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| DELAWARE                                                            | 13-3301899                                      |
|---------------------------------------------------------------------|-------------------------------------------------|
| (State      or Other Jurisdiction of Incorporation or Organization) |  (I.R.S.      Employer Identification No.) |
|                                                                |                                            |
| 8777 E. Via De Ventura, Suite 280,      Scottsdale, AZ         |  85258                                     |
|  (Address      of Principal Executive Offices)                 |  (Zip      Code)                           |

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

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Table of Contents

Table OfContents

|                                    |                                                                                                                                                                                                             | Page   |
|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| PART I. FINANCIAL      INFORMATION |                                                                                                                                                                                                             |
|                                    |                                                                                                                                                                                                             |   |
| ITEM      1.                       | FINANCIAL STATEMENTS                                                                                                                                                                                             |   |
|                                    | Condensed Consolidated Balance Sheets as of September 30, 2009      (unaudited) and December 31, 2008                                                                                                            | F-1    |
|                                    | Condensed Consolidated Statements of Losses for the three      and nine months ended September 30, 2009 and 2008, and for the period of      inception (October 30, 2002) to September 30, 2009      (unaudited) | F-2    |
|                                    | Condensed Consolidated Statement of Stockholders' Equity      (Deficit) from date of inception (October 30, 2002) to September 30, 2009      (unaudited)                                                         | F-3    |
|                                    | Condensed Consolidated Statements of Cash Flows for the      nine months ended September 30, 2009 and 2008, and for the period of      inception (October 30, 2002) to September 30, 2009      (unaudited)       | F-15   |
|                                    | Notes to Condensed Consolidated Financial      Statements                                                                                                                                                        | F-17   |
|                                    |                                                                                                                                                                                                             |   |
| ITEM      2.                            | MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION                                                                                                                                                   | 3      |
| ITEM      3.                            | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET      RISK                                                                                                                                                   | 10     |
| ITEM      4.                            | CONTROLS AND PROCEDURES                                                                                                                                                                                          | 10     |
|                                    |                                                                                                                                                                                                             |   |
| PART IIOTHER      INFORMATION           |                                                                                                                                                                                                             |
|                                    |                                                                                                                                                                                                             |   |
| ITEM      1.                            | LEGAL PROCEEDINGS                                                                                                                                                                                                | 12     |
| ITEM      1A.                           | RISK FACTORS                                                                                                                                                                                                     | 12     |
| ITEM      2.                            | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF      PROCEEDS                                                                                                                                                 | 12     |
| ITEM      3.                            | DEFAULTS UPON SENIOR SECURITIES                                                                                                                                                                                  | 13     |
| ITEM      4.                            | SUBMISSION OF MATTERS TO A VOTE OF SECURITIES      HOLDERS                                                                                                                                                       | 13     |
| ITEM      5.                            | OTHER INFORMATION                                                                                                                                                                                                | 13     |
| ITEM      6.                            | EXHIBITS                                                                                                                                                                                                         | 13     |
|                                    |                                                                                                                                                                                                             |   |
| Signatures                              | 14                                                                                                                                                                                                               |

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Table of Contents

ITEM 1. FINANCIAL INFORMATION

Condensed Consolidated Balance Sheets as of September 30, 2009(unaudited)

|                                                                                                                                                                                                   |   | September      30, |        |   | December      31, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------|-------------------|--------|
|                                                                                                                                                                                                   |   | 2009               |        |   | 2008              |   |
| Assets                                                                                                                                                                                                 |   | (unaudited)        |        |   |              |   |
| Current      assets                                                                                                                                                                                    |   |               |        |   |              |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |
| Cash      and cash equivalents                                                                                                                                                                         |   | $                  | 786,834     |   |              | $      | 3,158,226 |   |
| Prepaid      services and other current assets (note 1)                                                                                                                                                |   |               | 82,162      |   |              |   | 222,018 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
|       Total      current assets                                                                                                                                          |   |               | 868,996     |   |              |   | 3,380,244 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Deposits      and other assets (note 1)                                                                                                                                                                |   |               | 7,693       |   |              |   | 7,378 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Furniture      and equipment, net of accumulated depreciation of                                                                                                                                       |   |               |        |   |              |   |   |   |
|       $86,417      and $75,480, respectively (note 2)                                                                                                                    |   |               | 31,910      |   |              |   | 41,347 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Total      assets                                                                                                                                                                                      |   | $                  | 908,599     |   |              | $      | 3,428,969 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Liabilities      and Stockholders' Deficit                                                                                                                                                             |   |               |        |   |              |   |   |   |
| Current      liabilities                                                                                                                                                                               |   |               |        |   |              |   |   |   |
| Accounts      payable and accrued liabilities (note 3)                                                                                                                                                 |   | $                  | 728,366     |   |              | $      | 862,926 |   |
| Current      portion of notes payable (note 4)                                                                                                                                                         |   |               | 1,500,000   |   |              |   | 1,500,000 |   |
| Redemption      option liability                                                                                                                                                                       |   |               | 225,000     |   |              |   | - |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
|       Total      current liabilities                                                                                                                                     |   |               | 2,453,366   |   |              |   | 2,362,926 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Derivative      liability (Note 5)                                                                                                                                                                     |   |               | 4,170,881   |   |              |   | -  |   |
| Notes      payable, net of discount of $3,165,709 and $1,474,937, respectively (note      4)                                                                                                           |   |               | 4,203,180   |   |              |   | 5,293,952 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Total      liabilities                                                                                                                                                                                 |   |               | 10,827,427  |   |              |   | 7,656,878 |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Commitments      and contingencies                                                                                                                                                                     |   |               | -           |   |              |   | - |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Stockholders'      deficit (Note 6)                                                                                                                                                                    |   |               |        |   |              |   |   |   |
| Preferred      stock, $0.001 par value: 10,000,000 shares authorized, no shares issued      and outstanding                                                                                            |   |               | -      |   |              |   | -  |   |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Common      stock, $0.001 par value: 100,000,000 shares authorized; 13,297,525 shares      and 12,264,191 shares issued and outstanding at September 30, 2009 and      December 31, 2008, respectively |   |               | 13,298      |   |              |   | 12,265 |   |
|                                                                                                                                                                               |   |               |        |   |              |   |   |   |
| Additional      paid-in capital                                                                                                                                                                        |   |               | 18,542,872  |   |              |   | 20,066,317 |   |
| Common      stock subscribed (Note 6)                                                                                                                                                                  |   |               | 16,000      |   |              |   | 250,000 |   |
| Deficit      Accumulated during the development stage                                                                                                                                                  |   |               | (28,490,998 | )      |              |   | (24,556,491 | ) |
|       Total      stockholder's deficit                                                                                                                                   |   |               | (9,918,828  | )      |              |   | (4,227,909 | ) |
|                                                                                                                                                                                                   |   |               |        |   |              |   |   |   |
| Total      liabilities and stockholder’s deficit                                                                                                                                                 |   | $                  | 908,599     |   |              | $      | 3,428,969 |   |

