----

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| þ                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  |
|---------------------------------------------------------------------|------------------------------------------------------------------------------------------|
|                                                                |                                                                                     |
| For the quarterly period ended September 30, 2010                   |
|                                                                |                                                                                     |
| OR                                                                  |
|                                                                |                                                                                     |
| o                                                                   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|                                                                |                                                                                     |
| For the transition period from ________________ to ________________ |

|  Ecosphere Technologies, Inc.                           |
|--------------------------------------------------------------|
|  (Exact name of registrant as specified in its charter) |

| Delaware                                                     |   | 20-350286                |
|--------------------------------------------------------------|--------|--------------------------|
| (State or other jurisdiction of          |   | (I.R.S. Employer    |
| incorporation or organization)                     |   | Identification No.) |
|                                                         |   |                     |
| 3515 S.E. Lionel Terrace, Stuart, Florida                    |   | 34997                    |
| (Address of principal executive offices) |   | (Zip Code)          |

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

| Class                                   |   | Outstanding at November 12, 2010 |
|-----------------------------------------|--------|----------------------------------|
| Common Stock, $0.01 par value per share |   | 138,324,035 shares               |

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|                                 |                                                                                        | Page   |     |
|--------------------------------------|---------------------------------------------------------------------------------------------|--------|----------|
| PART I – FINANCIAL INFORMATION |
|                                 |                                                                                        |   |     |   |
| Item 1.                              | Condensed Consolidated Financial Statements (unaudited)                                     |   |     | 3  |   |
|                                 |                                                                                        |   |     |   |   |
|                                 | Condensed Consolidated Balance Sheets (unaudited)                                           |   |     | 3  |   |
|                                 |                                                                                        |   |     |   |   |
|                                 | Condensed Consolidated Statements of Operations (unaudited)                                 |   |     | 4  |   |
|                                 |                                                                                        |   |     |   |   |
|                                 | Condensed Consolidated Statements of Cash Flows (unaudited)                                 |   |     | 5  |   |
|                                 |                                                                                        |   |     |   |   |
|                                 | Notes to Condensed Consolidated  Financial Statements (unaudited)                 |   |     | 7  |   |
|                                 |                                                                                        |   |     |   |
| Item 2.                              | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   |     | 27  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 3.                              | Qualitative and Quantitative Disclosures about Market Risk                                  |   |     | 37  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 4.                              | Controls and Procedures                                                                     |   |     | 37  |   |
|                                 |                                                                                        |   |     |   |   |
| PART II – OTHER INFORMATION    |
|                                 |                                                                                        |   |     |   |
| Item 1.                              | Legal Proceedings                                                                           |   |     | 38  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 1A.                             | Risk Factors                                                                                |   |     | 38  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 2.                              | Unregistered Sales of Equity Securities and Use of Proceeds                                 |   |     | 38  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 3.                              | Defaults Upon Senior Securities                                                             |   |     | 39  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 4.                              | (Removed and Reserved)                                                                      |   |     | 39  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 5.                              | Other Information                                                                           |   |     | 39  |   |
|                                 |                                                                                        |   |     |   |   |
| Item 6.                              | Exhibits                                                                                    |   |     | 39  |   |
|                                 |                                                                                        |   |     |   |   |
| SIGNATURES                           |                                                                                        |   | 40  |   |

----

|                                                                                                                                                                                       |   | September 30, |                  |   | December 31, |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-----------------------|--------|--------------|---------|
|                                                                                                                                                                                       |   | 2010          |                  |   | 2009         |    |
|   Assets                                                                                                                                                                         |   | (Unaudited)   |                  |   |         |    |
| Current Assets                                                                                                                                                                             |   |          |                  |   |         |    |
| Cash                                                                                                                                                                                       |   | $             | 132,778               |   |         | $       | 1,089,238 |   |
| Restricted cash                                                                                                                                                                            |   |          | -                     |   |         |    | 425,000 |   |
| Accounts receivable                                                                                                                                                                        |   |          | 698,575               |   |         |    | 701,999 |   |
| Prepaid expenses and other current assets                                                                                                                                                  |   |          | 129,526               |   |         |    | 30,656 |   |
| Total current assets                                                                                                                                                                       |   |          | 960,879               |   |         |    | 2,246,893 |   |
|        Property and equipment, net                                                                                                                      |   |          | 8,352,057             |   |         |    | 7,174,919 |   |
|        Construction in progress                                                                                                                         |   |          | 364,034               |   |         |    | 764,229 |   |
|        Patents, net                                                                                                                                     |   |          | 46,305                |   |         |    | 37,891 |   |
|        Deposits                                                                                                                                         |   |          | 22,205                |   |         |    | 22,205 |   |
| Total assets                                                                                                                                                                               |   | $             | 9,745,480             |   |         | $       | 10,246,137 |   |
| Liabilities, Redeemable Convertible CumulativePreferred Stock and                                                                                                                          |   |          |                  |   |         |    |   |   |
| Stockholders’ Deficit                                                                                                                                                                |   |          |                  |   |         |    |   |   |
| Current Liabilities                                                                                                                                                                        |   |          |                  |   |         |    |   |   |
| Accounts payable                                                                                                                                                                           |   | $             | 2,027,313             |   |         | $       | 1,759,308 |   |
| Accounts payable - related parties                                                                                                                                                         |   |          | 22,914                |   |         |    | - |   |
| Accrued liabilities                                                                                                                                                                        |   |          | 931,244               |   |         |    | 705,510 |   |
| Advances from officers                                                                                                                                                                     |   |          | 45,000                |   |         |    | - |   |
| Insurance premium finance contract                                                                                                                                                         |   |          | 19,655                |   |         |    | - |   |
| Vehicle financing                                                                                                                                                                          |   |          | 72,172                |   |         |    | 41,339 |   |
| Capital lease obligations                                                                                                                                                                  |   |          | -                     |   |         |    | 13,080 |   |
| Due to affiliate                                                                                                                                                                           |   |          | 2,000                 |   |         |    | 2,000 |   |
| Deferred revenue                                                                                                                                                                           |   |          | -                     |   |         |    | 672,000 |   |
| Notes payable – related parties (net of discount) – current portion                                                                                                            |   |          | 1,067,110             |   |         |    | 1,795,376 |   |
| Notes payable – third parties (net of discount) – current portion                                                                                                              |   |          | 50,000                |   |         |    | 1,616,078 |   |
| Fair value of liability for warrant derivative instruments                                                                                                                                 |   |          | 654,332               |   |         |    | 6,315,631 |   |
| Fair value of liability for embedded conversion option derivative instruments                                                                                                              |   |          | -                     |   |         |    | 1,084,908 |   |
| Total current liabilities                                                                                                                                                                  |   |          | 4,891,740             |   |         |    | 14,005,230 |   |
|        Restructuring reserve                                                                                                                            |   |          | 175,804               |   |         |    | 123,436 |   |
|        Notes payable - related parties - less current portion                                                                                           |   |          | 2,000,000             |   |         |    | 2,000,000 |   |
| Total Liabilities                                                                                                                                                                          |   |          | 7,067,544             |   |         |    | 16,128,666 |   |
| Redeemable convertible cumulative preferred stock series A                                                                                                                                 |   |          |                  |   |         |    |   |   |
| 11 shares authorized; 6 shares issued and outstanding, $25,000 per share redemption amount plus dividends in arrears ($1,130,369 at September 30, 2010)                                    |   |          | 1,130,369   |   |         |    | 1,137,556   |   |
| Redeemable convertible cumulative preferred stock series B                                                                                                                                 |   |          |                  |   |         |    |   |   |
| 484 shares authorized; 326 and 355 shares issued and outstanding, respectively, $2,500 per share redemption amount plus dividends in arrears ($2,731,677  at September 30, 2010) |   |          | 2,731,677             |   |         |    | 2,742,239 |   |
|                                                                                                                                                                                       |   |          |                  |   |         |    |   |   |
| Commitments and Contingencies (Note 13)                                                                                                                                                    |   |          |                  |   |         |    |   |   |
|                                                                                                                                                                                       |   |          |                  |   |         |    |   |   |
| Ecosphere Technologies, Inc. Stockholders’ Deficit                                                                                                                                   |   |          |                  |   |         |    |   |   |
| Common stock, $0.01 par value; 300,000,000 shares authorized; 137,088,285 and 116,830,850 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively          |   |          | 1,370,883             |   |         |    | 1,168,308 |   |
| Common stock issuable, $0.01 par value, 1,164,321 and 630,089 issuable at September 30, 2010 and December 31, 2009, respectively                                                           |   |          | 11,643                |   |         |    | 6,301 |   |
| Additional paid-in capital                                                                                                                                                                 |   |          | 93,526,558            |   |         |    | 66,349,999 |   |
| Accumulated deficit                                                                                                                                                                        |   |          | (106,756,822          | )      |         |    | (87,893,515 | ) |
| Total Ecosphere Technologies, Inc. stockholders’ deficit                                                                                                                             |   |          | (11,847,738           | )      |         |    | (20,368,907 | ) |
| Noncontrolling interest in consolidated subsidiary                                                                                                                                         |   |          | 10,663,628            |   |         |    | 10,606,583 |   |
| Total stockholder' deficit                                                                                                                                                                 |   |          | (1,184,110            | )      |         |    | (9,762,324 | ) |
| Total liabilities, redeemable convertible cumulative preferred stock,                                                                                                                      |   |          |                  |   |         |    |   |   |
| and stockholders’ deficit                                                                                                                                                            |   |  $       | 9,745,480        |   |         |  $ | 10,246,137  |   |

