | $                        | 108,300 |   |                         | $      | 1,613,928 |                                                  |   |   |   |   |   | $ | 2,483,950 |   |

----

| The year ended December 31, 2008 |   |   | 1,298,534 |   |
|----------------------------------|--------|--------|-----------|--------|
| The year ended December 31, 2009 |   |   | 1,482,547 |   |

| The year ended December 31, 2008 |   |   | 1,556,666  |   |
|----------------------------------|--------|--------|------------|--------|
| The year ended December 31, 2009 |   |   | 11,090,000 |   |

| The year ended December 31, 2008 |   |   | 4,046,379 |   |
|----------------------------------|--------|--------|-----------|--------|
| The year ended December 31, 2009 |   |   | 2,452,590 |   |

----

|                             |   | Shares Underlying Warrants |       |   | Weighted Average Exercise Price |   |   | Intrinsic Value |   |
|----------------------------------|--------|----------------------------|------------|--------|---------------------------------|--------|--------|-----------------|--------|
| Outstanding at December 31, 2007 |   |                       | 25,889,331 |   |                            | $      | 0.11   |            |   | $ | -- |   |
|                             |   |                       |       |   |                            |   |   |            |   |   |   |   |
| Granted                          |   |                       | 6,811,579  |   |                            |   | 0.07   |            |   |   | -- |   |
| Expires                          |   |                       | (430,000   | )      |                            |   | 0.12   |            |   |   | -- |   |
| Exercised                        |   |                       | (110,000   | )      |                            |   | 0.085  |            |   |   | -- |   |
| Cancelled                        |   |                       | (2,000,000 | )      |                            |   | 0.11   |            |   |   | -- |   |
| Outstanding at December 31, 2008 |   |                       | 30,160,910 |   |                            |   | 0.11   |            |   |   | -- |   |
|                             |   |                       |       |   |                            |   |   |            |   |   |   |   |
| Granted                          |   |                       | 15,025,137 |   |                            |   | 0.05   |            |   |   | -- |   |
| Expired                          |   |                       | (7,272,352 | )      |                            |   | 0.12   |            |   |   | -- |   |
| Exercised                        |   |                       | --         |   |                            |   | --     |            |   |   | -- |   |
| Cancelled                        |   |                       | --         |   |                            |   | --     |            |   |   | -- |   |
| Outstanding at December 31, 2009 |   |                       | 37,913,695 |   |                            | $      | 0.07   |            |   |   | -- |   |

|           |   |   | Warrants Outstanding           |   |                                        | Warrants Exercisable |                            |
|----------------|--------|--------|--------------------------------|--------|---------------------------------------------|----------------------|---------------------------------|
| Exercise Price |   |   | Number of Outstanding Warrants |   | Weighted Average Remaining Contractual Life |                 | Weighted Average Exercise Price |   |   | Number of Exercisable Warrants |   |   | Weighted Average Exercise Price |   |
| $              | 0.0348 |   |                           |   | 344,828                                     |                 | 2.1 years                       |   | $ | 0.0348 |   |   |   | 344,828 |   |   | $ | 0.0348 |   |
|           | 0.0359 |   |                           |   | 334,448                                     |                 | 2.1 years                       |   |   | 0.0359 |   |   |   | 334,448 |   |   |   | 0.0359 |   |
|           | 0.0384 |   |                           |   | 440,625                                     |                 | 2.1 years                       |   |   | 0.0384 |   |   |   | 440,625 |   |   |   | 0.0384 |   |
|           | 0.0396 |   |                           |   | 151,515                                     |                 | 2.0 years                       |   |   | 0.0396 |   |   |   | 151,515 |   |   |   | 0.0396 |   |
|           | 0.0410 |   |                           |   | 10,750,000                                  |                 | 4.3 years                       |   |   | 0.0410 |   |   |   | 10,750,000 |   |   |   | 0.0410 |   |
|           | 0.0412 |   |                           |   | 582,524                                     |                 | 1.2 years                       |   |   | 0.0412 |   |   |   | 582,524 |   |   |   | 0.0412 |   |
|           | 0.0420 |   |                           |   | 1,142,856                                   |                 | 1.8 years                       |   |   | 0.0420 |   |   |   | 1,142,856 |   |   |   | 0.0420 |   |
|           | 0.0428 |   |                           |   | 280,374                                     |                 | 1.2 years                       |   |   | 0.0428 |   |   |   | 280,374 |   |   |   | 0.0428 |   |
|           | 0.0455 |   |                           |   | 131,927                                     |                 | 2.8 years                       |   |   | 0.0455 |   |   |   | 131,927 |   |   |   | 0.0455 |   |
|           | 0.0470 |   |                           |   | 512,820                                     |                 | 3.8 years                       |   |   | 0.0470 |   |   |   | 512,820 |   |   |   | 0.0470 |   |
|           | 0.0480 |   |                           |   | 750,000                                     |                 | 4.1 years                       |   |   | 0.0480 |   |   |   | 750,000 |   |   |   | 0.0480 |   |
|           | 0.0492 |   |                           |   | 121,951                                     |                 | 2.4 years                       |   |   | 0.0492 |   |   |   | 121,951 |   |   |   | 0.0492 |   |
|           | 0.0504 |   |                           |   | 119,048                                     |                 | 2.4 years                       |   |   | 0.0504 |   |   |   | 119,048 |   |   |   | 0.0504 |   |
|           | 0.0528 |   |                           |   | 340,908                                     |                 | 4.0 years                       |   |   | 0.0528 |   |   |   | 340,908 |   |   |   | 0.0528 |   |
|           | 0.0532 |   |                           |   | 902,256                                     |                 | 1.0 years                       |   |   | 0.0532 |   |   |   | 902,256 |   |   |   | 0.0532 |   |
|           | 0.0540 |   |                           |   | 3,000,000                                   |                 | 1.0 years                       |   |   | 0.0540 |   |   |   | 3,000,000 |   |   |   | 0.0540 |   |
|           | 0.0552 |   |                           |   | 326,086                                     |                 | 4.8 years                       |   |   | 0.0552 |   |   |   | 326,086 |   |   |   | 0.0552 |   |
|           | 0.0576 |   |                           |   | 208,334                                     |                 | 4.8 years                       |   |   | 0.0576 |   |   |   | 208,334 |   |   |   | 0.0576 |   |
|           | 0.0580 |   |                           |   | 300,000                                     |                 | 1.6 years                       |   |   | 0.0580 |   |   |   | 300,000 |   |   |   | 0.0580 |   |
|           | 0.0600 |   |                           |   | 200,000                                     |                 | 4.8 years                       |   |   | 0.0600 |   |   |   | 200,000 |   |   |   | 0.0600 |   |
|           | 0.6080 |   |                           |   | 394,737                                     |                 | 0.9 years                       |   |   | 0.6080 |   |   |   | 394,737 |   |   |   | 0.6080 |   |
|           | 0.0616 |   |                           |   | 389,610                                     |                 | 0.9 years                       |   |   | 0.0616 |   |   |   | 389,610 |   |   |   | 0.0616 |   |
|           | 0.0624 |   |                           |   | 192,308                                     |                 | 5.0 years                       |   |   | 0.0624 |   |   |   | 192,308 |   |   |   | 0.0624 |   |