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Table of Contents

 Consolidated Statements of Losses

|                                                                                                      |   | For      the Three Months Ended September 30, |       |   | For      the Nine Months Ended September 30, |   |       | For      the Period October 30, 2002 to |   |
|-----------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|--------|----------------------------------------------|--------|------------|-----------------------------------------|--------|
|                                                                                                      |   | 2009                                          |       |   | 2008                                         |   |       | 2009                                    |   |   | 2008 |   |   | September      30, 2009 |   |
| Revenues                                                                                                  |   | $                                             | -          |   |                                         | $      | -          |                                    |   | $ | - |   |   | $ | - |   |   | $ | - |   |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                                                                                  |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses                                                         |   |                                          | 743,383    |   |                                         |   | 1,776,708  |                                    |   |   | 2,408,251 |   |   |   | 3,671,252 |   |   |   | 23,518,205 |   |
| Merger      fees and costs                                                                                |   |                                          | -          |   |                                         |   | -          |                                    |   |   | - |   |   |   | - |   |   |   | 350,000 |   |
| Impairment      of intangible asset costs                                                                 |   |                                          | -          |   |                                         |   | -          |                                    |   |   | - |   |   |   | - |   |   |   | 6,393 |   |
| Total      operating expenses                                                                             |   |                                          | 743,383    |   |                                         |   | 1,776,708  |                                    |   |   | 2,408,251 |   |   |   | 3,671,252 |   |   |   | 23,874,598 |   |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      loss                                                                                       |   |                                          | (743,383   | )      |                                         |   | (1,776,708 | )                                       |   |   | (2,408,251 | ) |   |   | (3,671,252 | ) |   |   | (23,874,598 | ) |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      expense:                                                                                       |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of penalty for late registration of shares                                                      |   |                                          | -          |   |                                         |   | -          |                                    |   |   | - |   |   |   | - |   |   |   | 2,192,160 |   |
| (Gain)      loss from marking to market - warrant portion of penalty for late      registration of shares |   |                                          | -          |   |                                         |   | -          |                                    |   |   | - |   |   |   | - |   |   |   | (378,198 | ) |
| (Gain)      loss from marketing to market - stock portion of penalty for late      registration of shares |   |                                          | -          |   |                                         |   | -          |                                    |   |   | - |   |   |   | - |   |   |   | (760,058 | ) |
| (Gain)      loss from change in fair value of derivative liability                                        |   |                                          | 1,706,401  |   |                                         |   | -          |                                    |   |   | 3,082,961 |   |   |   | - |   |   |   | (490,004 | ) |
| Financing      cost                                                                                       |   |                                          | 31,250     |   |                                         |   | 31,250     |                                    |   |   | 93,750 |   |   |   | 148,125 |   |   |   | 363,125 |   |
| Interest      (income) expense, net                                                                       |   |                                          | 543,122    |   |                                         |   | 205,805    |                                    |   |   | 1,608,880 |   |   |   | 310,280 |   |   |   | 3,678,831 |   |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other (income) expense                                                                         |   |                                          | 2,280,773  |   |                                         |   | 237,055    |                                    |   |   | 4,785,591 |   |   |   | 458,405 |   |   |   | 4,605,856 |   |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) before income taxes                                                                    |   |                                          | (3,024,156 | )      |                                         |   | (2,013,763 | )                                       |   |   | (7,193,842 | ) |   |   | (4,129,657 | ) |   |   | (28,480,454 | ) |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes                                                                           |   |                                          | -          |   |                                         |   | -          |                                    |   |   | - |   |   |   | - |   |   |   | (10,544 | ) |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss)                                                                                           |   | $                                             | (3,024,156 | )      |                                         |   | (2,013,763 | )                                       |   |   | (7,193,842 | ) |   |   | (4,129,657 | ) |   | $ | (28,490,998 | ) |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      (loss) per share - basic and diluted                                                             |   | $                                             | (0.23      | )      |                                         | $      | (0.17      | )                                       |   | $ | (0.55 | ) |   | $ | (0.35 | ) |   | $ | (3.74 | ) |
|                                                                                                      |   |                                          |       |   |                                         |   |       |                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding - basic and diluted                                              |   |                                          | 13,201,148 |   |                                         |   | 11,935,282 |                                    |   |   | 13,114,131 |   |   |   | 11,675,701 |   |   |   | 7,621,046 |   |

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Table of Contents

From Date of Inception (October 30, 2002) to September 30,2009

|                                                                                                                      |   |              |      |   |    |   |   | Additional |   |   |         |   |   | Common      |   |   |    |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|--------|--------|--------|
|                                                                                                                      |   | Common      Stock |      |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                                                      |   | Shares            |      |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |   | Total  |   |
| Balance      at October 30, 2002 (date of inception)                                                                      |   |              | -         |   |    | $      | -      |       |   | $      | -            |   |   | $           | -      |   |    | $      | -      |   |   | $ | - |   |   | $ | - |   |
|                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      of common stock issued at $0.006 per share to founders for license of      proprietary right in December 2002 |   |              | 1,661,228 |   |    |   | 1,661  |       |   |   | 7,589        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 9,250 |   |
|                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      of common stock issued at $0.006 per share to founders for services      rendered in December 2002            |   |              | 140,531   |   |    |   | 141    |       |   |   | 641          |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 782 |   |
|                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      of common stock issued at $1.671 per share to consultants for services      rendered in December 2002         |   |              | 5,388     |   |    |   | 5      |       |   |   | 8,995        |   |   |        | (9,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Sale      of common stock for cash  at $1.671 per share in December      2002                                   |   |              | 18,558    |   |    |   | 19     |       |   |   | 30,982       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 31,001 |   |
|                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss for the period from inception (October 30, 2002) to December 31,      2002                                  |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   |   |   |   |   | (45,918 | ) |   |   | (45,918 | ) |
|                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2002 (reflective of stock splits)                                                            |   |              | 1,825,704 |   |    | $      | 1,826  |       |   | $      | 48,207       |   |   | $           | (9,000 | )      |    | $      | -      |   |   | $ | (45,918 | ) |   | $ | (4,885 | ) |

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Table of Contents

|                                                                                                                                      |   |              |      |   |    |   |   | Additional |   |   |         |   |   | Common      |   |   |    |   |   |   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|--------|--------|--------|
|                                                                                                                                      |   | Common      Stock |      |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                                                                      |   | Shares            |      |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |   | Total  |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |
| Shares      granted to consultants at $1.392 per share for services rendered in      January 2003                                         |   |              | 9,878     |   |    |   | 10     |       |   |   | 13,740       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 13,750 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Sale      of shares of common stock for cash at $1.517 per share in January      2003                                                     |   |              | 32,955    |   |    |   | 33     |       |   |   | 49,967       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 50,000 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      granted to consultants at $1.392 per share for services rendered in March      2003                                           |   |              | 15,445    |   |    |   | 15     |       |   |   | 21,485       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 21,500 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of notes payable to common stock at $1.392 per share in April      2003                                                   |   |              | 143,674   |   |    |   | 144    |       |   |   | 199,856      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 200,000 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      granted to consultants at $1.413 per share for services rendered in April      2003                                           |   |              | 1,437     |   |    |   | 1      |       |   |   | 2,029        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 2,030 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Sale      of shares of common stock for cash at $2.784 per share in May      2003                                                         |   |              | 1,796     |   |    |   | 2      |       |   |   | 4,998        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 5,000 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Sales      of shares of common stock for cash at $2.784 per share in June      2003                                                       |   |              | 3,592     |   |    |   | 4      |       |   |   | 9,996        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 10,000 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of notes payable to common stock at $1.392 per share in June      2003                                                    |   |              | 71,837    |   |    |   | 72     |       |   |   | 99,928       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 100,000 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Beneficial      conversion feature associated with notes issued in June    2003                                                           |   |              | -         |   |    |   | -      |       |   |   | 60,560       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 60,560 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of deferred compensation                                                                                                |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | 9,000  |   |    |   | -      |   |   |   | - |   |   |   | 9,000 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Costs      of GPN Merger in July 2003                                                                                                     |   |              | 236,813   |   |    |   | 237    |       |   |   | (121,036     | )      |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | (120,799 | ) |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued with extended notes payable in October    2003                                                              |   |              | -         |   |    |   | -      |       |   |   | 189,937      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 189,937 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   | - |   |
| Value      of Company warrants issued in conjunction with fourth quarter notes      payable issued October through December 2003          |   |              | -         |   |    |   | -      |       |   |   | 207,457      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 207,457 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants contributed by founders in conjunction with fourth quarter      notes payable issued October through December 2003 |   |              | -         |   |    |   | -      |       |   |   | 183,543      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 183,543 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued for services in October through December      2003                                                          |   |              | -         |   |    |   | -      |       |   |   | 85,861       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 85,861 |   |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss for the twelve month period ended December 31, 2003                                                                         |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | -      |   |   |   | (1,856,702 | ) |   |   | (1,856,702 | ) |
|                                                                                                                                      |   |              |      |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   | - |   |
| Balance      at December 31, 2003                                                                                                         |   |              | 2,343,130 |   |    | $      | 2,343  |       |   | $      | 1,056,529    |   |   | $           | -      |   |    | $      | -      |   |   | $ | (1,902,620 | ) |   | $ | (843,748 | ) |

----

Table of Contents

|                                                                                                                        |   |              |    |   |    |   |   | Additional |   |   |         |   |   | Common      |     |   |    |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|----------|--------|---------|--------|--------|--------|--------|
|                                                                                                                        |   | Common      Stock |    |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |     |   |    |   |
|                                                                                                                        |   | Shares            |    |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |     |   | Deficit |   |   | Total  |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |
| Shares      granted at $10.00 per share pursuant to the Senior Note Agreement in      January 2004                          |   |              | 60,000  |   |    |   | 60     |       |   |   | 599,940      |   |   |        | (600,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued at $10.00 per share to a consultant for services rendered in      January 2004                           |   |              | 80,000  |   |    |   | 80     |       |   |   | 799,920      |   |   |        | (800,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant at $6.20 per share for services rendered in      February 2004                           |   |              | 4,000   |   |    |   | 4      |       |   |   | 24,796       |   |   |        | (24,800  | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant at $4.00 per share for services rendered in March      2004                              |   |              | 105,160 |   |    |   | 105    |       |   |   | 420,535      |   |   |        | (420,640 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant at $5.00 per share for services rendered in March      2004                              |   |              | 50,000  |   |    |   | 50     |       |   |   | 249,950      |   |   |        | (250,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      sold for cash at $1.50 per share in March, 2004                                                                 |   |              | 800     |   |    |   | 1      |       |   |   | 1,199        |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 1,200 |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued at $5.00 per share to consultants for services rendered in March      2004                               |   |              | 2,000   |   |    |   | 2      |       |   |   | 9,998        |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 10,000 |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant at  $4.00 per share for services rendered      in March 2004                   |   |              | 200     |   |    |   | 0      |       |   |   | 800          |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 800 |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to consultants at $3.20 per share for services rendered in March      2004                               |   |              | 9,160   |   |    |   | 9      |       |   |   | 29,303       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 29,312 |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      to be issued to consultant at $4.10 per share in April 2004 for services      to be rendered through March 2005 |   |              | -       |   |    |   | -      |       |   |   | -            |   |   |        | (82,000  | )      |    |   | -      |   |   |   | - |   |   |   | (82,000 | ) |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      granted pursuant to the New Senior Note Agreement in April      2004                                            |   |              | 60,000  |   |    |   | 60     |       |   |   | 149,940      |   |   |        | (150,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to officer at $3.20 per share for services rendered in      April  2004                        |   |              | 20,000  |   |    |   | 20     |       |   |   | 63,980       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 64,000 |   |
|                                                                                                                        |   |              |    |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of Note Payable to common stock at $1.00 per share in May    2004                                           |   |              | 35,000  |   |    |   | 35     |       |   |   | 34,965       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 35,000 |   |