----

|                                                                                       |   | For The Three Months Ended September 30, |        |   | For The Nine Months Ended September 30, |   |
|--------------------------------------------------------------------------------------------|--------|------------------------------------------|-------------|--------|-----------------------------------------|--------|
|                                                                                       |   | 2010                                     |        |   | 2009                                    |   |   | 2010 |   |   | 2009 |   |
| Revenues                                                                                   |   | $                                        | 2,188,534   |   |                                    | $      | 357,076 |   |   | $ | 6,427,787 |   |   | $ | 705,385 |   |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Cost of revenues                                                                           |   |                                     | 1,002,796   |   |                                    |   | 136,257 |   |   |   | 2,541,566 |   |   |   | 391,006 |   |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                                               |   |                                     | 1,185,738   |   |                                    |   | 220,819 |   |   |   | 3,886,221 |   |   |   | 314,379 |   |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                                                         |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                                                        |   |                                     | 2,747,697   |   |                                    |   | 2,804,860 |   |   |   | 8,635,107 |   |   |   | 7,293,422 |   |
| Asset impairment                                                                           |   |                                     | 116,000     |   |                                    |   | - |   |   |   | 116,000 |   |   |   | - |   |
| Restructuring charge                                                                       |   |                                     | 50,000      |   |                                    |   | - |   |   |   | 50,000 |   |   |   | 548,090 |   |
| Total operating expenses                                                                   |   |                                     | 2,913,697   |   |                                    |   | 2,804,860 |   |   |   | 8,801,107 |   |   |   | 7,841,512 |   |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Loss from operations                                                                       |   |                                     | (1,727,959  | )      |                                    |   | (2,584,041 | ) |   |   | (4,914,886 | ) |   |   | (7,527,133 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                                    |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Other income                                                                               |   |                                     | 31          |   |                                    |   | 2 |   |   |   | 273 |   |   |   | 2,758 |   |
| Other expense                                                                              |   |                                     | -           |   |                                    |   | - |   |   |   | - |   |   |   | (1,605 | ) |
| Gain (loss) on conversion, net                                                             |   |                                     | 12,524      |   |                                    |   | (27,288 | ) |   |   | (121,080 | ) |   |   | (716,538 | ) |
| Interest expense                                                                           |   |                                     | (93,883     | )      |                                    |   | (655,645 | ) |   |   | (939,213 | ) |   |   | (4,656,787 | ) |
| Change in fair value of derivative instruments                                             |   |                                     | 1,203,883   |   |                                    |   | 2,173,567 |   |   |   | (12,831,356 | ) |   |   | (3,565,592 | ) |
| Total other income (expense)                                                               |   |                                     | 1,122,555   |   |                                    |   | 1,490,636 |   |   |   | (13,891,376 | ) |   |   | (8,937,764 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                          |   |                                     | (605,404    | )      |                                    |   | (1,093,405 | ) |   |   | (18,806,262 | ) |   |   | (16,464,897 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Preferred stock dividends                                                                  |   |                                     | (26,000     | )      |                                    |   | (30,000 | ) |   |   | (79,750 | ) |   |   | (90,000 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) applicable to common stock                                               |   |                                     | (631,404    | )      |                                    |   | (1,123,405 | ) |   |   | (18,886,012 | ) |   |   | (16,554,897 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Less: Net (income) loss applicable to non-controlling interest in consolidated subsidiary  |   |                                     | 135,665     |   |                                    |   | 268,531 |   |   |   | (57,045 | ) |   |   | 268,531 |   |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) applicable to Ecosphere Technologies, Inc. common stock                  |   | $                                        | (495,739    | )      |                                    | $      | (854,874 | ) |   | $ | (18,943,057 | ) |   | $ | (16,286,366 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) per common share applicable to Ecosphere Technologies, Inc. common stock |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                                          |   | $                                        | (0.00       | )      |                                    | $      | (0.01 | ) |   | $ | (0.15 | ) |   | $ | (0.17 | ) |
|                                                                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding                                       |   |                                     |        |   |                                    |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                                          |   |                                     | 137,646,787 |   |                                    |   | 110,461,145 |   |   |   | 129,200,820 |   |   |   | 96,419,567 |   |