----

|           |   |   | Warrants Outstanding           |   |                                        | Warrants Exercisable |                            |
|----------------|--------|--------|--------------------------------|--------|---------------------------------------------|----------------------|---------------------------------|
| Exercise Price |   |   | Number of Outstanding Warrants |   | Weighted Average Remaining Contractual Life |                 | Weighted Average Exercise Price |   |   | Number of Exercisable Warrants |   |   | Weighted Average Exercise Price |   |
|           | 0.0660 |   |                           |   | 90,909                                      |                 | 5.0 years                       |   |   | 0.0660 |   |   |   | 90,909 |   |   |   | 0.0660 |   |
|           | 0.0667 |   |                           |   | 500,000                                     |                 | 2.2 years                       |   |   | 0.0667 |   |   |   | 166,667 |   |   |   | 0.0667 |   |
|           | 0.0672 |   |                           |   | 89,286                                      |                 | 5.0 years                       |   |   | 0.0672 |   |   |   | 89,286 |   |   |   | 0.0672 |   |
|           | 0.0700 |   |                           |   | 2,000,000                                   |                 | 0.7 years                       |   |   | 0.0700 |   |   |   | 2,000,000 |   |   |   | 0.0700 |   |
|           | 0.0716 |   |                           |   | 335,196                                     |                 | 0.9 years                       |   |   | 0.0716 |   |   |   | 335,196 |   |   |   | 0.0716 |   |
|           | 0.0720 |   |                           |   | 83,333                                      |                 | 2.5 years                       |   |   | 0.0720 |   |   |   | 83,333 |   |   |   | 0.0720 |   |
|           | 0.0760 |   |                           |   | 631,912                                     |                 | 0.8 years                       |   |   | 0.0760 |   |   |   | 631,912 |   |   |   | 0.0760 |   |
|           | 0.0762 |   |                           |   | 389,610                                     |                 | 0.9 years                       |   |   | 0.0762 |   |   |   | 389,610 |   |   |   | 0.0762 |   |
|           | 0.0780 |   |                           |   | 76,923                                      |                 | 4.9 years                       |   |   | 0.0780 |   |   |   | 76,923 |   |   |   | 0.0780 |   |
|           | 0.0840 |   |                           |   | 214,287                                     |                 | 2.5 years                       |   |   | 0.0840 |   |   |   | 214,287 |   |   |   | 0.0840 |   |
|           | 0.0853 |   |                           |   | 90,000                                      |                 | 2.3 years                       |   |   | 0.0853 |   |   |   | 30,000 |   |   |   | 0.0853 |   |
|           | 0.0864 |   |                           |   | 194,447                                     |                 | 2.6 years                       |   |   | 0.0864 |   |   |   | 194,447 |   |   |   | 0.0864 |   |
|           | 0.0876 |   |                           |   | 547,947                                     |                 | 1.5 years                       |   |   | 0.0876 |   |   |   | 547,947 |   |   |   | 0.0876 |   |
|           | 0.0960 |   |                           |   | 1,384,786                                   |                 | 0.7 years                       |   |   | 0.0960 |   |   |   | 1,384,786 |   |   |   | 0.0960 |   |
|           | 0.1008 |   |                           |   | 166,667                                     |                 | 1.5 years                       |   |   | 0.1008 |   |   |   | 166,667 |   |   |   | 0.1008 |   |
|           | 0.1080 |   |                           |   | 333,333                                     |                 | 1.2 years                       |   |   | 0.1080 |   |   |   | 333,333 |   |   |   | 0.1080 |   |
|           | 0.1100 |   |                           |   | 5,875,757                                   |                 | 0.5 years                       |   |   | 0.1100 |   |   |   | 5,875,757 |   |   |   | 0.1100 |   |
|           | 0.1156 |   |                           |   | 415,224                                     |                 | 1.3 years                       |   |   | 0.1156 |   |   |   | 415,224 |   |   |   | 0.1156 |   |
|           | 0.1175 |   |                           |   | 2,000,000                                   |                 | 0.2 years                       |   |   | 0.1175 |   |   |   | 2,000,000 |   |   |   | 0.1175 |   |
|           | 0.1200 |   |                           |   | 300,000                                     |                 | 1.3 years                       |   |   | 0.1200 |   |   |   | 300,000 |   |   |   | 0.1200 |   |
|           | 0.1300 |   |                           |   | 276,923                                     |                 | 1.2 years                       |   |   | 0.1300 |   |   |   | 276,923 |   |   |   | 0.1300 |   |
|           |   |   |                           |   | 37,913,695                                  |                 |                            |   |   |   |   |   |   | 37,520,362 |   |   |   |   |   |