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Table of Contents

|                                                                                                                            |   |              |   |   |    |   |   | Additional |   |   |         |   |   | Common      |     |   |    |   |   |   |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|----------|--------|---------|--------|--------|--------|--------|
|                                                                                                                            |   | Common      Stock |   |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |     |   |    |   |
|                                                                                                                            |   | Shares            |   |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |     |   | Deficit |   |   | Total  |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |
| Beneficial      Conversion Feature associated with note payable in May2004                                                      |   |              | -      |   |    |   | -      |       |   |   | 35,000       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 35,000 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of warrants to officers and founder for services rendered in May      2004                                        |   |              | -      |   |    |   | -      |       |   |   | 269,208      |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 269,208 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      to a consultant at $2.00 per share as a due diligence fee in May      2004                                          |   |              | 12,500 |   |    |   | 13     |       |   |   | 24,988       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 25,000 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant at $10.00 per share for services to be rendered      over twelve months beginning May 2004   |   |              | 50,000 |   |    |   | 50     |       |   |   | 499,950      |   |   |        | (500,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Beneficial      Conversion Feature associated with notes payable issued in June      2004                                       |   |              | -      |   |    |   | -      |       |   |   | 3,000        |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 3,000 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of warrants to note holders in April, May, and June 2004                                                          |   |              | -      |   |    |   | -      |       |   |   | 17,915       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 17,915 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of warrants to employees and consultants for services rendered in April      through June 2004                    |   |              | -      |   |    |   | -      |       |   |   | 8,318        |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 8,318 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued in July to a consultant at $1.00 for services to be rendered      through July 2005                          |   |              | 25,000 |   |    |   | 25     |       |   |   | 24,975       |   |   |        | (25,000  | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant in July and September at $4.10 per share for      services to be rendered through April 2005 |   |              | 20,000 |   |    |   | 20     |       |   |   | 81,980       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 82,000 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to a consultant in September  at $1.20 to $2.20 for      services rendered through September 2004  |   |              | 12,728 |   |    |   | 13     |       |   |   | 16,896       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 16,909 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued in July to September 2004 as interest on note    payable                                                     |   |              | 30,000 |   |    |   | 30     |       |   |   | 35,970       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 36,000 |   |
|                                                                                                                            |   |              |   |   |    |   |   |       |   |   |         |   |   |        |     |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of warrants with notes payable in July and August 2004                                                            |   |              | -      |   |    |   | -      |       |   |   | 72,252       |   |   |        | -        |   |    |   | -      |   |   |   | - |   |   |   | 72,252 |   |

----

Table of Contents

|                                                                                                                                                               |   |              |      |   |    |   |   | Additional |   |   |         |   |   | Common      |    |   |    |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|---------|--------|---------|--------|--------|--------|--------|
|                                                                                                                                                               |   | Common      Stock |      |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |    |   |    |   |
|                                                                                                                                                               |   | Shares            |      |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |    |   | Deficit |   |   | Total  |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |
| Accrued      deferred compensation in August 2004 to a consultant for 10,000 shares at      $1.00 per share, committed but unissued                                |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | (10,000 | )      |    |   | -      |   |   |   | - |   |   |   | (10,000 | ) |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued in August 2004 at $1.40 to a consultant for services to be      performed through October 2004                                                  |   |              | 10,000    |   |    |   | 10     |       |   |   | 13,990       |   |   |        | (14,000 | )      |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued in August 2004 at $1.25 per share for conversion of $30,000 demand      loan                                                                    |   |              | 24,000    |   |    |   | 24     |       |   |   | 29,976       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 30,000 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued in August 2004 at $1.60 per share to a consultant for services      provided.                                                                   |   |              | 12,500    |   |    |   | 13     |       |   |   | 19,988       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 20,000 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued to employees in September, 2004 at $1.60 to $2.50 per      share                                                                                |   |              | 4,880     |   |    |   | 5      |       |   |   | 8,379        |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 8,384 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Commitment      to issue 10,000 shares of stock to a consultant in September, 2004 at      $2.30 per share for services to be provided through September      2005 |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | (23,000 | )      |    |   | -      |   |   |   | - |   |   |   | (23,000 | ) |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Sale      of stock for cash in October at $1.25 per share, net of costs of      $298,155                                                                           |   |              | 1,816,000 |   |    |   | 1,816  |       |   |   | 1,362,107    |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 1,363,923 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued with sale of common stock in October, net of      costs                                                                              |   |              | -         |   |    |   | -      |       |   |   | 607,922      |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 607,922 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of warrant to officer in October, 2004                                                                                                               |   |              | -         |   |    |   | -      |       |   |   | 112,697      |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 112,697 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of stock to investment bankers in October 2004 for commissions      earned                                                                           |   |              | 490,000   |   |    |   | 490    |       |   |   | (490         | )      |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of accounts payable to stock in October, 2004 at $1.25 per      share                                                                         |   |              | 125,775   |   |    |   | 126    |       |   |   | 108,514      |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 108,640 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued with accounts payable conversions in October,      2004                                                                              |   |              | -         |   |    |   | -      |       |   |   | 48,579       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 48,579 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of demand loan to stock in October, 2004 at $1.10 pershare                                                                                         |   |              | 9,330     |   |    |   | 9      |       |   |   | 10,254       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 10,263 |   |
|                                                                                                                                                               |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Forgiveness      of notes payable in October, 2004                                                                                                                 |   |              | -         |   |    |   | -      |       |   |   | 36,785       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 36,785 |   |

----

Table of Contents

|                                                                                                                     |   |              |      |   |    |   |   | Additional |   |   |         |   |   | Common      |      |   |    |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|-----------|--------|---------|--------|--------|--------|--------|
|                                                                                                                     |   | Common      Stock |      |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |      |   |    |   |
|                                                                                                                     |   | Shares            |      |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |      |   | Deficit |   |   | Total  |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |
| Issuance      of stock to officer and director at $1.25 per share in October,      2004 for conversion of liability |   |              | 144,000   |   |    |   | 144    |       |   |   | 123,789      |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 123,933 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued with officer and director conversion of liabilities in      October, 2004                  |   |              | -         |   |    |   | -      |       |   |   | 56,067       |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 56,067 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of debt and accrued interest to common stock at $0.75 to $1.25 per share      in October, 2004           |   |              | 670,315   |   |    |   | 670    |       |   |   | 423,547      |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 424,217 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued with conversion of debt in October,2004                                                    |   |              | -         |   |    |   | -      |       |   |   | 191,111      |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 191,111 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of Note Payable of $5,000 plus accrued interest of $71 in October,      2004                             |   |              | 6,761     |   |    |   | 7      |       |   |   | 4,993        |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 5,000 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of warrants to note holders in October, 2004                                                               |   |              | -         |   |    |   | -      |       |   |   | 112,562      |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 112,562 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of shares issued to CFO as compensation in December, 2004                                                     |   |              | 10,000    |   |    |   | 10     |       |   |   | 34,990       |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 35,000 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committees in November and      December, 2004                      |   |              | -         |   |    |   | -      |       |   |   | 16,348       |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 16,348 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Beneficial      conversion feature associated with notes  payable in December,      2004                       |   |              | -         |   |    |   | -      |       |   |   | 124,709      |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 124,709 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Shares      issued in error to be cancelled in December, 2004                                                            |   |              | (900      | )      |    |   | (1     | )          |   |   | 1            |   |   |        | -         |   |    |   | -      |   |   |   | - |   |   |   | 0 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of deferred compensation through December 31, 2004                                                     |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | 2,729,454 |   |    |   | -      |   |   |   | - |   |   |   | 2,729,454 |   |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Loss      for the twelve months ended December 31, 2004                                                                  |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | -         |   |    |   | -      |   |   |   | (5,305,407 | ) |   |   | (5,305,407 | ) |
|                                                                                                                     |   |              |      |   |    |   |   |       |   |   |         |   |   |        |      |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2004                                                                                        |   |              | 6,242,339 |   |    | $      | 6,242  |       |   | $      | 7,979,124    |   |   | $           | (169,986  | )      |    | $      | -      |   |   | $ | (7,208,027 | ) |   | $ | 607,353 |   |