----

|                                                                                          |   | For the Nine Months Ended September 30, |        |
|-----------------------------------------------------------------------------------------------|--------|-----------------------------------------|-------------|
|                                                                                          |   | 2010                                    |        |   | 2009 |   |
| OPERATING ACTIVITIES:                                                                         |   |                                    |        |   |   |   |
| Net (loss) income applicable to Ecosphere Technologies, Inc, common stock                     |   | $                                       | (18,943,057 | ) |   | $ | (16,286,366 | ) |
| Adjustments to reconcile net income (loss) to net cash used in operating activities:          |   |                                    |        |   |   |   | . |   |
| Accrued preferred stock dividends                                                             |   |                                    | 79,750      |   |   |   | 90,000 |   |
| Depreciation and amortization                                                                 |   |                                    | 1,435,955   |   |   |   | 438,549 |   |
| Amortization of debt issue costs                                                              |   |                                    | -           |   |   |   | 268,792 |   |
| Additional restructuring reserve                                                              |   |                                    | 50,000      |   |   |   | - |   |
| Shares issued for settlement                                                                  |   |                                    | 114,000     |   |   |   | - |   |
| Accretion of discount on notes payable                                                        |   |                                    | 538,712     |   |   |   | 2,305,093 |   |
| Loss on conversion of accrued interest to stock                                               |   |                                    | 19,604      |   |   |   | 701,343 |   |
| Non-cash compensation expense                                                                 |   |                                    | 2,518,533   |   |   |   | 3,589,619 |   |
| Asset impairment                                                                              |   |                                    | 116,000     |   |   |   | - |   |
| Interest expense for warrant derivative liability related to new warrants                     |   |                                    | -           |   |   |   | 684,381 |   |
| Interest expense for embedded conversion option derivative liability of new convertible notes |   |                                    | -           |   |   |   | 983,871 |   |
| Expense related to warrant modifications                                                      |   |                                    | 93,735      |   |   |   | - |   |
| Increase (decrease) in fair value of warrant derivative liability                             |   |                                    | 8,816,136   |   |   |   | 1,804,869 |   |
| Increase (decrease) in fair value of embedded conversion option derivative liability          |   |                                    | 4,015,220   |   |   |   | 1,760,733 |   |
| Noncontrolling interest in consolidated subsidiary                                            |   |                                    | 57,045      |   |   |   | (268,531 | ) |
| Changes in operating assets and liabilities                                                   |   |                                    | -           |   |   |   |   |   |
| Decrease in accounts receivable                                                               |   |                                    | 3,424       |   |   |   | 123,728 |   |
| (Increase) decrease in prepaid expenses and other current assets                              |   |                                    | 75,797      |   |   |   | (419,898 | ) |
| (Increase) in debt issue costs and other non-current assets                                   |   |                                    | (12,006     | ) |   |   | (2,737 | ) |
| Increase (decrease) in accounts payable                                                       |   |                                    | 359,075     |   |   |   | 2,527,299 |   |
| Increase in accounts payable - related parties                                                |   |                                    | 22,914      |   |   |   | (5,485 | ) |
| (Decrease) increase in restructuring reserve                                                  |   |                                    | (42,852     | ) |   |   | 261,147 |   |
| Increase in deferred rent                                                                     |   |                                    | -           |   |   |   | 3,094 |   |
| (Decrease) in deferred revenue                                                                |   |                                    | (672,000    | ) |   |   | 200,000 |   |
| Increase in accrued expenses                                                                  |   |                                    | 251,260     |   |   |   | 178,449 |   |
| Net cash used in operating activities                                                         |   |                                    | (1,102,755  | ) |   |   | (1,062,050 | ) |
| INVESTING ACTIVITIES:                                                                         |   |                                    |        |   |   |   |   |   |
| Redemption of restricted cash                                                                 |   |                                    | 425,000     |   |   |   | - |   |
| Construction in process purchases                                                             |   |                                    | (1,982,293  | ) |   |   | (3,292,989 | ) |
| Purchase of property and equipment                                                            |   |                                    | (343,013    | ) |   |   | (60,343 | ) |
| Net cash used in investing activities                                                         |   |                                    | (1,900,306  | ) |   |   | (3,353,332 | ) |
| FINANCING ACTIVITIES:                                                                         |   |                                    |        |   |   |   |   |   |
| Proceeds from non-controlling interest investment                                             |   |                                    | -           |   |   |   | 3,500,000 |   |
| Proceeds from officer advances                                                                |   |                                    | 45,000      |   |   |   | - |   |
| Proceeds from issuance of notes payable and warrants                                          |   |                                    | -           |   |   |   | 575,000 |   |
| Proceeds from issuance of common stock and warrants                                           |   |                                    | 545,000     |   |   |   | - |   |
| Warrant modifications in exchange for cash                                                    |   |                                    | 756,968     |   |   |   | - |   |
| Proceeds from new vehicle financing                                                           |   |                                    | 42,000      |   |   |   | - |   |
| Proceeds from issuance of notes payable                                                       |   |                                    | -           |   |   |   | 45,500 |   |
| Proceeds from issuance of notes payable and warrants to related parties                       |   |                                    | -           |   |   |   | 80,000 |   |
| Proceeds from warrant exercises                                                               |   |                                    | 1,123,151   |   |   |   | 75,938 |   |
| Repayments of notes payable and insurance financing                                           |   |                                    | (155,012    | ) |   |   | (212,664 | ) |
| Repayments of notes payable to related parties                                                |   |                                    | (286,259    | ) |   |   | (30,000 | ) |
| Repayments of vehicle financing                                                               |   |                                    | (11,167     | ) |   |   | - |   |
| Principal payments on capital leases                                                          |   |                                    | (13,080     | ) |   |   | (28,286 | ) |
| Net cash provided by financing activities                                                     |   |                                    | 2,046,601   |   |   |   | 4,005,488 |   |
| Net (decrease) in cash                                                                        |   |                                    | (956,460    | ) |   |   | (409,894 | ) |
| Cash, beginning of period                                                                     |   |                                    | 1,089,238   |   |   |   | 461,514 |   |
| Cash, end of period                                                                           |   | $                                       | 132,778     |   |   | $ | 51,620 |   |

----

|                                                                                                                  |   | For The Nine Months Ended September |       |
|-----------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|
|                                                                                                                  |   | 2010                                |       |   | 2009 |   |
| Cash paid for interest                                                                                                |   | $                                   | 124,388    |   |   | $ | 215,576 |   |
| Cash paid for income taxes                                                                                            |   | $                                   | —    |   |   | $ | — |   |
|                                                                                                                  |   |                                |       |   |   |   |   |   |
| Non-cash investing and financing activities:                                                                          |   |                                |       |   |   |   |   |   |
| Accrued preferred stock dividends                                                                                     |   | $                                   | 79,750     |   |   | $ | 90,000 |   |
| Conversion of convertible debentures to common stock                                                                  |   | $                                   | —    |   |   | $ | 1,057,442 |   |
| Conversion of convertible notes  to common stock                                                            |   | $                                   | 2,104,393  |   |   | $ | 1,455,000 |   |
| Conversion of related party debt to common stock                                                                      |   | $                                   | 422,222    |   |   | $ | 1,050,000 |   |
| Reduction of derivative liability for embedded conversion options from conversion of convertible notes and debentures |   | $                                   | 5,100,128  |   |   | $ | 1,977,877 |   |
| Reduction of derivative liability for warrants from exercise and modification of warrants                             |   | $                                   | 14,571,170 |   |   | $ | 4,925,703 |   |
| Warrant liability recorded as debt discount                                                                           |   | $                                   | —    |   |   | $ | 231,248 |   |
| Embedded conversion option recorded as debt discount                                                                  |   | $                                   | —    |   |   | $ | 334,504 |   |
| Common stock issued as payment of accrued interest                                                                    |   | $                                   | 30,462     |   |   | $ | 373,154 |   |
| Common stock issued in payment of services or accounts payable                                                        |   | $                                   | 60,518     |   |   | $ | 85,814 |   |
| Series A Redeemable Convertible Cumulative Preferred Stock converted to common stock                                  |   | $                                   | 25,000     |   |   | $ | — |   |
| Series B Redeemable Convertible Cumulative Preferred Stock converted to common stock                                  |   | $                                   | 72,500     |   |   | $ | 122,500 |   |

----

----

----

| Table 1                     |   | Black Scholes Inputs                                                           |              |   |                      |   |
|-----------------------------|--------|--------------------------------------------------------------------------------|-------------------|--------|---------------------------|--------|
| Warrants                    |   |                                                                           |              |   |                      |   |   |   |   |   |   |   |
|                        |   | Warrants Exercised During the Nine Months EndedSeptember 30, 2010         |              |   | As of March 31, 2010 |   |   | As of June 30, 2010 |   |   | As of September 30, 2010 |   |
| Volatility                  |   |                                                                           | 83.96% - 110.94   | %      |                      |   | 99.19 | % |   |   | 106.04 | % |   |   | 108.35 | % |
| Expected Term               |   |                                                                           | 1.00 - 4.52 years |   |                      |   | 1.13 - 4.58 years |   |   |   | 0.89 - 3.78 years |   |   |   | 1.19 to 3.53 years |   |
| Risk Free Interest Rate     |   |                                                                           | 0.35% - 2.24      | %      |                      |   | 0.45% - 2.31 | % |   |   | 0.28% - 1.31 | % |   |   | 0.3% - 0.81 | % |
|                        |   |                                                                           |              |   |                      |   |   |   |   |   |   |   |   |   |   |   |
|                        |   |                                                                           |              |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Embedded Conversion Options |   |                                                                           |              |   |                      |   |   |   |   |   |   |   |   |   |   |   |
|                        |   | Notes Converted During the Nine Months Ended September 30, 2010 |              |   | As of March 31, 2010 |   |   | As of June 30, 2010 |   |   | As of September 30, 2010 |   |
| Volatility                  |   |                                                                           | 83.5% - 110.94    | %      |                      |   | 99.19 | % |   |   | N/A |   |   |   | N/A |   |
| Expected Term               |   |                                                                           | 0.001 - 0.4 years |   |                      |   | 0.001 - 0.6 years |   |   |   | N/A |   |   |   | N/A |   |
| Risk Free Interest Rate     |   |                                                                           | 0.001% - 0.20     | %      |                      |   | 0.001 - 0.23 | % |   |   | N/A |   |   |   | N/A |   |