| (a) | In March 2007, the Company’s Chief Executive Officer and a former director each made loans of $50,000 to the Company.  The loans accrue simple interest at the rate of 10% per annum and were due and payable 120 days after funding.  The loans carry an option that, if the loans were not repaid by June 14, 2007 and June 29, 2007, respectively, such options would entitle the lenders to convert their debt into shares of common stock at a conversion price equal to 50% of the average closing price of the common stock over the three previous business days preceding the date of demand for conversion is made.  Under accounting guidance provide by ASC 815, the conversion price of the loans did not have a determinable number of shares the loans could be settled in and as a result, have been presented as a derivative liability.  Accordingly, the conversion option will be marked to market through earnings at the end of each reporting period.  In January 2008, the Chief Executive Officer converted her note plus accrued interest of $53,658 into 2,146,324 shares of common stock.  As December 31, 2009, the $50,000 loan and $13,699 accrued interest owed to the former director are still outstanding. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (b) | In each of 2008 and 2009, a firm in which the Company’s Chief Financial Officer held a one-third equity position was retained to prepare the Company’s income tax returns.  During the years ended December 31, 2009 and 2008, the Company incurred fees totaling $4,768 and $2,000, respectively, with respect to such services rendered. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (c) | On February 8, 2008, the Company’s Board of Directors authorized the negotiation of a termination agreement (the “Termination Agreement”) with the Company’s then Vice President of Sales and Marketing.  The Termination Agreement was finalized on February 12, 2008, pursuant to which the Company agreed to pay the former officer eight months’ salary at the rate of $7,000 per month commencing on February 12, 2008.  In addition, the Company was obligated to continue to contribute 80% of the health insurance premium with respect to the former officer through October 12, 2008.  One-third of the one million shares of common stock that the Company granted the former officer on April 23, 2007 vested immediately upon the execution of the Termination Agreement.  The balance of 666,367 shares was forfeited.  On March 26, 2008, the Company issued 333,333 shares of common stock to the former officer and recorded a charge to operations of approximately $13,300.  The 2,000,000 warrants the Company awarded the officer on April 23, 2007 were voided and, in replacement, the Company issued warrants to purchase 666,666 shares of common stock at an exercise price of $0.11 per share exercisable through April 23, 2010.  In connection with the issuance of the replacement warrants, the Company recorded a charge to operations of approximately $8,500.  The Company agreed to pay an additional sum of $7,000, representing repayment for all advances previously made by the former officer on behalf of the Company, in two installments which were paid prior to September 30, 2008. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (d) | On March 14, 2008, Malcolm Hoenlein was appointed as director to the Company.  He is to receive $8,000 cash compensation per year.  In addition, Mr. Hoenlein will receive 250,000 shares of common stock upon the one year anniversary of his appointment and warrants to purchase an additional 500,000 shares, exercisable for a three-year period following the one-year anniversary of his appointment to the Board at an exercise price of $0.0667 per share.  The right to exercise these warrants will vest annually over three years.  Accordingly, the Company will amortize the fair value of these warrants of approximately $17,000 over the vesting period. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (e) | In April 2008, Leslie J. Kessler, the Company’s Chief Executive Officer, Terry R. Lazar, the Company’s Chief Financial Officer and a consultant for the Company, each individually entered into Stock Purchase, Loan and Security Agreements with the Company.  Under these April 2008 agreements, the Company loaned the individuals approximately $1.4 million in the aggregate.  The obligations to repay the loans were evidenced by non-recourse promissory notes.  The notes called for interest at a rate of 6% per annum and were to mature in April 2011, at which time all unpaid principal and interest are due.  The loan funds were to be used exclusively for the purchase of the Common Stock.  The purchase price of the stock was based on the average closing price of the Common Stock during the 30 trading days immediately preceding the date of the April 2008 agreements which equaled $0.0843. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The April 2008 agreements being deemed rescinded in all respects ab initio and it being deemed as if the April 2008 agreements were never entered into, and that all mutual promises, covenants and/or agreements contained in the April 2008 agreements being of no force and/or effect; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Ms. Kessler’s and Mr. Lazar’s notes, as well as their respective obligations to repay the amounts due under their respective notes, being deemed cancelled in all respects ab initio, and it being deemed as if the notes were never entered into, that they each have no obligation to repay the amounts due under their respective notes and that all mutual promises, covenants and/or agreements contained in their respective notes being of no force and/or effect; and |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The aggregate 13 million shares issued to Ms. Kessler and Mr. Lazar being deemed cancelled in all respects ab initio and it being deemed as if the shares were never issued or outstanding. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

|                                  |   | 2009   |   |   | 2008   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|
| Federal statutory rate                |   |   | (34.0  | )%     |   |   | (34.0 | )% |
| State tax benefit, net of federal tax |   |   | (6.0   | )      |   |   | (6.0 | ) |
| Stock based compensation              |   |   | 13.6   |   |   |   | 9.5 |   |
| Other permanent differences           |   |   | (4.4   | )      |   |   | 5.6 |   |
| True up of net operating loss         |   |   | (9.7   | )      |   |   | -- |   |
| Change in valuation allowance         |   |   | 40.5   |   |   |   | 24.8 |   |
| Effective rate                        |   |   | 0.0    | %      |   |   | 0.0 | % |

----

| Net Operating Profit Before Income Taxes |   | Performance Bonus |   |
|------------------------------------------|--------|------------------------|--------|
|                                     |   |                   |   |
| On the First $10 Million                 |   |                   | 0      | % |
|                                     |   |                   |   |   |
| On the Next $40 Million                  |   |                   | 3.5    | % |
|                                     |   |                   |   |   |
| On the Next $50 Million                  |   |                   | 2.5    | % |
|                                     |   |                   |   |   |
| On all Amounts Over $100 Million         |   |                   | 1.5    | % |

----

----

| Item 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. |
|---------|---------------------------------------------------------------------------------------|

| Item 9A(T). | Controls and Procedures. |
|-------------|--------------------------|

| • | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 9B. | Other Information. |
|----------|--------------------|

----

| Item 10. | Directors, Executive Officers and Corporate Governance. |
|----------|---------------------------------------------------------|

|              |   | Principal Positions and                                              | Director |
|-------------------|--------|----------------------------------------------------------------------|----------|
| Name              | Age    | Offices with our Company                                             | Since    |
| Leslie J. Kessler | 62     | Chief Executive Officer  and Chairman                      | 2007     |
| Carrol S. Keim    | 64     | President                                                            | 2010     |
| Terry R. Lazar    | 66     | Chief Financial Officer and Director                                 | 2007     |
| Henry(Bob) Hidell | 69     | Chief Operating Officer                                              | 2010     |
| Malcolm Hoenlein  | 66     | Director                                                             | 2008     |
| Richard Pellerito | 59     | Vice President-Technical Sales                                       | 2010     |
| Shaul Kochan      | 64     | Vice President International Markets                                 | 2010     |
| Alphonse Wolter   | 60     | General Manager of PureSafe Manufacturing & Research Corporation | 2010     |

----

----

| • | Leslie J. Kessler failed to timely file Form 4's reporting a total of six transactions during our fiscal year ended December 31, 2009 and four transactions from prior years; |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Terry R. Lazar failed to timely file Forms 4's reporting a total of six transactions during our fiscal year ended December 31, 2009 and three transactions from prior years; and |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Malcolm Hoenlein failed to timely file two Forms 4's reporting a total of one transaction during our fiscal year ended December 31, 2009 and one from 2008. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 11. | Executive Compensation. |
|----------|-------------------------|