----

Table of Contents

|                                                                                                                  |   |              |      |   |    |   |   | Additional |   |   |         |   |   | Common      |    |   |    |   |   |   |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|---------|--------|---------|--------|--------|--------|--------|
|                                                                                                                  |   | Common      Stock |      |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |    |   |    |   |
|                                                                                                                  |   | Shares            |      |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |    |   | Deficit |   |   | Total  |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |
| Sale      of shares of common stock for cash at $2.00 per share in March 2005 for      warrant exercise, net of costs |   |              | 660,078   |   |    |   | 660    |       |   |   | 1,190,196    |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 1,190,856 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committees in March      2005                                    |   |              | -         |   |    |   | -      |       |   |   | 137,049      |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 137,049 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Deferred      compensation in February 2005 to a consultant for 5,000 shares of common      stock at $6.50 per share. |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | (32,500 | )      |    |   | -      |   |   |   | - |   |   |   | (32,500 | ) |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Warrants      exercised at $0.50 per share in June 2003                                                               |   |              | 8,000     |   |    |   | 8      |       |   |   | 3,992        |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 4,000 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committee in June      2005                                      |   |              | -         |   |    |   | -      |       |   |   | 70,781       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 70,781 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to investors and service providers in June      2005                                    |   |              | -         |   |    |   | -      |       |   |   | 32,991       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 32,991 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of 23,215 shares of common stock in July 2005 for conversion of notes      payable                      |   |              | 23,215    |   |    |   | 23     |       |   |   | 64,980       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 65,003 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of 10,000 shares of common stock in August 2005  to a consultant      for services provided   |   |              | 10,000    |   |    |   | 10     |       |   |   | 9,990        |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 10,000 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to advisory committee in September 2005 for      services                               |   |              | -         |   |    |   | -      |       |   |   | 20,491       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 20,491 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of deferred comp for the twelve months ended December,2005                                          |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | 199,726 |   |    |   | -      |   |   |   | - |   |   |   | 199,726 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued in October and December 2005 to investors and service      providers                    |   |              | -         |   |    |   | -      |       |   |   | 18,399       |   |   |        | -       |   |    |   | -      |   |   |   | - |   |   |   | 18,399 |   |
|                                                                                                                  |   |              |      |   |    |   |   |       |   |   |         |   |   |        |    |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Loss      for the year ended December 31,2005                                                                         |   |              | -         |   |    |   | -      |       |   |   | -            |   |   |        | -       |   |    |   | -      |   |   |   | (4,591,107 | ) |   |   | (4,591,107 | ) |
|                                                                                                                  |   |              | 6,943,632 |   |    | $      | 6,943  |       |   | $      | 9,527,993    |   |   | $           | (2,760  | )      |    | $      | -      |   |   | $ | (11,799,134 | ) |   | $ | (2,266,958 | ) |

----

Table of Contents

|                                                                                               |   |              |       |   |    |   |   | Additional |   |   |         |   |   | Common      |   |   |    |   |   |   |   |
|----------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|--------|--------|--------|
|                                                                                               |   | Common      Stock |       |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                               |   | Shares            |       |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |   | Total  |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |
| Issuance      of 10,000 shares to officer, previously accrued in March,    2006                    |   |              | 10,000     |   |    |   | 10     |       |   |   | 41,406       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 41,416 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committee in March,      2006                 |   |              | -          |   |    |   | -      |       |   |   | 8,399        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 8,399 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Amortization      of deferred compensation for the three months ended March 31,      2006          |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | 2,760  |   |    |   | -      |   |   |   | - |   |   |   | 2,760 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of common stock in May 2006 to a consultant for services      provided               |   |              | 3,446      |   |    |   | 3      |       |   |   | 16,194       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 16,197 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of accrued interest to common stock at $1.25 per share in May,      2006           |   |              | 1,929      |   |    |   | 2      |       |   |   | 2,409        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 2,411 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of accrued interest to common stock at $1.25 per share in May,      2006           |   |              | 1,632      |   |    |   | 2      |       |   |   | 2,039        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 2,041 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Conversion      of accrued interest to common stock at $1.00 per share in May,      2006           |   |              | 1,345      |   |    |   | 1      |       |   |   | 1,354        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 1,355 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Common      stock issued pursuant to the exercise of warrants at $0.90 per share in      June 2006 |   |              | 500        |   |    |   | 1      |       |   |   | 450          |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 450 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committee in June      2006                   |   |              | -          |   |    |   | -      |       |   |   | 8,820        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 8,820 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committee in September      2006              |   |              | -          |   |    |   | -      |       |   |   | 3,495        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 3,495 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to officers in September, 2010                                       |   |              | -          |   |    |   | -      |       |   |   | 50,874       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 50,874 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of penalty Common Stock, previously accrued in August,2006                           |   |              | 415,080    |   |    |   | 415    |       |   |   | 871,250      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 871,665 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of penalty warrants, previously accrued in August, 2006                              |   |              | -          |   |    |   | -      |       |   |   | 182,239      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 182,239 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of options issued to officer in September, 2006                                         |   |              | -          |   |    |   | -      |       |   |   | 78,802       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 78,802 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to members of advisory committee in December      2006               |   |              | -          |   |    |   | -      |       |   |   | 1,974        |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 1,974 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of Common Stock for cash in December, 2006                                           |   |              | 3,426,625  |   |    |   | 3,427  |       |   |   | 4,610,122    |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 4,613,549 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Common      stock to be issued as commission for equity fund raising in December,      2006        |   |              | -          |   |    |   | -      |       |   |   | (5,483       | )      |   |        | -      |   |    |   | 5,483  |   |   |   | - |   |   |   | - |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of options issued to officer in October, 2006                                           |   |              | -          |   |    |   | -      |       |   |   | 185,472      |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 185,472 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Value      of shares issued to officer in March, 2006                                              |   |              | -          |   |    |   | -      |       |   |   | 32,120       |   |   |        | -      |   |    |   | -      |   |   |   | - |   |   |   | 32,120 |   |
|                                                                                               |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |   |   |   |   |   |   |   |   |   |   |
| Loss      for the year ended December 31, 2006                                                     |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | -      |   |   |   | (1,486,046 | ) |   |   | (1,486,046 | ) |
|                                                                                               |   |              | 10,804,190 |   |    | $      | 10,804 |       |   | $      | 15,619,928   |   |   | $           | -      |   |    | $      | 5,483  |   |   | $ | (13,285,180 | ) |   | $ | 2,351,035 |   |

----

Table of Contents

|                                                                                                     |   |              |       |   |    |   |   | Additional |   |   |         |   |   | Common      |   |   |    |   |    |   |   |
|----------------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|---------|--------|--------|
|                                                                                                     |   | Common      Stock |       |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                                     |   | Shares            |       |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |    | Total  |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |
| Common      stock issued as commission for equity fund raising in January,      2007                     |   |              | 548,260    |   |    |   | 548    |       |   |   | 4,935        |   |   |        | -      |   |    |   | (5,483  | )      |   |   | - |   |   |   | - |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued to consultant in January 2007 at $1.50 per    share                             |   |              | 29,804     |   |    |   | 30     |       |   |   | 44,676       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 44,706 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued to consultants in January 2007 at $1.55 per    share                            |   |              | 40,000     |   |    |   | 40     |       |   |   | 61,960       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 62,000 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued to consultants in January 2007 at $1.50 per    share                            |   |              | 10,000     |   |    |   | 10     |       |   |   | 14,990       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 15,000 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of options issued to officer in January, February and March      2007                         |   |              | -          |   |    |   | -      |       |   |   | 471,457      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 471,457 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of options issued to employee  in January 2007                                      |   |              | -          |   |    |   | -      |       |   |   | 5,426        |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 5,426 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued to consultant in April 2007                                                |   |              | -          |   |    |   | -      |       |   |   | 166,998      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 166,998 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of options issued to employees in July 2007                                                   |   |              | -          |   |    |   | -      |       |   |   | 996,133      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 996,133 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of options issued to directors in July 2007                                                   |   |              | -          |   |    |   | -      |       |   |   | 537,833      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 537,833 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of options issued to consultants in July 2007                                                 |   |              | -          |   |    |   | -      |       |   |   | 80,996       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 80,996 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock to be issued for consulting services in 2008 at $1.10 per share in      November, 2007 |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | 33,000  |   |   |   | - |   |   |   | 33,000 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock to be issued for finders fee in 2008 at $1.20 per share in November,      2007         |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | 120,000 |   |   |   | - |   |   |   | 120,000 |   |
|                                                                                                     |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Loss      for the year ended December 31, 2007                                                           |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | -       |   |   |   | (5,463,958 | ) |   |   | (5,463,958 | ) |
|                                                                                                     |   |              | 11,432,254 |   |    | $      | 11,432 |       |   | $      | 18,005,332   |   |   | $           | -      |   |    | $      | 153,000 |   |   | $ | (18,749,138 | ) |   | $ | (579,374 | ) |