----

|                                                                          |   | Balance at September 30, 2010 |    | Quoted Prices inActive Marketsfor IdenticalAssets |   | SignificantOtherObservableInputs |    | SignificantUnobservableInputs |   |
|-------------------------------------------------------------------------------|--------|----------------------------------------------|---------|---------------------------------------------------|--------|----------------------------------|---------|-------------------------------|--------|
|                                                                          |   |                                         |    | (Level 1)                                         |   | (Level 2)                        |    | (Level 3)                     |   |
| Fair value of liability for warrant derivative instruments                    |   | $                                            | 654,332 |                                              |   | $                                | — |                          |   | $ | — |   |   | $ | 654,332 |   |
| Fair value of liability for embedded conversion option derivative instruments |   |                                         | — |                                              |   |                             | — |                          |   |   | — |   |   |   | — |   |
| Total Financial Liabilities                                                   |   | $                                            | 654,332 |                                              |   | $                                | — |                          |   | $ | — |   |   | $ | 654,332 |   |

----

|                                                       |   | Fair Value of Liability For Warrant Derivative Instruments |        |   | Fair Value of Liability For Embedded Conversion Option Derivative Instruments |   |       | Total  |   |
|------------------------------------------------------------|--------|------------------------------------------------------------|-------------|--------|-------------------------------------------------------------------------------|--------|------------|--------|--------|
| Balance December 31, 2009                                  |   | $                                                          | 6,315,631   |   |                                                                          | $      | 1,084,908  |   |   | $ | 7,400,539 |   |
| Fair value of new warrants and embedded conversion options |   |                                                       | 93,735      |   |                                                                          |   | -          |   |   |   | 93,735 |   |
| Adjustments for exercises and conversions                  |   |                                                       | (14,571,170 | )      |                                                                          |   | (5,100,128 | )      |   |   | (19,671,298 | ) |
| Change in fair value included in other (income) loss       |   |                                                       | 8,816,136   |   |                                                                          |   | 4,015,220  |   |   |   | 12,831,356 |   |
| Balance at Septmber 30, 2010                               |   | $                                                          | 654,332     |   |                                                                          | $      | -          |   |   | $ | 654,332 |   |

----

----

| Restructuring Reserve          |   |   |     |
|--------------------------------|--------|--------|----------|
|                           |   |   |     |
| Balance December 31, 2009      |   | $      | 123,436  |   |
| Rent payments                  |   |   | (130,136 | ) |
| Sublease payment received      |   |   | 87,284   |   |
| Reclassification from payables |   |   | 45,220   |   |
| Additional reserve             |   |   | 50,000   |   |
| Balance September 30, 2010     |   | $      | 175,804  |   |

----

| a)       | 5,035,348 shares of common stock were issued to convert $1,812,726 of secured convertible notes payable. |
|----------------------------------------|----------------------------------------------------------------------------------------------------------|

| b)       | 16,700 shares of common stock were issued upon the conversion of 20 shares of Series B Preferred Stock.  Accordingly, $50,000 was reclassified to equity from temporary equity. |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)      | 1,525,112 shares of common stock were issued upon exercise of warrants and options at exercise prices ranging from $0.15 to $0.44 per share resulting in proceeds to the Company of $367,773. |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a)       | 1,983,024 shares of common stock were issued to convert $713,889 of secured convertible notes payable. |
|----------------------------------------|--------------------------------------------------------------------------------------------------------|

| b)       | 24,000 shares of common stock were issued upon the conversion of one share of Series A Preferred Stock.  Accordingly, $25,000 was reclassified to equity from temporary equity. |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)       | 4,175 shares of common stock were issued upon the conversion of 5 shares of Series B Preferred Stock.  Accordingly, $12,500 was reclassified to equity from temporary equity. |
|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| d)       | 3,148,251 shares of common stock were issued upon exercise of warrants and options at exercise prices ranging from $0.07 to $0.75 per share resulting in proceeds to the Company of $652,548. |
|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e)       | 7,010,011 shares of common stock were issued upon the cashless exercise of 10,898,688 warrants at exercise prices ranging from $0.15 to $1.25 per share and based upon market prices of the Company’s common stock ranging from $0.80 to $1.73 per share. |
|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f)       | 35,776 shares of common stock upon the exercise of options to purchase 35,776 shares at an exercise price of $0.41 per share in lieu of receiving wages of $14,668. |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g)       | 36,975 shares of common stock were issued to a director in exchange for a payable to the director in the amount of $45,850.  The number of shares issued was based upon the fair market value of the Company’s common stock of $1.24 on the date of the settlement. |
|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h)      | 100,000 shares of common stock were issued as settlement of an agreement for consulting services.  The Company recorded a loss on settlement of $114,000 based upon a fair market value of the Company’s common stock on the date of settlement of $1.14. |
|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| i)       | 30,160 shares of common stock, with fair market value of $1.01 per share, were issued in payment of accrued interest of $10,858, resulting in a loss on conversion of $19,604. |
|----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a)       | 482,428 shares of common stock were issued upon exercise of warrants and options at exercise prices ranging from $0.15 to $0.43 per share resulting in proceeds to the Company of $102,830. |
|----------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b)       | 294,613 shares of common stock were issued upon the cashless exercise of 380,000 warrants at exercise prices ranging from $0.15 to $0.25 per share and based upon market prices of the Company’s common stock ranging from $0.80 to $1.05 per share. |
|----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c)       | 707,792 shares of common stock and three year warrants to purchase 353,898 shares of common stock at $1.00 per share were issued in exchange for $545,000 in connection with private placements with three accredited investors. |
|----------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d)       | 3,340 shares of common stock were issued upon the conversion of 4 shares of Series B Preferred Stock.  Accordingly, $10,000 was reclassified to equity from temporary equity.  |
|----------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                      | Shares  |   | Weighted Average Grant-Date Fair-Value |   |
|-------------------------------------------|---------|--------|-------------------------------------------------------|--------|
| Non-vested at January 1, 2010        | 547,559 |   | $                                                     | 0.47   |   |
| Granted                                   | 153,225 |   | $                                                     | 1.24   |   |
| Vested                                    | 373,140 |   | $                                                     | 0.46   |   |
| Forfeited                                 | ---     |   | $                                                     | ---    |   |
|                                      |    |   |                                                  |   |   |
| Unvested at September 30,  2010 | 327,644 |   | $                                                     | 0.81   |   |

|                    |   | For the Nine Months EndedSeptember 30, |              |
|-------------------------|--------|---------------------------------------------|-------------------|
|                    |   | 2010                                        |              | 2009 |   |
| Expected volatility     |   |                                        | 104.57% - 107.68% |   |   | 125.17% - 137.11% |   |
| Expected lives          |   |                                        | 2.5 – 4.0   |   |   | 2.5 - 5 years |   |
| Risk-free interest rate |   |                                        | 1.01% - 1.22      |   |   | 1.24% - 2.7% |   |
| Expected dividend yield |   |                                        | None              |   |   | None |   |

----

| Employee Fixed Plan                                           |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|------------|--------|---------------------------------------------------|--------|---------|--------|--------|--------|---------------------------------|--------|
|                                                          |   | For the Nine Months Ended September 30, 2010 |       |   | For the Nine Months Ended September 30, 2009 |   |
|                                                          |   | Shares                                            |       |   | Weighted Average Exercise Price                   |   |    | Shares |   |   | Weighted Average Exercise Price |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |
| Outstanding at beginning of period                            |   |                                              | 11,468,736 |   |                                              | $      | 0.58    |   |   |   | 6,741,796                       |   |   | $ | 0.69 |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Granted                                                       |   |                                              | 234,842    |   |                                              | $      | 1.22    |   |   |   | 797,521                         |   |   | $ | 0.45 |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Exercised                                                     |   |                                              | (623,667   | )      |                                              | $      | 0.27    |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Forfeited                                                     |   |                                              | -          |   |                                              | $      | -       |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Expired                                                       |   |                                              | -          |   |                                              | $      | -       |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Outstanding at end of period                                  |   |                                              | 11,079,911 |   |                                              | $      | 0.61    |   |   |   | 7,539,317                       |   |   | $ | 0.66 |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Exercisable at end of period                                  |   |                                              | 10,675,650 |   |                                              | $      | 0.60    |   |   |   | 6,784,221                       |   |   | $ | 0.68 |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Outstanding                                                   |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
|    Weighted average remaining contractual term |   |                                              |       |   |                                              |   | 3.15    |   |   |   |                            |   |   |   | 3.68 |   |
|    Aggregate intrinsic value                   |   |                                              |       |   |                                              | $      | 530,154 |   |   |   |                            |   |   | $ | 287,037 |   |
|    Weighted average grant date fair value      |   |                                              |       |   |                                              | $      | 0.80    |   |   |   |                            |   |   | $ | 0.33 |   |
|                                                          |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Exercisable                                                   |   |                                              |       |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
|    Weighted average remaining contractual term |   |                                              |       |   |                                              |   | 3.16    |   |   |   |                            |   |   |   | 3.56 |   |
|    Aggregate intrinsic value                   |   |                                              |       |   |                                              | $      | 517,945 |   |   |   |                            |   |   | $ | 271,935 |