----

|                                                         |   | Fiscal Year |   | Salary  |    |   | Stock Awards |    |    | Option Awards |   |   | All Other Compensation |   |   | Total  |   |
|--------------------------------------------------------------|--------|-------------|--------|---------|---------|--------|--------------|---------|---------|---------------|--------|--------|------------------------|--------|--------|--------|--------|
| Leslie J. Kessler, Chief Executive Officer and President (1) |   | 2009        |   | $       | 108,000 |   |         | $       | 132,000 |          |   | $      | 198,100                |   |   | $      | 0      |   |   | $ | 438,100 |   |
|                                                         | 2008   |        |   | 108,000 |    |   |         | 50,000  |    |          |   | 62,600 |                   |   |   | 12,000 |   |   |   | 232,600 |   |
|                                                         |   |        |   |    |    |   |         |    |    |          |   |   |                   |   |   |   |   |   |   |   |   |   |
| Terry R. Lazar, Chief Financial Officer (2)                  |   | 2009        |   |    | 60,000  |   |         |    | 132,000 |          |   |   | 84,900                 |   |   |   |   |   |   |   | 276,900 |   |
|                                                         | 2008   |        |   | 60,000  |    |   |         | 150,000 |    |          |   | 12,300 |                   |   |   |   |   |   |   | 222,300 |   |

| (1) | Ms. Kessler was appointed our President in January 2007 and Chief Executive Officer in February 2007.  From May 2006 to January 2007, she was an outside consultant to our company.  The amounts reflected in the table constitute the total compensation earned by Ms. Kessler during the subject fiscal years, whether or not actually paid to her.  Ms. Kessler was paid $72,000 for her monthly compensation from January 2008 through August 2008 and she chose to defer her monthly salary from September through December 2009.  Ms. Kessler was awarded 3 million shares of our common stock.  We recorded $132,000 in stock-based compensation in connection with such award and have included such amount in the Summary Compensation Table.   In addition, Ms Kessler was also awarded warrants to purchase 7 million shares of our common stock at exercise price of $0.041 per share.  We recorded $198,100 in stock-based compensation in connection with such award and have included such amount in the Summary Compensation Table. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Mr. Lazar was appointed Chief Financial Officer and a director of our company in September 2007. The amounts reflected in the table constitute the total compensation earned by Mr. Lazar during the subject fiscal years, whether or not actually paid to him.  Mr. Lazar was paid $40,000 for his monthly compensation from January through August 2008 and he chose to defer his monthly salary from September through December 2009.    Mr. Lazar was awarded 3 million shares of our common stock.  We recorded $132,000 in stock-based compensation in connection with such award and have included such amount in the Summary Compensation Table.   In addition, Mr. Lazar was also awarded warrants to purchase 3 million shares of our common stock at exercise price of $0.041 per share.  We recorded $84,900 in stock-based compensation in connection with such award and have included such amount in the Summary Compensation Table. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Net Operating Profit Before Income Taxes |   | Performance Bonus |   |
|------------------------------------------|--------|------------------------|--------|
|                                     |   |                   |   |
| On the First $10 Million                 |   |                   | 0      | % |
|                                     |   |                   |   |   |
| On the Next $40 Million                  |   |                   | 3.5    | % |
|                                     |   |                   |   |   |
| On the Next $50 Million                  |   |                   | 2.5    | % |
|                                     |   |                   |   |   |
| On all Amounts Over $100 Million         |   |                   | 1.5    | % |

----

----

| • | with respect to each option award - |
|---------|-------------------------------------|

|   | • | the number of shares of our common stock issuable upon exercise of outstanding options that have been earned, separately identified by those exercisable and unexercisable; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the number of shares of our common stock issuable upon exercise of outstanding options that have not been earned; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------|

|   | • | the exercise price of such option; and |
|--------|---------|----------------------------------------|

|   | • | the expiration date of such option; and |
|--------|---------|-----------------------------------------|

| • | with respect to each stock award - |
|---------|------------------------------------|

|   | • | the number of shares of our common stock that have been earned but have not vested; |
|--------|---------|-------------------------------------------------------------------------------------|

|   | • | the market value of the shares of our common stock that have been earned but have not vested; |
|--------|---------|-----------------------------------------------------------------------------------------------|

|   | • | the total number of shares of our common stock awarded under any equity incentive plan that have not vested and have not been earned; and |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the aggregate market or pay-out value of our common stock awarded under any equity incentive plan that have not vested and have not been earned. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Option Award – |
|--------|----------------------|

| Name                  |   | Number of Securities Underlying Unexercised Options Exercisable |      |   | Number of Securities Underlying Unexercised Options Unexercisable |   |   | Equity Incentive Plan Awards:Number of Securities Underlying Unexercised Unearned Options |   |   | Option Exercise Price |   | Option Expiration Date |
|-----------------------|--------|-----------------------------------------------------------------|-----------|--------|-------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------|--------|--------|-----------------------|--------|------------------------|
| Leslie J. Kessler (1) |   |                                                            | 2,000,000 |   |                                                              |   |   |                                                                                      |   |   |                  |   | $                      | 0.110 |   | 03/28/10 |
|                  |   |                                                            |      |   |                                                              |   |   |                                                                                      |   |   | 3,000,000             |   |                   |   | 0.041 |   | 04/17/14 |
|                  |   |                                                            | 4,000,000 |   |                                                              |   |   |                                                                                      |   |   |                  |   |                   |   | 0.041 |   | 04/17/14 |
|                  |   |                                                            |      |   |                                                              |   |   |                                                                                      |   |   |                  |   |                   |   |   |   |   |
| Terry R. Lazar (2)    |   |                                                            | 2,000,000 |   |                                                              |   |   |                                                                                      |   |   |                  |   |                   | $ | 0.07 |   | 09/27/10 |
|                  |   |                                                            |      |   |                                                              |   |   |                                                                                      |   |   | 3,000,000             |   |                   |   | 0.041 |   | 04/17/14 |

|   | (1) | Does not include (a) 506,410 shares of our common stock issuable upon exercise of warrants granted to Ms. Kessler in connection with loans she made to the Company in each October and November 2008  and (b) 104,167 shares issuable upon exercise of warrants that were issued in connection with a loan Ms. Kessler made in October 2009. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Does not include (a) 506,410 shares of our common stock issuable upon exercise of warrants granted to Mr. Lazar in connection with loans she made to the Company in each October and November 2008  and (b) 100,000 shares issuable upon exercise of warrants that were issued in connection with a loan  Mr. Lazar made in October 2009. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Name             |   | Number of Shares That Have Not Vested |      |   | Market Value of Shares That Have Not Vested |   |    | Number of Unearned Shares That Have Not Vested |   |      | Equity Incentive Award:Market or Pay-Out Value of Unearned Shares That Have Not Vested |   |
|------------------|--------|---------------------------------------|-----------|--------|---------------------------------------------|--------|---------|------------------------------------------------|--------|-----------|----------------------------------------------------------------------------------------|--------|
| Leslie J Kessler |   |                                  | 2,000,000 |   |                                        | $      | 114,000 |                                           |   |      | --                                                                                     |   |   | $ | -- |   |
| Terry R. Lazar   |   |                                  | 2,000,000 |   |                                        |   | 114,000 |                                           |   | _­-- |                                                                                   |   |   | -- |   |