----

Table of Contents

|                                                                                               |   |              |    |   |    |   |   | Additional |   |   |         |   |   | Common      |   |   |    |   |     |   |   |
|----------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|----------|--------|--------|
|                                                                                               |   | Common      Stock |    |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                               |   | Shares            |    |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |     | Total  |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |
| Common      stock issued for consulting services previously accrued in November      2007          |   |              | 30,000  |   |    |   | 30     |       |   |   | 32,970       |   |   |        | -      |   |    |   | (33,000  | )      |   |   | - |   |   |   | - |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Common      stock issued for finders fee previously accrued in November      2007                  |   |              | 100,000 |   |    |   | 100    |       |   |   | 119,900      |   |   |        | -      |   |    |   | (120,000 | )      |   |   | - |   |   |   | - |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued pursuant to convertible debt agreement in January      2008          |   |              | -       |   |    |   | -      |       |   |   | 226,754      |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 226,754 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Adjustment      to value of warrants issued in January 2008 due to decrease in exercise      price |   |              | -       |   |    |   | -      |       |   |   | 60,092       |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 60,092 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to advisory board in March 2008                                       |   |              | -       |   |    |   | -      |       |   |   | 3,729        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 3.729 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to employee  in January 2007                                |   |              | -       |   |    |   | -      |       |   |   | 5,428        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 5,428 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to consultants in July 2007                                           |   |              | -       |   |    |   | -      |       |   |   | 6,994        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 6,994 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Common      stock issued for March 2008 interest payment at $0.488 per      share                  |   |              | 39,500  |   |    |   | 39     |       |   |   | 19,237       |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 19,276 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to employees in March 2008                                            |   |              | -       |   |    |   | -      |       |   |   | 1,708        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 1,708 |   |
|                                                                                               |   |              |    |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to a Director in March 2008                                           |   |              | -       |   |    |   | -      |       |   |   | 19,625       |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 19,625 |   |

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Table of Contents

|                                                                                                         |   |              |       |   |    |   |   | Additional |   |   |         |   |   | Common      |   |   |    |   |    |   |   |
|--------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|---------|--------|--------|------------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|---------|--------|--------|
|                                                                                                         |   | Common      Stock |       |   | Paid-In |   |   | Deferred   |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                                         |   | Shares            |       |   | Amount  |   |   | Capital    |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |    | Total  |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |
| Common      stock issued for June 2008 interest payment at $0.699 per share in July      2008                |   |              | 28,220     |   |    |   | 28     |       |   |   | 19,698       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 19,726 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for June 2008 interest payment at $0.699 per share in July      2008                |   |              | 2,822      |   |    |   | 3      |       |   |   | 1,969        |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 1,972 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for interest payment at $0.33032 per share in August      2008                      |   |              | 95,825     |   |    |   | 96     |       |   |   | 31,557       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 31,653 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for interest payment at $0.33032 per share in August      2008                      |   |              | 2,228      |   |    |   | 2      |       |   |   | 734          |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 736 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for interest payment at $0.33032 per share in August      2008                      |   |              | 124,794    |   |    |   | 125    |       |   |   | 41,097       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 41,222 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for pre-payment of interest payment at $0.33032 per share in      August 2008       |   |              | 162,721    |   |    |   | 163    |       |   |   | 53,587       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 53,750 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for pre-payment of interest payment at $0.33032 per share in      August 2008       |   |              | 3,785      |   |    |   | 4      |       |   |   | 1,246        |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 1,250 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for pre-payment of interest payment at $0.33032 per share in      August 2008       |   |              | 211,916    |   |    |   | 212    |       |   |   | 69,788       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 70,000 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued pursuant to the exercise of warrants at $0.375 per share in      June and July 2008 |   |              | 30,000     |   |    |   | 30     |       |   |   | 11,220       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 11,250 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock issued for rounding due to reverse stock split in August      2008                         |   |              | 126        |   |    |   | 1      |       |   |   | (1           | )      |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | - |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Common      stock subscribed pursuant to agreement for capital raise in August      2008                     |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | 250,000 |   |   |   | - |   |   |   | 250,000 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued pursuant to convertible debt agreement in August      2008                     |   |              | -          |   |    |   | -      |       |   |   | 286,846      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 286,846 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued pursuant to convertible debt agreement in August      2008                     |   |              | -          |   |    |   | -      |       |   |   | 427,628      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 427,628 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued pursuant to convertible debt agreement in August      2008                     |   |              | -          |   |    |   | -      |       |   |   | 9,946        |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 9,946 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of warrants issued pursuant to convertible debt agreement in August      2008                     |   |              | -          |   |    |   | -      |       |   |   | 556,949      |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 556,949 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Value      of options issued to directors in November 2008                                                   |   |              | -          |   |    |   | -      |       |   |   | 52,284       |   |   |        | -      |   |    |   | -       |   |   |   | - |   |   |   | 52,284 |   |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Loss      for the year ended December 31, 2008                                                               |   |              | -          |   |    |   | -      |       |   |   | -            |   |   |        | -      |   |    |   | -       |   |   |   | (5,807,353 | ) |   |   | (5,807,353 | ) |
|                                                                                                         |   |              |       |   |    |   |   |       |   |   |         |   |   |        |   |   |    |   |    |   |   |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                                                                            |   |              | 12,264,191 |   |    | $      | 12,265 |       |   | $      | 20,066,317   |   |   | $           | -      |   |    | $      | 250,000 |   |   | $ | (24,556,491 | ) |   | $ | (4,227,909 | ) |

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Table of Contents

|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   | Additional   |   |   |        |   |   | Common  |   |     |   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|------------|--------|---------|--------|--------|----------|--------|--------|--------------|--------|--------|-------------|--------|--------|---------|--------|----------|--------|--------|
|                                                                                                                                                                                   |   | Common      Stock |       |   | Paid-In |   |   | Deferred |   |   | Stock        |   |   | Accumulated |   |   |    |   |
|                                                                                                                                                                                   |   | Shares            |       |   | Amount  |   |   | Capital  |   |   | Compensation |   |   | Subscribed  |   |   | Deficit |   |     | Total  |   |
| Cumulative      effect of change in accounting principle- January 1, 2009 reclassification      of embedded feature of equity-linked financial instrument to derivative      liability |   |              | -          |   |    |   | -      |     |   |   | (1,856,576   | )      |   |        | -      |   |    |   | -        |   |   |   | 3,259,335 |   |   |   | 1,402,759 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Common      stock issued pursuant to agreement for capital raise previously accrued in      August 2008 at $0.30 per share                                                             |   |              | 833,334    |   |    |   | 833    |     |   |   | 249,167      |   |   |        | -      |   |    |   | (250,000 | )      |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to employees in March 2008                                                                                                                                |   |              | -          |   |    |   | -      |     |   |   | 244          |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 244 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Loss      for the three months ended March 31, 2009                                                                                                                                    |   |              | -          |   |    |   | -      |     |   |   | -            |   |   |        | -      |   |    |   | -        |   |   |   | (2,141,047 | ) |   |   | (2,141,047 | ) |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Balance      at March 31, 2009                                                                                                                                                         |   |              | 13,097,525 |   |    | $      | 13,098 |     |   | $      | 18,459,152   |   |   | $           | -      |   |    | $      | -        |   |   | $ | (23,438,203 | ) |   | $ | (4,965,953 | ) |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Common      stock to be issued for consulting services performed from June to August      2009 at $0.19 per share                                                                      |   |              | -          |   |    |   | -      |     |   |   | -            |   |   |        | -      |   |    |   | 38,000   |   |   |   | - |   |   |   | 38,000 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Loss      for the three months ended June 30, 2009                                                                                                                                     |   |              | -          |   |    |   | -      |     |   |   | -            |   |   |        | -      |   |    |   | -        |   |   |   | (2,028,639 | ) |   |   | (2,028,639 | ) |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Balance      at June 30, 2009                                                                                                                                                          |   |              | 13,097,525 |   |    | $      | 13,098 |     |   | $      | 18,459,152   |   |   | $           | -      |   |    | $      | 38,000   |   |   | $ | (25,466,842 | ) |   | $ | (6,956,952 | ) |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Common      stock issued for consulting services performed from June to August 2009 at      $0.19 per share, previously accrued                                                        |   |              | 200,000    |   |    |   | 200    |     |   |   | 37,800       |   |   |        | -      |   |    |   | (38,000  | )      |   |   | - |   |   |   | - |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Common      stock to be issued for consulting services performed in September 2009 at      $0.36 per share                                                                             |   |              | -          |   |    |   | -      |     |   |   | -            |   |   |        | -      |   |    |   | 16,000   |   |   |   | - |   |   |   | 16,000 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to advisory board in Aug 2009                                                                                                                             |   |              | -          |   |    |   | -      |     |   |   | 4,045        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 4,045 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to consultants in Aug 2009                                                                                                                                |   |              | -          |   |    |   | -      |     |   |   | 1,458        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 1,458 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to employees in Aug 2009                                                                                                                                  |   |              | -          |   |    |   | -      |     |   |   | 2,500        |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 2,500 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Value      of options issued to Officers and Directors in Aug 2009                                                                                                                     |   |              | -          |   |    |   | -      |     |   |   | 37,917       |   |   |        | -      |   |    |   | -        |   |   |   | - |   |   |   | 37,917 |   |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Loss      for the three months ended September 30, 2009                                                                                                                                |   |              | -          |   |    |   | -      |     |   |   | -            |   |   |        | -      |   |    |   | -        |   |   |   | (3,024,156 | ) |   |   | (3,024,156 |  ) |
|                                                                                                                                                                                   |   |              |       |   |    |   |   |     |   |   |         |   |   |        |   |   |    |   |     |   |   |   |   |   |   |   |   |   |
| Balance      at September 30, 2009                                                                                                                                                     |   |              | 13,297,525 |   |    | $      | 13,298 |     |   | $      | 18,542,872   |   |   | $           | -      |   |    | $      | 16,000   |   |   | $ | (28,490,998 | ) |   | $ | (9,918,828 | ) |