----

| Employee Fixed Non-Plan                                       |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|------------|--------|---------------------------------------------------|--------|-----------|--------|--------|--------|---------------------------------|--------|
|                                                          |   | For the Nine Months Ended September 30, 2010 |       |   | For the Nine Months Ended September 30, 2009 |   |
|                                                          |   | Shares                                            |       |   | Weighted Average Exercise Price                   |   |      | Shares |   |   | Weighted Average Exercise Price |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |
| Outstanding at beginning of period                            |   |                                              | 33,115,414 |   |                                              | $      | 0.45      |   |   |   | 33,216,667                      |   |   | $ | 0.45 |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Granted                                                       |   |                                              | 7,200,000  |   |                                              | $      | 0.97      |   |   |   | 6,900,000                       |   |   | $ | 0.42 |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Exercised                                                     |   |                                              | (1,157,851 | )      |                                              | $      | 0.30      |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Forfeited                                                     |   |                                              | (202,020   | )      |                                              | $      | 1.00      |   |   |   | (6,500,000                      | )      |   | $ | 0.57 |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Expired                                                       |   |                                              | -          |   |                                              | $      | -         |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Outstanding at end of period                                  |   |                                              | 38,955,543 |   |                                              | $      | 0.54      |   |   |   | 33,616,667                      |   |   | $ | 0.44 |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Exercisable at end of period                                  |   |                                              | 27,129,902 |   |                                              | $      | 0.45      |   |   |   | 23,903,333                      |   |   | $ | 0.45 |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Outstanding                                                   |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
|    Weighted average remaining contractual term |   |                                              |       |   |                                              |   | 3.29      |   |   |   |                            |   |   |   | 3.88 |   |
|    Aggregate intrinsic value                   |   |                                              |       |   |                                              | $      | 3,578,667 |   |   |   |                            |   |   | $ | 2,712,867 |   |
|    Weighted average grant date fair value      |   |                                              |       |   |                                              | $      | 0.62      |   |   |   |                            |   |   | $ | 0.33 |   |
|                                                          |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
| Exercisable                                                   |   |                                              |       |   |                                              |   |      |   |   |   |                            |   |   |   |   |   |
|    Weighted average remaining contractual term |   |                                              |       |   |                                              |   | 2.88      |   |   |   |                            |   |   |   | 3.77 |   |
|    Aggregate intrinsic value                   |   |                                              |       |   |                                              | $      | 1,280,221 |   |   |   |                            |   |   | $ | 2,328,311 |   |

----

| Non-Employee Fixed Non-Plan                                   |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |
|---------------------------------------------------------------|--------|---------------------------------------------------|-----------|--------|---------------------------------------------------|--------|---------|--------|--------|--------|---------------------------------|--------|
|                                                          |   | For the Nine Months Ended September 30, 2010 |      |   | For the Nine Months Ended September 30, 2009 |   |
|                                                          |   | Shares                                            |      |   | Weighted Average Exercise Price                   |   |    | Shares |   |   | Weighted Average Exercise Price |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |
| Outstanding at beginning of period                            |   |                                              | 3,803,741 |   |                                              | $      | -       |   |   |   | 3,803,741                       |   |   | $ | 0.59 |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Granted                                                       |   |                                              | -         |   |                                              | $      | -       |   |   |   | 500,000                         |   |   | $ | 0.44 |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Exercised                                                     |   |                                              | (193,548  | )      |                                              | $      | 1.00    |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Forfeited                                                     |   |                                              | (806,452  | )      |                                              | $      | 1.00    |   |   |   | (500,000                        | )      |   | $ | 0.42 |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Expired                                                       |   |                                              | (300,000  | )      |                                              | $      | 1.02    |   |   |   | -                               |   |   | $ | - |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Outstanding at end of period                                  |   |                                              | 2,503,741 |   |                                              | $      | 0.37    |   |   |   | 3,803,741                       |   |   | $ | 0.59 |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Exercisable at end of period                                  |   |                                              | 2,488,832 |   |                                              | $      | 0.37    |   |   |   | 3,318,000                       |   |   | $ | 0.61 |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Outstanding                                                   |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
|    Weighted average remaining contractual term |   |                                              |      |   |                                              |   | 1.25    |   |   |   |                            |   |   |   | 1.70 |   |
|    Aggregate intrinsic value                   |   |                                              |      |   |                                              | $      | 404,817 |   |   |   |                            |   |   | $ | 245,057 |   |
|    Weighted average grant date fair value      |   |                                              |      |   |                                              |   | N/A     |   |   |   |                            |   |   |   | N/A |   |
|                                                          |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
| Exercisable                                                   |   |                                              |      |   |                                              |   |    |   |   |   |                            |   |   |   |   |   |
|    Weighted average remaining contractual term |   |                                              |      |   |                                              |   | 1.24    |   |   |   |                            |   |   |   | 1.30 |   |
|    Aggregate intrinsic value                   |   |                                              |      |   |                                              | $      | 403,865 |   |   |   |                            |   |   | $ | 242,700 |   |

----

| Warrants                                    |   | For the Nine Months Ended September 30, 2010 |        |   | For the Nine Months Ended September 30, 2009 |   |
|---------------------------------------------|--------|---------------------------------------------------|-------------|--------|---------------------------------------------------|--------|
|                                        |   | Shares                                            |        |   | Weighted Average Exercise Price                   |   |   | Shares |   |   | Weighted Average Exercise Price |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |
| Outstanding at beginning of period          |   |                                              | 32,588,207  |   |                                              | $      | 0.51 |   |   |   | 39,132,197 |   |   | $ | 0.51 |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Granted                                     |   |                                              | 353,898     |   |                                              | $      | 1.00 |   |   |   | 2,594,945 |   |   | $ | 0.22 |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Exercised                                   |   |                                              | (10,521,324 | )      |                                              | $      | 0.25 |   |   |   | (759,375 | ) |   | $ | 0.10 |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Forfeited                                   |   |                                              | (2,594,121  | )      |                                              | $      | 0.70 |   |   |   | - |   |   | $ | - |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Exchanged, net                              |   |                                              | 2,063,000   |   |                                              | $      | 0.69 |   |   |   | - |   |   | $ | - |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Expired                                     |   |                                              | (2,580,372  | )      |                                              | $      | 1.20 |   |   |   | (647,125 | ) |   | $ | - |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at end of period                |   |                                              | 19,309,288  |   |                                              | $      | 0.44 |   |   |   | 40,320,642 |   |   | $ | 0.51 |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable at end of period                |   |                                              | 19,309,288  |   |                                              | $      | 0.44 |   |   |   | 40,320,642 |   |   | $ | 0.51 |   |
|                                        |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding and exercisable                 |   |                                              |        |   |                                              |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average remaining contractual term |   |                                              |        | 1.80   |                                              |   |   |   |   |   |   | 2.33 |   |
|    Aggregate intrinsic value |   |                                              |        |   |                                              | $      | 3,116,187 |   |   |   |   |   |   | $ | 6,391,186 |   |