----

| Name                 |   | Fees Earned or Paid in Cash |   |   | Stock Awards |   |   | Option Awards |   |   | All Other Compensation |   |   | Total |   |
|----------------------|--------|-----------------------------|--------|--------|--------------|--------|--------|---------------|--------|--------|------------------------|--------|--------|-------|--------|
| Malcolm Hoenlein (1) |   | $                           | 8,000  |   |         | $      | --     |          |   | $      |                   |   |   | $     |   |   |   | $ | 8,000\ |   |

| (1) | We have agreed to compensate Malcolm Hoenlein, currently our sole outside director, $8,000 per year for his services as a director of our company.  In addition, in connection with his initial election to our board of directors in March 2008, we agreed to issue to Mr. Hoenlein 250,000 shares of our common stock on March 14, 2009, the first anniversary of his appointment to our Board of Directors, if he was a director of our company on such date, and granted him an option to purchase an additional 500,000 shares or our common stock, exercisable for a three-year period at $0.0667 per share commencing on such one-year anniversary date. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
|----------|-------------------------------------------------------------------------------------------------|

----

| • | each person known by us to beneficially own 5% or more of the outstanding shares of such class of stock, based on filings with the Securities and Exchange Commission and certain other information, |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | each of our current “named executive officers” and directors, and |
|---------|-------------------------------------------------------------------------------|

| • | all of our current executive officers and directors as a group. |
|---------|-----------------------------------------------------------------|

| • | we believe that all shares are beneficially owned, and investment and voting power is held by, the persons named as owners, and |
|---------|---------------------------------------------------------------------------------------------------------------------------------|

| • | the address for each beneficial owner listed in the table is c/o Puresafe Water Systems, Inc., 25 Fairchild Avenue, Suite 250, Plainview, New York 11803. |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name and Address of Stockholder                                 |   | Amount and Nature of Beneficial Ownership |   |   | Percentage of Class |   |
|-----------------------------------------------------------------|--------|-------------------------------------------|--------|--------|---------------------|--------|
| Jerome and Anne Asher JTWROS (1)                                |   |                                      | 5,000  |   |                |   | 9.5 | % |
| Robert D. Asher (2)                                             |   |                                      | 5,000  |   |                |   | 9.5 |   |
| All executive officers and directors as a group (three persons) |   |                                      | 0      |   |                |   | 0.0 | % |

| (1) | The address for Mr. J. and Ms. Asher is 2701 N. Ocean Boulevard, Apartment E-202, Boca Raton, Florida 33431. |
|-----|--------------------------------------------------------------------------------------------------------------|

| (2) | The address for Mr. R. Asher is 72 Old Farm Road, Concord, Massachusetts 01742. |
|-----|---------------------------------------------------------------------------------|

| Name and Address of Stockholder                                 |   | Amount and Nature of Beneficial Ownership |   |   | Percentage of Class |   |
|-----------------------------------------------------------------|--------|-------------------------------------------|--------|--------|---------------------|--------|
| John A. Borger (1)                                              |   |                                      | 10,000 |   |                |   | 10.8 | % |
| Shirley M. Wan (2)                                              |   |                                      | 6,000  |   |                |   | 6.5 |   |
| All executive officers and directors as a group (three persons) |   |                                      | 0      |   |                |   | 0.0 | % |

| (1) | The address for Mr. Borger is 806 E. Avenida Pico, Suite 1, PMB #262, San Clemente, California 92673. |
|-----|-------------------------------------------------------------------------------------------------------|

| (2) | The address for Ms. Wan is 5455 Chelsen Wood Drive, Duluth, Georgia 30155. |
|-----|----------------------------------------------------------------------------|

| Name and Address of Stockholder                                 |   | Amount and Nature of Beneficial Ownership |   |   | Percentage of Class |   |
|-----------------------------------------------------------------|--------|-------------------------------------------|--------|--------|---------------------|--------|
| Robert Kaszovitz (1)                                            |   |                                      | 10,000 |   |                |   | 25.2 | % |
| C Trade Inc. (2)                                                |   |                                      | 9,375  |   |                |   | 10.4 |   |
| Olsham Grundman Frome Rosenzweig & Wolosky (3)              |   |                                      | 5,000  |   |                |   | 5.6 |   |
| Peter Hoffman (4)                                               |   |                                      | 3,126  |   |                |   | 7.9 |   |
| All executive officers and directors as a group (three persons) |   |                                      | 0      |   |                |   | 0.0 |   |

| (1) | The address for Mr. Kaszovitz is 1621 51st Street, Brooklyn, New York, 11204. |
|-----|-------------------------------------------------------------------------------|

| (2)  | The address for C Trade Inc. is 25-40 Shore Boulevard, Suite 9L, Astoria, New York 11102. |
|-----------|-------------------------------------------------------------------------------------------|

| (3) | The address for Olsham Grundman Frome Rosenzweig & Wolosky is 65 East 55th Street, New York, New York 10022. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (4) | The address for Mr. Hoffman is 70-35 Vleigh Place, Flushing, New York 11367. |
|-----|------------------------------------------------------------------------------|