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Table of Contents

Condensed Consolidated Statements of Cash Flows

|                                                                                                           |   | For      the Nine  |       |   | For      the Nine  |   |       | Cumulative                 |   |
|----------------------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------|--------------------|--------|------------|----------------------------|--------|
|                                                                                                           |   | Months      Ended  |       |   | Months      Ended  |   |       | from      Inception        |   |
|                                                                                                           |   | September      30, |       |   | September      30, |   |       | (October      30, 2002) to |   |
|                                                                                                           |   | 2009               |       |   | 2008               |   |       | September      30, 2009    |   |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |
| Cash      flows from operating activities:                                                                     |   |               |       |   |               |   |       |                       |   |
|    Net      loss                                                                                |   | $                  | (7,193,842 | )      |               | $      | (4,129,657 | )                          |   | $ | (28,490,998 | ) |
| Adjustments      to reconcile net loss to net                                                                  |   |               |       |   |               |   |       |                       |   |   |   |   |
|     cash      used in operating activities:                                                |   |               |       |   |               |   |       |                       |   |   |   |   |
|   Non-cash      compensation                                                                         |   |               | 100,164    |   |               |   | 313,383    |                       |   |   | 7,248,291 |   |
|   Cost      of penalty for late registration of shares - stock portion                               |   |               | -          |   |               |   | -          |                       |   |   | 1,631,726 |   |
|   Cost      of penalty for late registration of shares - warrant    portion                          |   |               | -          |   |               |   | -          |                       |   |   | 560,434 |   |
| (Gain)      loss from marking to market - stock portion of penalty for late      registration of shares   |   |               | -          |   |               |   | -          |                       |   |   | (760,058 | ) |
| (Gain)      loss from marking to market - warrant portion of penalty for late      registration of shares |   |               | -          |   |               |   | -          |                       |   |   | (378,198 | ) |
|   Change      in fair value of derivative liability                                                  |   |               | 3,082,961  |   |               |   | -          |                       |   |   | (489,734 | ) |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
|   Legal      fees for note payable                                                                   |   |               | -          |   |               |   | -          |                       |   |   | 20,125 |   |
|   Placement      fees for note payable                                                               |   |               | -          |   |               |   | -          |                       |   |   | 65,000 |   |
|   Impairment      of intangible asset                                                                |   |               | -          |   |               |   | -          |                       |   |   | 6,393 |   |
|   Interest      expense                                                                              |   |               | 600,000    |   |               |   | -          |                       |   |   | 1,174,880 |   |
|   Amortization      of discount on notes payable                                                     |   |               | 799,907    |   |               |   | (11,234    | )                          |   |   | 2,338,482 |   |
|   Redemption      Option Liability                                                                   |   |               | 225,000    |   |               |   | -          |                       |   |   | 225,000 |   |
|   Depreciation      and amortization                                                                 |   |               | 10,937     |   |               |   | 90,352     |                       |   |   | 80,024 |   |
|   Changes      in operating assets and liabilities:                                                  |   |               |       |   |               |   |       |                       |   |   |   |   |
|   Increase      in deposits                                                                          |   |               | (315       | )      |               |   | -          |                       |   |   | (5,183 | ) |
|   Decrease      in prepaid services and other assets                                                 |   |               | 139,856    |   |               |   | 38,430     |                       |   |   | 210,328 |   |
| Increase/(Decrease)      in accounts payable and accrued expenses                                              |   |               | (134,560   | )      |               |   | (36,372    | )                          |   |   | 974,120 |   |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
|    Net      cash used in operating activities                                                   |   |               | (2,369,892 | )      |               |   | (3,735,098 | )                          |   |   | (15,589,368 | ) |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
| Cash      flows from investing activities:                                                                     |   |               |       |   |               |   |       |                       |   |   |   |   |
|    Acquisition      of property and equipment                                                   |   |               | (1,500     | )      |               |   | (15,048    | )                          |   |   | (86,577 | ) |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
|    Net      cash used in investing activities                                                   |   |               | (1,500     | )      |               |   | (15,048    | )                          |   |   | (86,577 | ) |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
| Cash      flows from financing activities:                                                                     |   |               |       |   |               |   |       |                       |   |   |   |   |
|    Proceeds      from notes payable                                                             |   |               | -          |   |               |   | 7,818,889  |                       |   |   | 9,668,375 |   |
|    Principal      payments on notes payable and demand loans                                    |   |               | -          |   |               |   | -          |                       |   |   | (1,094,747 | ) |
|    Shares      of stock sold for cash                                                           |   |               | -          |   |               |   | -          |                       |   |   | 7,873,451 |   |
|    Proceeds      from exercise of warrant                                                       |   |               | -          |   |               |   | 11,250     |                       |   |   | 15,700 |   |
|    Officer      repayment of amounts paid on his behalf                                         |   |               | -          |   |               |   | -          |                       |   |   | 19,880 |   |
|    Cash      paid on behalf of officer                                                          |   |               | -          |   |               |   | -          |                       |   |   | (19,880 | ) |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
|    Net      cash provided by financing activities                                               |   |               | -          |   |               |   | 7,830,139  |                       |   |   | 16,462,779 |   |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
| Net      (decrease) increase in cash and cash equivalents                                                 |   |               | (2,371,392 | )      |               |   | 4,079,993  |                       |   |   | 786,834 |   |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
| Cash      and cash equivalents at beginning of period                                                          |   |               | 3,158,226  |   |               |   | 221,120    |                       |   |   | - |   |
|                                                                                                           |   |               |       |   |               |   |       |                       |   |   |   |   |
| Cash      and cash equivalents at end of period                                                                |   | $                  | 786,834    |   |               | $      | 4,301,113  |                       |   | $ | 786,834 |   |