----

----

| ●    | A business activity from which the Company may earn revenue and incur expenses; |
|---------------------------|---------------------------------------------------------------------------------|

| ●    | Whose operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance; and |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | For which discrete financial information is available. |
|---------------------------|--------------------------------------------------------|

| ●    | ESI which we organized in April 2005 to operate our non-Ozonix water filtration system business; |
|---------------------------|-------------------------------------------------------------------------------------------------------|

| ●    | Ecosphere Envirobotic Solutions, Inc., formerly UltraStrip Envirobotic Solutions, Inc., which we organized in October 2005 to operate our coating removal business; and, |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | EES, Inc., which we organized in November 2006, conducted our water processing for the oil and gas industry using the Ecosphere Ozonix® technology until July 2009, when the assets and liabilities of EES, Inc. were contributed in the formation of EES.  As of September 30, 2010, the Company has a 52.6% ownership position in EES. |
|---------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | Ecosphere EnergyServices LLC |       |   | Ecosphere Energy Services, Inc. |   |    | Ecosphere Systems, Inc. |   |   | Ecosphere Envirobotic Solutions, Inc. |   |   | Segment Totals |    |   | Corporate |   |       | Consolidated Totals |   |
|--------------------------------------------------------------|--------|------------------------------|------------|--------|---------------------------------|--------|---------|-------------------------|--------|--------|---------------------------------------|--------|--------|---------------------|---------|--------|-----------|--------|------------|---------------------|--------|
|                                                         |   |                         |       |   |                            |   |    |                    |   |   |                                  |   |   |                |    |   |      |   |       |                |   |
| Revenue from external customers                              |   | $                            | 6,427,787  |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 6,427,787  |                |   | $ | — |   |   | $ | 6,427,787 |   |
| Interest expense and amortization of debt discount           |   | $                            | (301,622   | )      |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | (301,622   | )                   |   | $ | (637,591 | ) |   | $ | (939,213 | ) |
| Change in fair value of liability for derivative instruments |   | $                            | —    |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | —    |                |   | $ | (12,831,356 | ) |   | $ | (12,831,356 | ) |
| Asset impairment                                             |   | $                            | —    |   |                            | $      | — |                    |   | $      | (116,000                              | )      |   | $                   | — |   |      | $      | (116,000   | )                   |   | $ | — |   |   | $ | (116,000 | ) |
| Depreciation and amortization                                |   | $                            | (1,302,152 | )      |                            | $      | — |                    |   | $      | (65,803                               | )      |   | $                   | (2,448  | )      |      | $      | (1,370,403 | )                   |   | $ | (61,960 | ) |   | $ | (1,432,363 | ) |
| Income tax expense                                           |   | $                            | —    |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | -          |                |   | $ | — |   |   | $ | — |   |
| Net income (loss)                                            |   | $                            | 57,045     |   |                            | $      | — |                    |   | $      | (181,803                              | )      |   | $                   | (2,448  | )      |      | $      | (127,206   | )                   |   | $ | (18,679,056 | ) |   | $ | (18,806,262 | ) |
|                                                         |   |                         |       |   |                            |   |    |                    |   |   |                                  |   |   |                |    |   |      |   |       |                |   |   |   |   |   |   |   |   |
| Segment fixed assets & construction in process           |   | $                            | 9,878,437  |   |                            | $      | — |                    |   | $      | 865,375                               |   |   | $                   | 25,824  |   |      | $      | 10,769,636 |                |   | $ | 1,562,027 |   |   | $ | 12,331,663 |   |
| Fixed asset additions (disposals) (net)                      |   | $                            | 2,451,053  |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 2,451,053  |                |   | $ | 115,064 |   |   | $ | 2,566,117 |   |
| Total Assets                                                 |   | $                            | 7,642,643  |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 7,642,643  |                |   | $ | 2,102,837 |   |   | $ | 9,745,480 |   |

----

|                                                         |   | Ecosphere EnergyServices LLC |      |   | Ecosphere Energy Services, Inc. |   |       | Ecosphere Systems, Inc. |   |   | Ecosphere Envirobotic Solutions, Inc. |   |   | Segment Totals |    |   | Corporate |   |      | Consolidated Totals |   |
|--------------------------------------------------------------|--------|------------------------------|-----------|--------|---------------------------------|--------|------------|-------------------------|--------|--------|---------------------------------------|--------|--------|---------------------|---------|--------|-----------|--------|-----------|---------------------|--------|
|                                                         |   |                         |      |   |                            |   |       |                    |   |   |                                  |   |   |                |    |   |      |   |      |                |   |
| Revenue from external customers                              |   | $                            | 310,555   |   |                            | $      | 394,830    |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 705,385   |                |   | $ | — |   |   | $ | 705,385 |   |
| Interest expense and amortization of debt discount           |   | $                            | (127,909  | )      |                            | $      | —    |                    |   | $      | -                                     |   |   | $                   | — |   |      | $      | (127,909  | )                   |   | $ | (4,528,878 | ) |   | $ | (4,656,787 | ) |
| Change in fair value of liability for derivative instruments |   | $                            | —   |   |                            | $      | —    |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | —   |                |   | $ | (3,565,592 | ) |   | $ | (3,565,592 | ) |
| Depreciation and amortization                                |   | $                            | (93,108   | )      |                            | $      | (194,455   | )                       |   | $      | (85,692                               | )      |   | $                   | (808    | )      |      | $      | (374,063  | )                   |   | $ | (64,486 | ) |   | $ | (438,549 | ) |
| Income tax expense                                           |   | $                            | —   |   |                            | $      | —    |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | —   |                |   | $ | — |   |   | $ | — |   |
| Net income (loss)                                            |   | $                            | (268,531  | )      |                            | $      | (277,840   | )                       |   | $      | (85,692                               | )      |   | $                   | (7,762  | )      |      | $      | (639,825  | )                   |   | $ | (15,556,541 | ) |   | $ | (16,196,366 | ) |
|                                                         |   |                         |      |   |                            |   |       |                    |   |   |                                  |   |   |                |    |   |      |   |      |                |   |   |   |   |   |   |   |   |
| Segment fixed assets & construction in process           |   | $                            | 2,193,665 |   |                            | $      | —    |                    |   | $      | 865,375                               |   |   | $                   | 25,375  |   |      | $      | 3,084,415 |                |   | $ | 3,991,591 |   |   | $ | 7,076,006 |   |
| Fixed asset additions (disposals) (net)                      |   | $                            | 1,653,818 |   |                            | $      | (1,626,055 | )                       |   | $      | —                               |   |   | $                   | — |   |      | $      | 27,763    |                |   | $ | 32,580 |   |   | $ | 60,343 |   |
| Total Assets                                                 |   | $                            | 1,913,176 |   |                            | $      | —    |                    |   | $      | 221,451                               |   |   | $                   | 6,390   |   |      | $      | 2,141,017 |                |   | $ | 3,611,492 |   |   | $ | 5,752,509 |   |

|                                                         |   | Ecosphere EnergyServices LLC |      |   | Ecosphere Energy Services, Inc. |   |    | Ecosphere Systems, Inc. |   |   | Ecosphere Envirobotic Solutions, Inc. |   |   | Segment Totals |    |   | Corporate |   |       | Consolidated Totals |   |
|--------------------------------------------------------------|--------|------------------------------|-----------|--------|---------------------------------|--------|---------|-------------------------|--------|--------|---------------------------------------|--------|--------|---------------------|---------|--------|-----------|--------|------------|---------------------|--------|
|                                                         |   |                         |      |   |                            |   |    |                    |   |   |                                  |   |   |                |    |   |      |   |       |                |   |
| Revenue from external customers                              |   | $                            | 2,188,534 |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 2,188,534  |                |   | $ | — |   |   | $ | 2,188,534 |   |
| Interest expense and amortization of debt discount           |   | $                            | (100,391  | )      |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | (100,391   | )                   |   | $ | (227,003 | ) |   | $ | (327,394 | ) |
| Change in fair value of liability for derivative instruments |   | $                            | —   |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | —    |                |   | $ | 1,203,883 |   |   | $ | 1,203,883 |   |
| Asset impairment                                             |   | $                            | —   |   |                            | $      | — |                    |   | $      | (116,000                              | )      |   | $                   | — |   |      | $      | (116,000   | )                   |   | $ | — |   |   | $ | (116,000 | ) |
| Depreciation and amortization                                |   | $                            | (472,512  | )      |                            | $      | — |                    |   | $      | (17,706                               | )      |   | $                   | (490    | )      |      | $      | (490,708   | )                   |   | $ | (19,310 | ) |   | $ | (510,018 | ) |
| Income tax expense                                           |   | $                            | —   |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | -          |                |   | $ | — |   |   | $ | — |   |
| Net income (loss)                                            |   | $                            | (165,665  | )      |                            | $      | — |                    |   | $      | (123,706                              | )      |   | $                   | (490    | )      |      | $      | (289,861   | )                   |   | $ | (315,543 | ) |   | $ | (605,404 | ) |
|                                                         |   |                         |      |   |                            |   |    |                    |   |   |                                  |   |   |                |    |   |      |   |       |                |   |   |   |   |   |   |   |   |
| Segment fixed assets & construction in process           |   | $                            | 9,878,437 |   |                            | $      | — |                    |   | $      | 865,375                               |   |   | $                   | 25,824  |   |      | $      | 10,769,636 |                |   | $ | 1,562,027 |   |   | $ | 12,331,663 |   |
| Fixed asset additions (disposals) (net)                      |   | $                            | 1,391,327 |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 1,391,327  |                |   | $ | (22,506 | ) |   | $ | 1,368,821 |   |
| Total Assets                                                 |   | $                            | 7,642,643 |   |                            | $      | — |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 7,642,643  |                |   | $ | 2,102,837 |   |   | $ | 9,745,480 |   |