----

| Name and Address of Stockholder                 | Amount and Nature ofBeneficial Ownership |   | Percentage of Class |
|-------------------------------------------------|------------------------------------------|--------|--------------------------|
| Leslie Kessler (1)                              | 23,399,418                               | (2)    | 7.95                     |
| Terry Lazar (3)                                 | 19,889,527                               | (4)    | 6.84                     |
| Malcolm Hoenlein (5)                            | 750,000                                  | (6)    | 0.26                     |
| Carroll S. Keim (7)                             | --                                       |   | --                       |
| Henry Hidell, III (8)                           | 1,741,464                                | (9)    | 0.61                     |
| Richard Pellerito (10)                          | 50,000                                   |   | 0.02                     |
| Shaul Kochan (11)                               | 9,499,500                                | (12)   | 3.31                     |
| All executive officers and directors as a group | 55,329,909                               | (13)   | 18.27                    |

| (1) | Ms. Kessler is our President and Chief Executive Officer and a member of our board of directors. |
|-----|--------------------------------------------------------------------------------------------------|

| (2) | Includes (a) 98,400 shares of our common stock held in Ms. Kessler’s IRA account; (b) 2 million shares of our common stock issuable upon exercise of warrants granted to Ms. Kessler in March 2010; (c) 7 million shares of our common stock issuable upon exercise of warrants granted to Ms. Kessler in 2009; (d) 506,410 shares of our common stock issuable upon exercise of warrants Ms. Kessler acquired in connection with loans Ms. Kessler made to the Company in 2008; and (e)  104,167 shares of our common stock issuable upon exercise of warrants Ms. Kessler acquired in connection with loans Ms. Kessler made to the Company in 2009.   All warrants included in this section are exercisable within the next 60 days. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Mr. Lazar is our Chief Financial Officer and a member of our board of directors. |
|-----|----------------------------------------------------------------------------------|

| (4) | Includes (a) 270,000 shares of our common stock owned by Mr. Lazar and his spouse, jointly; (b) 185,000 shares of our common stock held in Mr. Lazar’s IRA account; (c) 205,000 shares of our common stock held in Mr. Lazar’s 401(k) account; (d) 140,000 shares held in an IRA account of Mr. Lazar’s spouse; (e) 25,000 shares of our common stock held in a profit sharing plan trust for the benefit of Mr. Lazar; (f) 476,191 shares of our common stock held by a partnership in which Mr. Lazar holds a one-third (1/3) equity interest; (g) 2,000,000 shares of our common stock issuable upon exercise of warrants previously granted to Mr. Lazar in connection with his initial retention as our Chief Financial Officer in September 2007; (h) 95,238 shares of our common stock issuable upon exercise of warrants sold, in March  2008, to the partnership in which Mr. Lazar holds a one-third (1/3) equity interest; (i) 274,776 shares of our common stock issuable upon exercise of warrants sold to Mr. Lazar, in December 2007; (j) 3 million shares of our common stock issuable upon exercise of warrants granted to Mr. Lazar in 2009; (k) 506,410 shares of our common stock issuable upon exercise of warrants Mr. Lazar acquired in connection with loans Mr. Lazar made to the Company in 2008; and (l) 100,000 shares of our common stock issuable upon exercise of warrants Mr. Lazar acquired in connection with loan Mr. Lazar made to the Company in 2009.  All warrants included in this section are exercisable within the next 60 days. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Mr. Hoenlein is a member of our board of directors. |
|-----|-----------------------------------------------------|

| (6) | Includes 500,000 shares of our common stock underlying an option granted to Mr. Hoenlein in March 2008, which option is exercisable within the next 60 days. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Mr. Keim was retained as President on March 26, 2010 under agreement we signed with Hidell-Eyster International, Inc. (“HEI”). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------|

| (8) | Mr. Hidell was retained as Chief Operating Officer on March 26, 2010 under HEI agreement. |
|-----|-------------------------------------------------------------------------------------------|

| (9) | The shares were issued to Hidell-Eyster Technical Services in which Mr. Hidell is the sole owner of the company. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (10) | Mr. Pellerito was retained as Vice President of Operations on March 26, 2010. |
|------|-------------------------------------------------------------------------------|

| (11) | Mr. Kochan joined us as International Market consultant in 2007 and was appointed Vice President of International Markets on March 26, 2010. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------|

| (12) | Includes 2,000,000 shares of our common stock issuable upon exercise of warrants granted to Mr. Kochan in March 2010. |
|------|-----------------------------------------------------------------------------------------------------------------------|

| (13) | Includes those shares beneficially owned by our current executive officers and directors, as set forth in notes (3), (5) and (8).   |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
|----------|----------------------------------------------------------------------------|

----

| • | the April 2008 agreement being deemed rescinded in all respects ab initio and it being deemed as if the April 2008 agreement was never entered into, and that all mutual promises, covenants and/or agreements contained in the April 2008 agreement being of no force and/or effect; |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Ms. Kessler’s promissory note, as well as the obligations of Ms. Kessler to repay the amounts due under such note, being deemed cancelled in all respects ab initio and it being deemed as if the note was never entered into, that Ms. Kessler has no obligation to repay the amounts due under the note and that all mutual promises, covenants and/or agreements contained in the note being of no force and/or effect; and |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | the 6.5 million shares being deemed cancelled in all respects ab initio and it being deemed as if the shares were never issued or outstanding. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

| • | the April 2008 agreement being deemed rescinded in all respects ab initio and it being deemed as if the April 2008 agreement was never entered into, and that all mutual promises, covenants and/or agreements contained in the April 2008 agreement being of no force and/or effect; |
|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | Mr. Lazar’s promissory note, as well as the obligations of Mr. Lazar to repay the amounts due under such note, being deemed cancelled in all respects ab initio and it being deemed as if the note was never entered into, that Mr. Lazar has no obligation to repay the amounts due under the note and that all mutual promises, covenants and/or agreements contained in the note being of no force and/or effect; and |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| • | the 6.5 million shares being deemed cancelled in all respects ab initio and it being deemed as if the shares were never issued or outstanding. |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Item 14. | Principal Accounting Fees and Services. |
|----------|-----------------------------------------|

|                   |   | Fiscal Year Ended December 31, |   |
|------------------------|--------|--------------------------------|--------|
| Category               |   | 2009                           |   |   | 2008 |   |
| Audit fees (1)         |   | $                              | 96,815 |   |   | $ | 177,260 |   |
| Audit-related fees (2) |   |                           | 0      |   |   |   | 0 |   |
| Tax fees (3)           |   |                           | 0      |   |   |   | 0 |   |
| All Other Fees (4)     |   |                           | 0      |   |   |   | 0 |   |

| (1) | Consists of fees billed for the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Consists of assurance and related services that are reasonably related to the performance of the audit and reviews of our financial statements and are not included in “audit fees” in this table. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Consists of professional services rendered for tax compliance, tax advice and tax planning.  The nature of these tax services is tax preparation. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Marcum provided the following other services during the year ended December 31, 2009: none. |
|-----|---------------------------------------------------------------------------------------------|