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|                                                                                                                  |   | For      the Nine Months Ended September 30, |      |   | For      the Period October 30, 2002 to |   |
|-----------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------|--------|-----------------------------------------|--------|
|                                                                                                                  |   | 2009                                         |      |   | 2008                                    |   |   | September      30, 2009 |   |
| Supplemental      disclosures of cash flow information:                                                               |   |                                         |      |   |                                    |   |   |   |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |
| Cash      paid during the period for:                                                                                 |   |                                         |      |   |                                    |   |   |   |   |
| Interest                                                                                                              |   | $                                            | -         |   |                                    | $      | 40,998 |   |   | $ | 127,051 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Taxes                                                                                                                 |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 8,115 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Acquisition      and capital restructure:                                                                             |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Assets      acquired                                                                                                  |   |                                         | -         |   |                                    |   | - |   |   |   | - |   |
| Liabilities      assumed                                                                                              |   |                                         | -         |   |                                    |   | - |   |   |   | (120,799 | ) |
| Common      stock retained                                                                                            |   |                                         | -         |   |                                    |   | - |   |   |   | (2,369 | ) |
| Adjustment      to additional paid-in capital                                                                         |   |                                         | -         |   |                                    |   | - |   |   |   | 123,168 |   |
| Organization      costs                                                                                               |   |                                         | -         |   |                                    |   | - |   |   |   | 350,000 |   |
| Total      consideration paid                                                                                         |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 350,000 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock issued in exchange for proprietary rights                                                           |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 9,250 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock issued in exchange for services                                                                     |   | $                                            | 38,000    |   |                                    | $      | - |   |   | $ | 3,215,483 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock to be issued in exchange for services rendered                                                      |   | $                                            | 16,000    |   |                                    | $      | - |   |   | $ | 16,000 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock issued in exchange for previously incurred debt and accrued      interest                           |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 1,066,401 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock issued in exchange as interest                                                                      |   | $                                            | -         |   |                                    | $      | 114,585 |   |   | $ | 150,585 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Amortization      of beneficial conversion feature                                                                    |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 223,269 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Stock      options and warrants issued in exchange for services    rendered                                           |   | $                                            | 46,164    |   |                                    | $      | 63,383 |   |   | $ | 3,790,841 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Debt      and accrued interest forgiveness from note holders                                                          |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 36,785 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock issued in satisfaction of amounts due to an Officer and a      Director                             |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 180,000 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Common      stock issued in satisfaction of accounts payable                                                          |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 157,219 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Deferred      compensation to a consultant accrued in March 2005                                                      |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 2,630,761 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Amortization      of deferred compensation                                                                            |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 202,486 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Fair      value of common stock and warrants in payable in connection with late      filing of registration statement |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 3,684,664 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Gain      from marking to market - stock portion of penalty for late registration of      shares                      |   | $                                            | -         |   |                                    | $      | - |   |   | $ | (1,124,255 | ) |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Gain      from marking to market - warrant portion of penalty for late registration      of shares                    |   | $                                            | -         |   |                                    | $      | - |   |   | $ | (456,603 | ) |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Revaluation      of derivative liability                                                                              |   | $                                            | 3,082,961 |   |                                    |   | - |   |   | $ | (489,734 | ) |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Impairment      of intangible asset                                                                                   |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 6,393 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Issuance      of stock to Officer, previously accrued                                                                 |   | $                                            | 250,000   |   |                                    | $      | - |   |   | $ | 291,416 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Services      for note payable                                                                                        |   | $                                            | -         |   |                                    | $      | - |   |   | $ | 9,750 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Issuance      of shares for accounts payable                                                                          |   | $                                            | -         |   |                                    | $      | 44,706 |   |   | $ | 44,706 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Stock      issued as commission for equity fund raising                                                               |   | $                                            |      |   |                                    | $      | 120,000 |   |   | $ | 125,483 |   |
|                                                                                                                  |   |                                         |      |   |                                    |   |   |   |   |   |   |   |
| Value      of warrants issued for financing                                                                           |   | $                                            | -         |   |                                    | $      | 1,568,215 |   |   | $ | 1,568,215 |   |

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NOTES TO CONDENSED 

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Table of Contents

|                                                     |   | Options |      |   | Weighted      AverageExercise      Price |   |
|----------------------------------------------------------|--------|---------|-----------|--------|------------------------------------------|--------|
| Outstanding      at December 31, 2008                    |   |    | 1,791,168 |   |                                     | $      | 2.65 |   |
|            Issued               |   |    | 1,021,235 |   |                                     | $      | 0.25 |   |
|            Exercised            |   |    | -         |   |                                     |   | - |    |
|            Forfeited or expired |   |    | -         |   |                                     |   | - |   |
| Outstanding      at September 30, 2009                   |   |    | 2,812,403 |   |                                     | $      | 1.78 |   |
|                                                     |   |    |      |   |                                     |   |   |   |
| Non-vested      at September 30, 2009                    |   |    | 753,750   |   |                                     | $      | 0.25 |   |
| Exercisable      at September 30, 2009                   |   |    | 2,058,653 |   |                                     | $      | 2.34 |   |

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Table of Contents

|                                                        |   | September      30, 2009 |   |   | December      31, 2008 |    |
|-------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|---------|
| Prepaid      monitoring fees                                |   | $                       | 46,875 |   |                   | $  | 140,625 |   |
| Prepaid      insurance                                      |   |                    | 11,001 |   |                   |    | 44,929 |   |
| Prepaid      services                                       |   |                    | 14,286 |   |                   |    | 22,834 |   |
| Prepaid      car lease                                      |   |                    | -      |   |                   |    | 11,865 |   |
| Prepaid      software                                       |   |                    | 10,000 |   |                   |    | - |   |
| Salary      advance                                         |   |                    | -      |   |                   |    | 1,765 |   |
|        Total prepaid services and other current assets |   | $                       | 82,162 |   |                   | $       | 222,018 |   |

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| Computer      equipment   | 3      years |
|---------------------------|--------------|
| Laboratory      equipment | 3      years |
| Website                   | 5      years |
| Furniture                 | 7      years |

|                                           |   | September      30, 2009 |    |   | December      31, 2008 |   |
|------------------------------------------------|--------|-------------------------|---------|--------|------------------------|--------|
| Office      Equipment                          |   | $                       | 49,909  |   |                   | $      | 49,909 |   |
| Office      Fixtures and Furniture             |   |                    | 30,568  |   |                   |   | 30,568 |   |
| Website                                        |   |                    | 28,600  |   |                   |   | 27,100 |   |
| Licensed      Proprietary Rights               |   |                    | 9,250   |   |                   |   | 9,250 |   |
|                                           |   |                    | 118,327 |   |                   |   | 116,827 |   |
| Accumulated      Depreciation and Amortization |   |                    | (86,417 | )      |                   |   | (75,480 | ) |
|                                           |   | $                       | 31,910  |   |                   | $      | 41,347 |   |

|                                          |   | September      30,2009 |    |   | December      31,2008 |   |
|-----------------------------------------------|--------|------------------------|---------|--------|-----------------------|--------|
| Accounts      payable and accrued liabilities |   | $                      | 669,316 |   |                  | $      | 776,319 |   |
| Accounts      payable - Pre-merger            |   |                   | 34,926  |   |                  |   | 34,926 |   |
| Interest      payable                         |   |                   | 3,215   |   |                  |   | 3,215 |   |
| Accrued      payroll                          |   |                   | -       |   |                  |   | - |   |
| Credit      cards                             |   |                   | 17,709  |   |                  |   | 45,266 |   |
| State      income tax payable                 |   |                   | 3,200   |   |                  |   | 3,200 |   |
|                                          |   | $                      | 728,366 |   |                  | $      | 862,926 |   |

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|                                                                 |   | September      30, 2009 |       |   | December      31,2008 |   |
|----------------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------------|--------|
| YA      Global Investments, L.P. Debentures                          |   | $                       | 3,000,000  |   |                  | $      | 3,000,000 |   |
| Note      Issued To YA Global Investments, L.P. For Accrued Interest |   |                    | 368,889    |   |                  |   | 143,889 |   |
| Brencourt      Advisors, LLC Debentures                              |   |                    | 5,000,000  |   |                  |   | 5,000,000 |   |
| Note      Issued To Brencourt Advisors, LLC For Accrued Interest     |   |                    | 500,000    |   |                  |   | 125,000 |   |
| Less:      Debt discount                                             |   |                    | (3,165,709 | )      |                  |   | (1,474,937 | )  |
| Total      note payable                                              |   |                    | 5,703,180  |   |                  |   | 6,793,952 |   |
| Less:      current portion of notes payable                          |   |                    | 1,500,000  |   |                  |   | 1,500,000 |   |
| Total      long term portion of notes payable                        |   |                    | 4,203,180  |   |                  |   | 5,293,952 |   |

| For      the twelve months ended December 31, |   | Amount |          |
|-----------------------------------------------|--------|--------|---------------|
| 2009                                          |   | $      | 1,500,000     |   |
| 2010                                          |   |   | 1,500,000     |   |
| 2011                                          |   |   | -             |   |
| 2012                                          |   |   |        - |   |
| 2013      and beyond                          |   |   | 5,868,889     |   |
|                                          |   | $      | 8,868,889     |   |

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| Level 1      —  | Inputs      are unadjusted, quoted prices in active markets for identical assets or      liabilities at the measurement date;         |
|---------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                            |                                                                                                                                  |
| Level 2      —  | Inputs      other than Level 1 inputs that are either directly or indirectly      observable; and                                     |
|                            |                                                                                                                                  |
| Level      3 —       | Unobservable      inputs, for which little or no market data exist, therefore requiring an      entity to develop its ownassumptions. |

|                      |   |         |   |   |         |   |   |         |   |   | Liabilities        |   |
|---------------------------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------------|--------|
|                      |   | Level      1 |   |   | Level      2 |   |   | Level      3 |   |   | at      fair value |   |
| Notes      payable        |   | $            | -      |   |         | $      | -      |         |   | $      | 5,703,180          |   |   | $ | 5,703,180 |   |
| Derivative      liability |   |         | -      |   |         |   | -      |         |   |   | 4,170,881          |   |   |   | 4,170,881 |   |
| Total                     |   | $            | -      |   |         | $      | -      |         |   | $      | 9,874,061          |   |   | $ | 9,874,061 |   |

|                         |   | January      1, |      |   | September      30, |   |
|------------------------------|--------|-----------------|-----------|--------|--------------------|--------|
|                         |   | 2009            |      |   | 2009               |   |
| Expected      volatility     |   |            | 189.77    | %      |               |   | 349.02 | % |
| Expected      life (years)   |   |            | 4.40-5.51 |   |               |   | 2.97-5.00 |   |
| Risk      free interest rate |   |            | 1.13      | %      |               |   | 1.48 | % |
| Forfeiture      rate         |   |            | -         |   |               |   | - |   |
| Dividend      rate           |   |            | -         |   |               |   | - |   |