----

|                                                         |   | Ecosphere EnergyServices LLC |      |   | Ecosphere Energy Services, Inc. |   |       | Ecosphere Systems, Inc. |   |   | Ecosphere Envirobotic Solutions, Inc. |   |   | Segment Totals |    |   | Corporate |   |      | Consolidated Totals |   |
|--------------------------------------------------------------|--------|------------------------------|-----------|--------|---------------------------------|--------|------------|-------------------------|--------|--------|---------------------------------------|--------|--------|---------------------|---------|--------|-----------|--------|-----------|---------------------|--------|
|                                                         |   |                         |      |   |                            |   |       |                    |   |   |                                  |   |   |                |    |   |      |   |      |                |   |
| Revenue from external customers                              |   | $                            | 310,555   |   |                            | $      | 46,521     |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | 357,076   |                |   | $ | — |   |   | $ | 357,076 |   |
| Interest expense and amortization of debt discount           |   | $                            | (127,909  | )      |                            | $      | —    |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | (127,909  | )                   |   | $ | (527,736 | ) |   | $ | (655,645 | ) |
| Change in fair value of liability for derivative instruments |   | $                            | —   |   |                            | $      | —    |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | —   |                |   | $ | 2,173,567 |   |   | $ | 2,173,567 |   |
| Depreciation and amortization                                |   | $                            | (93,108   | )      |                            | $      | (33,433    | )                       |   | $      | (28,564                               | )      |   | $                   | (245    | )      |      | $      | (155,350  | )                   |   | $ | (33,738 | ) |   | $ | (189,088 | ) |
| Income tax expense                                           |   | $                            | —   |   |                            | $      | —    |                    |   | $      | —                               |   |   | $                   | — |   |      | $      | —   |                |   | $ | — |   |   | $ | — |   |
| Net income (loss)                                            |   | $                            | (268,531  | )      |                            | $      | (28,363    | )                       |   | $      | (28,564                               | )      |   | $                   | (245    | )      |      | $      | (325,703  | )                   |   | $ | (499,171 | ) |   | $ | (824,874 | ) |
|                                                         |   |                         |      |   |                            |   |       |                    |   |   |                                  |   |   |                |    |   |      |   |      |                |   |   |   |   |   |   |   |   |
| Segment fixed assets & construction in process           |   | $                            | 2,193,665 |   |                            | $      | —    |                    |   | $      | 865375                                |   |   | $                   | 25,824  |   |      | $      | 3,084,864 |                |   | $ | 3,991,591 |   |   | $ | 7,076,455 |   |
| Fixed asset additions (disposals) (net)                      |   | $                            | 1,653,818 |   |                            | $      | (1,626,055 | )                       |   | $      | —                               |   |   | $                   | — |   |      | $      | 27,763    |                |   | $ | 29,410 |   |   | $ | 57,173 |   |
| Total Assets                                                 |   | $                            | 1,913,176 |   |                            | $      | —    |                    |   | $      | 221,451                               |   |   | $                   | 6,390   |   |      | $      | 2,141,017 |                |   | $ | 3,611,492 |   |   | $ | 5,752,509 |   |

----

----

----

| ●    | As evidence that the Ecosphere Ozonix® process is breakthrough technology, we received three patents for our Ecosphere Ozonix® process from the U.S Patent and Trademark Office under the new Green Tech Fast Track program. Patent numbers 7,699,994, 7,699,988 and 7,785,470. |
|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | Our revenues of $2.1 million for the first quarter and $2.1 million for the second quarter and $2.2 million for the third quarter  were records for operating revenues in any quarter, a 981% increase compared to the first quarter of 2009, a 1,288% increase compared to the second quarter of 2009 and a 513% increase compared to the third quarter of 2009. |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ●    | In January and February we performed paid pilot programs for British Petroleum in Wyoming and for Southwestern Energy in Arkansas. |
|---------------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ●    | We converted all of our remaining convertible debt, a reduction of $2.5 million since December 31, 2009 |
|---------------------------|---------------------------------------------------------------------------------------------------------|

| ●          | We filed additional patents for applying our Ecosphere Ozonix® technology using our Ecosphere Oxonix® technology to raise oil in a concentrated column of ozonated bubbles from below the surface of the ocean. |
|---------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                            |                                                                                                                                                                                                                           |
| ●          | The Company deployed personnel and equipment to the Gulf in an attempt to secure a contract. See further discussion on page 34.                                                                                           |
| ●     |  In August, we signed a new 13 month agreement to process frac flowback water for a subsidiary of Newfield Explorations for a monthly flat fee.                                                                           |

----

----

|                                                                                                       |   | For the Three Months Ended September 30, 2010 |       |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|
|                                                                                                       |   | 2010                                               |       |   | 2009 |   |   |  $ |   |   |   | % |   |
|                                                                                                       |   |                                               |       |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                                                                   |   | $                                                  | 2,188,534  |   |   | $ | 357,076 |   |   | $ | 1,831,458 |   |   |   | 513 | % |
| Cost of revenues                                                                                           |   |                                               | 1,002,796  |   |   |   | 136,257 |   |   |   | 866,539 |   |   |   | 636 | % |
| Gross profit                                                                                               |   |                                               | 1,185,738  |   |   |   | 220,819 |   |   |   | 964,919 |   |   |   | 437 | % |
| Operating expenses                                                                                         |   |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Salaries and employee benefits                                   |   |                                               | 1,447,248  |   |   |   | 1,914,578 |   |   |   | (467,330 | ) |   |   | -24 | % |
|        Administrative and selling                                       |   |                                               | 375,478    |   |   |   | 166,128 |   |   |   | 209,350 |   |   |   | 126 | % |
|        Professional fees                                                |   |                                               | 377,748    |   |   |   | 507,410 |   |   |   | (129,662 | ) |   |   | -26 | % |
|        Depreciation and amortization                                    |   |                                               | 510,018    |   |   |   | 185,500 |   |   |   | 324,518 |   |   |   | 175 | % |
|        Research and development                                         |   |                                               | 37,205     |   |   |   | 31,244 |   |   |   | 5,961 |   |   |   | 19 | % |
|            Total selling general and administrative |   |                                               | 2,747,697  |   |   |   | 2,804,860 |   |   |   | (57,163 | ) |   |   | -2 | % |
|        Impairment of assets                                             |   |                                               | 116,000    |   |   |   | - |   |   |   | 116,000 |   |   |   | 100 | % |
|        Restructuring charge                                             |   |                                               | 50,000     |   |   |   | - |   |   |   | 50,000 |   |   |   | 100 | % |
| Total operating expenses                                                                                   |   |                                               | 2,913,697  |   |   |   | 2,804,860 |   |   |   | (7,163 | ) |   |   | 0 | % |
| Loss from operations                                                                                       |   |                                               | (1,727,959 | ) |   |   | (2,584,041 | ) |   |   | 856,082 |   |   |   | 62 | % |
| Other income (expense):                                                                                    |   |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Other income (expense)                                                                         |   |                                               | 31         |   |   |   | 2 |   |   |   | 29 |   |   |   | -1450 | % |
|   Gain (loss) on conversion, net                                                                 |   |                                               | 12,524     |   |   |   | (27,288 | ) |   |   | 39,812 |   |   |   | 146 | % |
|   Interest expense                                                                               |   |                                               | (93,883    | ) |   |   | (655,645 | ) |   |   | 561,762 |   |   |   | 86 | % |
|         Change in fair value of derivative instruments             |   |                                               | 1,203,883  |   |   |   | 2,173,567 |   |   |   | (969,684 | ) |   |   | 81 | % |
| Total other income (expense)                                                                               |   |                                               | 1,122,555  |   |   |   | 1,490,636 |   |   |   | (368,081 | ) |   |   | -25 | % |
| Net (loss) income                                                                                          |   |                                               | (605,404   | ) |   |   | (1,093,405 | ) |   |   | 488,001 |   |   |   | 45 | % |
| Preferred stock dividends                                                                                  |   |                                               | 26,000     |   |   |   | 30,000 |   |   |   | 4,000 |   |   |   | -13 | % |
| Net income (loss) applicable to common stock                                                               |   |                                               | (631,404   | ) |   |   | (1,123,405 | ) |   |   | 492,001 |   |   |   | 44 | % |
| Net (income) loss applicable to noncontrolling interest of consolidated subsidiary                         |   |                                               | 135,665    |   |   |   | 268,531 |   |   |   | (132,866 | ) |   |   | -98 | % |
| Net income (loss) applicable to Ecosphere Technologies, Inc. common stock                                  |   | $                                                  | (495,739   | ) |   | $ | (854,874 | ) |   | $ | 359,135 |   |   |   | 42 | % |