----

----

| Item 15. | Exhibits and Financial Statement Schedules |
|----------|--------------------------------------------|

| Exhibit |   |                                                                                                                                                                                                                                                                                                           |
|---------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number  |   | Exhibit Description                                                                                                                                                                                                                                                                                            |
| 3.1     |   | Composite of Certificate of Incorporation of PureSafe Water Systems, Inc., as amended to date.                                                                                                                                                                                                                 |
| 3.2     |   | Amended and restated By-laws of PureSafe Water Systems, Inc.  [Incorporated by reference to Exhibit 3(ii)  to Amendment  No. 1 to our Annual Report 10-KSB/A, filed with the SEC on November 17, 2003 (File No.: 0-30544).]                                                      |
| 3.2a    |   | Amended and Restated By-laws of PureSafe Water Systems, Inc., effective June 11, 2009 [Incorporated by reference to Exhibit 3.2a  to our Current Report on Form 8-K, filed with the SEC on June 11, 2009.]                                                                                           |
| 4.5     |   | Series B Warrant to Purchase Common Stock and Allonge to and Amendment and Extension of Common Stock Purchase Warrant.   [Incorporated by reference to Exhibit 4.6 to Amendment No. 1 to our Annual Report on Form 10-KSB/A, filed with the SEC on November 17, 2003 (File No.: 0-30544).]      |
| 4.6     |   | Series B Second Allonge to and Amendment and Extension of Common Stock Purchase Warrant.  [Incorporated by reference to Exhibit 4.6 to our Registration statement on Form SB-2, filed with the SEC on January 24, 2005 (File No.: 0-30544).]                                                         |
| 4.7     |   | Subordinated Debentures.  [Incorporated by reference to Exhibit 4.5 to Amendment No. 1 to our Annual Report on Form 10-KSB, filed with the SEC on November 17, 2003 (File No.: 0-30544).]                                                                                                            |
| 10.4    |   | Warrant Certificate, dated November 16, 2005, issued to Southridge Partners LP.  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, filed with the SEC on November 23, 2005 (File No.: 0-30544).]                                                                         |
| 10.5    |   | Loan Agreement, dated as of October 11, 2006, between Water Chef, Inc. and Southridge Partners LP.  .  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, filed with the SEC on October 19, 2006 (File No.: 0-30544).]                                          |
| 10.6    |   | Registration Rights Agreement, dated as of October 11, 2006, between Water Chef, Inc. and Southridge Partners LP.  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, filed with the SEC on October 19, 2006 (File No.: 0-30544).]                                        |
| 10.7    |   | Promissory Note of Water Chef, Inc., dated October 17, 2006 and in the principal amount of $300,000, issued to Southridge Partners LP.  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, filed with the SEC on October 19, 2006 (File No.: 0-30544).]                   |
| 10.8    |   | Warrant Certificate, dated October 11, 2006, issued to Southridge Partners LP.  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, filed with the SEC on October 19, 2006 (File No.: 0-30544).]                                                                           |
| 10.9    |   | Securities Purchase Agreement, dated as of August 27, 2007, between Water Chef, Inc., Southridge Partners LP and Southshore Capital Fund Ltd.  [Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).]           |
| 10.10   |   | Registration Rights Agreement, dated as of August 27, 2007, between Water Chef, Inc. and Southridge Partners LP.  [Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).]                                        |
| 10.11   |   | 10% Convertible Promissory Note of Water Chef, Inc., dated September 7, 2007 and in the principal amount of $200,000, issued to Southridge Partners LP.  [Incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).] |

----

| 10.12 |   | 10% Convertible Promissory Note of Water Chef, Inc., dated September 7, 2007 and in the principal amount of $50,000, issued to Southshore Capital Fund Ltd.  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).] |
|-------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.13 |   | Warrant Certificate, dated September 7, 2007, issued to Southridge Partners LP.  [Incorporated by reference to Exhibit 99.5 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).]                                                                             |
| 10.14 |   | Warrant Certificate, dated September 7, 2007, issued to Southshore Capital Fund Ltd.  [Incorporated by reference to Exhibit 99.6 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).]                                                                        |
| 10.15 |   | Private Equity Credit Agreement, dated as of September 7, 2007, between Water Chef, Inc. and Brittany Capital Management Limited.  [Incorporated by reference to Exhibit 99.7 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).]                           |
| 10.16 |   | Registration Rights Agreement, dated as of September 7, 2007, between Water Chef, Inc. and Brittany Capital Management Limited.  [Incorporated by reference to Exhibit 99.8 to our Current Report on Form 8-K, filed with the SEC on September 9, 2007 (File No.: 0-30544).]                             |
| 10.17 |   | Employment Agreement, dated April 16, 2008 between Water Chef, Inc. and Leslie J. Kessler.  [Incorporated by reference to Exhibit 99.1 to our Current Report on Form 8-K (Date of Report: April 16, 2008), filed with the SEC on April 17, 2008 (File No.: 0-30544).]                                    |
| 10.18 |   | Employment Agreement, dated April 16, 2008, between Water Chef, Inc. and Terry R. Lazar.  [Incorporated by reference to Exhibit 99.2 to our Current Report on Form 8-K (Date of Report: April 16, 2008), filed with the SEC on April 17, 2008 (File No.: 0-30544).]                                      |
| 10.19 |   | Stock Purchase, Loan and Security Agreement, dated April 16, 2008, between Water Chef, Inc. and Leslie J. Kessler.  [Incorporated by reference to Exhibit 99.3 to our Current Report on Form 8-K (Date of Report: April 16, 2008), filed with the SEC on April 17, 2008 (File No.: 0-30544).]            |
| 10.20 |   | Stock Purchase, Loan and Security Agreement, dated April 16, 2008, between Water Chef, Inc. and Terry R. Lazar.  [Incorporated by reference to Exhibit 99.4 to our Current Report on Form 8-K (Date of Report: April 16, 2008), filed with the SEC on April 17, 2008 (File No.: 0-30544).]               |
| 10.21 |   | Stock Purchase, Loan and Security Agreement dated April 16, 2008 between Water Chef, Inc. and Shaul Kochan.  [Incorporated by reference to Exhibit 99.5 to our Current Report on Form 8-K (Date of Report: April 16, 2008), filed with the SEC on April 17, 2008 (File No.: 0-30544).]                   |
| 10.22 |   | Letter Agreement, dated August 18, 2008 between Water Chef, Inc. and Leslie J. Kessler.  [Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K (Date of Report: August 18, 2008), filed with the SEC on August 19, 2008 (File No.: 0-30544).]                                     |
| 10.23 |   | Letter Agreement, dated August 18, 2008, between Water Chef, Inc. and Terry R. Lazar.  [Incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K (Date of Report: August 18, 2008), filed with the SEC on August 19, 2008 (File No.: 0-30544).]                                       |
| 10.24 |   | Consulting Agreement, dated as of June 6, 2008, by and between Water Chef, Inc., and Hidell-Eyster International.  [Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-QSB, filed with the SEC on August 19, 2008 (File No.: 0-30544).]                                        |
| 10.25 |   | Form of Stock Subscription Agreement utilized in the sale of common stock and warrants from October 26, 2007 through July 18, 2008.  [Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-QSB, filed with the SEC on August 19, 2008 (File No.: 0-30544).]                      |
| 10.26 |   | Form of Warrant issued to investors in connection with the sale of common stock and warrants from October 26, 2007 through July 18, 2008.  [Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-QSB, filed with the SEC on August 19, 2008 (File No.: 0-30544).]                |
| 10.27 |   | Loan Agreement, Promissory Note, and Warrant of Water Chef, Inc., dated October 14, 2008 and in the principal amount of $50,000 issued to Leslie J. Kessler. [Incorporated by reference to Exhibit 10.27 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.]                                 |
| 10.28 |   | Loan Agreement, Promissory Note, and Warrant of Water Chef, Inc., dated November 17, 2008 and in the principal amount of $50,000 issued to Leslie J. Kessler. [Incorporated by reference to Exhibit 10.28 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.]                                |
| 10.29 |   | Loan Agreement, Promissory Note, and Warrant of Water Chef, Inc., dated October 14, 2008 and in the principal amount of $50,000 issued to Terry R. Lazar. [Incorporated by reference to Exhibit 10.29 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.]                                    |