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| Options      Outstanding |      |   | Options      Exercisable |   |
|--------------------------|-----------|--------|--------------------------|--------|
| Exercise      Prices     |      |   | Number      Outstanding  |   |   | Weighted      Average Remaining Contractual Life (years) |   |   | Weighted      Average Exercise Price |   |   | Number      Exercisable |   |   | Weighted      Average Remaining Contractual Life (years) |   |
| $                        | 0.10-2.20 |   |                     |   | 2,579,235 |   |   |   | 7.68 |   |   | $ | 0.10-2.20 |   |   |   | 1,825,485 |   |   |   | 6.77 |   |
|                     | 2.30-2.50 |   |                     |   | 201,444 |   |   |   | 1.77 |   |   |   | 2.30-2.50 |   |   |   | 201,444 |   |   |   | 1.77 |   |
|                     | 3.10      |   |                     |   | 100 |   |   |   | 1.20 |   |   |   | 3.10 |   |   |   | 100 |   |   |   | 1.20 |   |
|                     | 3.30      |   |                     |   | 10,303 |   |   |   | 0.89 |   |   |   | 3.30 |   |   |   | 10,303 |   |   |   | 0.89 |   |
|                     | 4.40      |   |                     |   | 15,000 |   |   |   | 0.75 |   |   |   | 4.40 |   |   |   | 15,000 |   |   |   | 0.75 |   |
|                     | 250.00    |   |                     |   | 6,321 |   |   |   | 0.50 |   |   |   | 250.00 |   |   |   | 6,321 |   |   |   | 0.50 |   |
|                     |      |   |                     |   | 2,812,403 |   |   |   | 7.18 |   |   |   |   |   |   |   | 2,058,653 |   |   |   | 6.19 |   |

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|                                    |   | Number      of Shares |      |   | Weighted      AveragePrice      Per Share |   |
|-----------------------------------------|--------|-----------------------|-----------|--------|-------------------------------------------|--------|
| Outstanding      at December 31, 2008   |   |                  | 1,791,168 |   |                                      | $      | 2.65 |   |
|           Granted        |   |                  | -         |   |                                      |   | - |   |
|           Exercised |   |                  | -         |   |                                      |   | - |   |
|           Expired   |   |                  | -         |   |                                      |   | - |   |
| Outstanding      at March 31, 2009      |   |                  | 1,791,168 |   |                                      | $      | 2.65 |   |
|           Granted   |   |                  | -         |   |                                      |   | - |   |
|           Exercised |   |                  | -         |   |                                      |   | - |   |
|           Expired   |   |                  | -         |   |                                      |   | - |   |
| Outstanding      at June 30, 2009       |   |                  | 1,791,168 |   |                                      | $      | 2.65 |   |
|           Granted   |   |                  | 1,021,235 |   |                                      |   | 0.25 |   |
|           Exercised |   |                  | -         |   |                                      |   | - |   |
|           Expired   |   |                  | -         |   |                                      |   | - |   |
| Outstanding      at September 30, 2009  |   |                  | 2,812,403 |   |                                      | $      | 2.65 |   |
|                                    |   |                  |      |   |                                      |   |   |   |
| Non-vested      at September 30, 2009   |   |                  | 753,750   |   |                                      | $      | 0.25 |   |
| Exercisable      September 30, 2009     |   |                  | 2,058,653 |   |                                      | $      | 2.34 |   |

|                                       |   | 2009         |   |   | 2008        |                  |
|--------------------------------------------|--------|--------------|--------|--------|-------------|-----------------------|
| Risk-free      interest rate at grant date |   |         | 1.48   | %      |        |                  | 4.25 | % |
| Expected      stock price volatility       |   |         | 349.02 | %      |        | 82.54%      to 93.11% |   |
| Expected      dividend payout              |   |         | -      |   |        |                  | - |   |
| Expected      option life-years            |   | 3      to 10 |   |   | 3      to 5 |                  |

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| Warrants      Outstanding |      |   | Warrants      Exercisable |
|---------------------------|-----------|--------|---------------------------|
|                      |      |   |                      |   |   | Weighted |   |   |   |   |   |   |   |   | Weighted |
|                      |      |   |                      |   |   | Average |   |   | Weighted |   |   |   |   |   | Average |
|                      |      |   |                      |   |   | Remaining |   |   | Average |   |   |   |   |   | Remaining |
| Exercise                  |      |   | Number                    |   |   | Contractual |   |   | Exercise |   |   | Number |   |   | Contractual |
| Prices                    |      |   | Outstanding               |   |   | Life      (years) |   |   | Price |   |   | Exercisable |   |   | Life      (years) |
| $                         | 0.50-1.00 |   |                      |   | - |   |   |   | - |   |   | $ | 0.50-1.00 |   |   |   | - |   |   | - |
|                      | 1.25-2.20 |   |                      |   | 4,103,475 |   |   |   | 3.91 |   |   |   | 1.25-2.20 |   |   |   | 4,103,475 |   |   | 3.91 |
|                      | 2.30-5.60 |   |                      |   | 2,543,077 |   |   |   | 1.58 |   |   |   | 2.30-5.60 |   |   |   | 2,543,077 |   |   | 1.58 |
|                      | 10.00     |   |                      |   | 2,750 |   |   |   | 0.25 |   |   |   | 10.00 |   |   |   | 2,750 |   |   | 0.25 |
|                      | 20.00     |   |                      |   | - |   |   |   | - |   |   |   | 20.00 |   |   |   | - |   |   | - |
|                      |      |   |                      |   | 6,649,302 |   |   |   | 3.01 |   |   |   |   |   |   |   | 6,649,302 |   |   | 3.01 |

|                                               |   | Number      of Shares(post-split) |      |   | Weighted      AveragePrice      Per Share(post-split) |   |
|----------------------------------------------------|--------|-----------------------------------|-----------|--------|-------------------------------------------------------|--------|
| Outstanding      at December 31, 2008              |   |                              | 7,020,975 |   |                                                  | $      | 2.66 |   |
|           Granted              |   |                              | -         |   |                                                  |   | - |   |
|      Exercised            |   |                              | -         |   |                                                  |   | - |   |
|           Cancelled or expired |   |                              | (102,548  | )      |                                                  |   | 2.26 |   |
| Outstanding      at March 31, 2009                 |   |                              | 6,918,427 |   |                                                  | $      | 2.67 |   |
|           Granted              |   |                              | -         |   |                                                  |   | - |   |
|           Exercised            |   |                              | -         |   |                                                  |   | - |   |
|           Cancelled or expired |   |                              | (62,350   | )      |                                                  |   | 2.88 |   |
| Outstanding      at June 30, 2009                  |   |                              | 6,856,077 |   |                                                  | $      | 2.67 |   |
|           Granted              |   |                              | -         |   |                                                  |   | - |   |
|      Exercised            |   |                              | -         |   |                                                  |   | - |   |
|           Cancelled or expired |   |                              | (206,775  | )      |                                                  |   | 4.60 |   |
| Outstanding      at September 30, 2009             |   |                              | 6,649,302 |   |                                                  |   | 2.61 |   |

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OFOPERATION

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK

ITEM 4. CONTROLS AND PROCEDURES

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ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OFPROCEEDS

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIESHOLDERS

ITEM 5. OTHER INFORMATION

ITEM 6. EXHIBITS

| 31.1 | Certification of Chief      Executive Officer pursuant to Item 601(b)(31) of Regulation S-B, as      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of      2002. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.2 | Certification of Chief      Financial Officer pursuant to Item 601(b)(31) of Regulation S-B, as      adopted pursuant to Section 302 of the Sarbanes-Oxley Act of      2002. |
| 32.1 | Certifications of Chief      Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant      to Section 906 of the Sarbanes-Oxley Act of    2002.*             |
| 32.2 | Certifications of Chief      Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant      to Section 906 of the Sarbanes-Oxley Act of    2002.*             |

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Signatures

|         | IR      BioSciences Holdings, Inc.                                                                                                         |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------|
|    |                                                                                                                                  |    |
|         | By:                                                                                                                              | /s/ Michael K.      Wilhelm            |
|         | Michael      K. Wilhelm                                                                                                                    |
|         | President,      Chief Executive Officer                                                                                                    |
|         |                                                                                                                                       |
|         | /s/ John N.      Fermanis                   |
|         | John      N. Fermanis                                                                                                                      |
|         | Chief      Financial Officer                                                                                                               |

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