----

| 10.30 |   | Loan Agreement, Promissory Note, and Warrant of Water Chef, Inc., dated November 17, 2008 and in the principal amount of $50,000 issued to Terry R. Lazar. [Incorporated by reference to Exhibit 10.30 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.] |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.31 |   | Loan Agreement, Promissory Note, and Warrant of Water Chef, Inc., dated December 17, 2008 and in the principal amount of $50,000 issued to Steve Legum. [Incorporated by reference to Exhibit 10.30 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.]    |
| 10.32 |   | Consulting Agreement, dated as of August 6, 2008, by and between Water Chef, Inc., and Designs and Project Development Corp. [Incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.]                               |
| 10.33 |   | Consulting Agreement, dated as of December 14, 2007, by and between Water Chef, Inc., and Bircon Ltd. [Incorporated by reference to Exhibit 10.33 to our Annual Report on Form 10-K, filed with the SEC on April 15, 2009.]                                                      |
| 10.34 |   | Incentive Stock Option Agreement, dated April 17, 2009, between PureSafe Water Systems, Inc. and Leslie J. Kessler. [Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on May 20, 2009.]                                        |
| 10.35 |   | Incentive Stock Option Agreement, dated April 17, 2009, between PureSafe Water Systems, Inc. and Terry R. Lazar.[Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q, filed with the SEC on May 20, 2009.]                                            |
| 10.36 |   | Incentive Stock Option Agreement, dated April 17, 2009, between PureSafe Water Systems, Inc. and Al Wolter.[Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, filed with the SEC on May 20, 2009.]                                                 |
| 10.37 |   | Incentive Stock Option Agreement, dated April 17, 2009, between PureSafe Water Systems, Inc. and Al Wolter.[Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q, filed with the SEC on May 20, 2009.]                                                 |
| 10.38 |   | Warrant certificate evidencing 4,000,000 warrants registered in the name of Leslie J. Kessler.[Incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q, filed with the SEC on May 20, 2009.]                                                              |
| 10.39 |   | Form of Loan Agreement for the Company’s 2009 private placement. [Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on November 16, 2009.]                                                                                |
| 10.40 |   | Employment Agreement, effective as of January 1, 2010, between the Company and Leslie J. Kessler.[Incorporated by reference to Exhibit 10.40 to our Current Report on Form 8-K, filed with the SEC on February 8, 2010.]                                                         |
| 10.41 |   | Employment Agreement, effective as of January 1, 2010, between the Company and Terry R. Lazar. [Incorporated by reference to Exhibit 10.41 to our Current Report on Form 8-K, filed with the SEC on February 8, 2010.]                                                      |
| 10.42 |   | General Management Services Agreement, effective January 1, 2010, between Hidell—Eyster International and the Company. [Incorporated by reference to Exhibit 10.42 to our Current Report on Form 8-K, filed with the SEC on April 1, 2010.]                                |
| 14.1  |   | Code of Ethics.  [Incorporated by reference to Exhibit 14.1 to our Quarterly Report on Form 10-QSB, filed with the SEC on August 15, 2005.]                                                                                                                            |
| 31.1  |   | Rule 13a-14(a)/15d-14(a) Certification of Leslie J. Kessler, filed herewith.                                                                                                                                                                                                     |
| 31.2  |   | Rule 13a-14(a)/15d-14(a) Certification of Terry R. Lazar, filed herewith.                                                                                                                                                                                                        |
| 32.1  |   | Section 1350 Certification of Leslie J. Kessler, filed herewith.                                                                                                                                                                                                                 |
| 32.2  |   | Section 1350 Certification of Terry R. Lazar, filed herewith.                                                                                                                                                                                                                    |

----

| Date:  April 13, 2010 | PURESAFE WATER SYSTEMS, INC. |
|---------------------------------|---------------------------------------------|
|                            |                                        |   |
|                            |                                        |   |
|                            |                                        |   |
|                            |                                        |   |
|                            | By:  /s/                     | Leslie J. Kessler |
|                            |                                        | Leslie J. Kessler, President |
|                            |                                        |   |
|                            |                                        |   |
|                            |                                        |   |
|                            |                                        |   |
|                            | By: /s/                                     | Terry R. Lazar |
|                            |                                        | Terry R. Lazar, Chief Financial and Accounting Officer |

| Signature and Name            |   | Capacities                           | Date           |
|-------------------------------|--------|--------------------------------------|----------------|
|                          |   |                                 |           |
|                          |   |                                 |           |
|                          |   |                                 |           |
| /s/ Leslie J. Kessler         |   | Chief Executive Officer, President   | April 13, 2010 |
| Leslie J. Kessler             |   | and Director                         |           |
| (Principal Executive Officer) |   |                                 |           |
|                          |   |                                 |           |
|                          |   |                                 |           |
|                          |   |                                 |           |
| /s/ Terry R. Lazar            |   | Chief Financial Officer and Director | April 13, 2010 |
| Terry R. Lazar                |   | (Principal Financial Officer and     |           |
| Principal Accounting Officer) |   |                                 |           |
|                          |   |                                 |           |
|                          |   |                                 |           |
|                          |   |                                 |           |
| /s/ Malcolm Hoenlein          |   | Director                             | April 13, 2010 |
| Malcolm Hoenlein              |   |                                 |           |

----