----

----

----

|                                                                                                       |   | For the Nine Months Ended September 30, 2010 |        |
|------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-------------|
|                                                                                                       |   |                                         |        |   |   |   |   | Change |   |
|                                                                                                       |   | 2010                                         |        |   | 2009 |   |   |  $ |   |   |   | % |   |
|                                                                                                       |   |                                         |        |   |   |   |   |   |   |   |   |   |   |
| Revenues                                                                                                   |   | $                                            | 6,427,787   |   |   | $ | 705,385 |   |   | $ | 5,722,402 |   |   |   | 811 | % |
| Cost of revenues                                                                                           |   |                                         | 2,541,566   |   |   |   | 391,006 |   |   |   | 2,150,560 |   |   |   | 550 | % |
| Gross profit                                                                                               |   |                                         | 3,886,221   |   |   |   | 314,379 |   |   |   | 3,571,842 |   |   |   | 1136 | % |
| Operating expenses                                                                                         |   |                                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Salaries and employee benefits                                   |   |                                         | 4,949,593   |   |   |   | 5,134,875 |   |   |   | (185,282 | ) |   |   | -4 | % |
|        Administrative and selling                                       |   |                                         | 1,299,676   |   |   |   | 734,076 |   |   |   | 565,600 |   |   |   | 77 | % |
|        Professional fees                                                |   |                                         | 826,535     |   |   |   | 943,128 |   |   |   | (116,593 | ) |   |   | -12 | % |
|        Depreciation and amortization                                    |   |                                         | 1,432,363   |   |   |   | 438,549 |   |   |   | 993,814 |   |   |   | 227 | % |
|        Research and development                                         |   |                                         | 126,940     |   |   |   | 42,794 |   |   |   | 84,146 |   |   |   | 197 | % |
|            Total selling general and administrative |   |                                         | 8,635,107   |   |   |   | 7,293,422 |   |   |   | 1,341,685 |   |   |   | 18 | % |
|        Impairment of assets                                             |   |                                         | 116,000     |   |   |   | - |   |   |   | 116,000 |   |   |   | 100 | % |
|        Restructuring charge                                             |   |                                         | 50,000      |   |   |   | 548,090 |   |   |   | (498,090 | ) |   |   | -91 | % |
| Total operating expenses                                                                                   |   |                                         | 8,801,107   |   |   |   | 7,841,512 |   |   |   | 843,595 |   |   |   | 11 | % |
| Loss from operations                                                                                       |   |                                         | (4,914,886  | ) |   |   | (7,527,133 | ) |   |   | 2,612,247 |   |   |   | 35 | % |
| Other income (expense):                                                                                    |   |                                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Other income (expense):                                                                        |   |                                         | 273         |   |   |   | 1,153 |   |   |   | (880 | ) |   |   | 76 | % |
|   Gain (loss) on conversion, net                                                                 |   |                                         | (121,080    | ) |   |   | (716,538 | ) |   |   | 595,458 |   |   |   | 83 | % |
|   Interest expense                                                                               |   |                                         | (939,213    | ) |   |   | (4,656,787 | ) |   |   | 3,717,574 |   |   |   | 80 | % |
|         Change in fair value of derivative instruments             |   |                                         | (12,831,356 | ) |   |   | (3,565,592 | ) |   |   | (9,265,764 | ) |   |   | -72 | % |
| Total other income (expense)                                                                               |   |                                         | (13,891,376 | ) |   |   | (8,937,764 | ) |   |   | (4,953,612 | ) |   |   | 55 | % |
| Net (loss) income                                                                                          |   |                                         | (18,806,262 | ) |   |   | (16,464,897 | ) |   |   | (2,341,365 | ) |   |   | -14 | % |
| Preferred stock dividends                                                                                  |   |                                         | 79,750      |   |   |   | 90,000 |   |   |   | 10,250 |   |   |   | -11 | % |
| Net income (loss) applicable to common stock                                                               |   |                                         | (18,886,012 | ) |   |   | (16,554,897 | ) |   |   | (2,331,115 | ) |   |   | -14 | % |
| Net (income) loss applicable to noncontrolling interest of consolidated subsidiary                         |   |                                         | (57,045     | ) |   |   | 268,531 |   |   |   | (325,576 | ) |   |   | 571 | % |
| Net income (loss) applicable to Ecosphere Technologies, Inc. common stock                                  |   | $                                            | (18,943,057 | ) |   | $ | (16,286,366 | ) |   | $ | (2,656,691 | ) |   |   | -16 | % |

----

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| Name or Class of Investor  | Date Sold                  | No. of Securities                                                                        | Consideration                                    |
|---------------------------------|----------------------------|-----------------------------------------------------------------------------------------------|--------------------------------------------------|
| Warrant Holders (1)             | 7/1/2010 & 7/14/2010   | 35,000 shares of common stock                                                                 | Exercise of warrants at $0.07 per share          |
| Warrant Holders (2)             | 7/7/2010 through 7/22/2010 | 541,852 shares of common stock                                                                | Cashless exercise of warrants at $0.15 per share |
| Warrant Holder (2)              | 7/7/2010                   | 123,750 shares of common stock                                                                | Cashless exercise of warrants at $0.25 per share |
| Warrant Holder (2)              | 7/22/2010                  | 25,200 shares of common stock                                                                 | Cashless exercise of warrants at $0.20 per share |
| Private Placement Investors (1) | 7/23/2010 and 9/7/2010     | 707,792 shares of common stock and 353,898 three-year warrants exercisable at $1.00 per share | Investment of $545,000 in private placement      |
| Series B Holder (2)             | 8/20/2010                  | 3,340 shares of common stock                                                                  | Conversion of four shares of Series B            |

----

| Exhibit |   |                                                                                    |   | Incorporated by Reference |   | Filed or Furnished |
|---------|--------|-----------------------------------------------------------------------------------------|--------|---------------------------|--------|--------------------|
| No.     |   | Exhibit Description                                                                     |   | Form                      |   | Date               |   | Number |   | Herewith |
|    |   |                                                                                    |   |                      |   |               |   |   |   |   |
| 3.1     |   | Certificate of Incorporation                                                            |   | 10-QSB                    |   | 12/11/06           |   |   | 3.1 |   |   |
| 3.2     |   | Certificate of Amendment                                                                |   | 10-K                      |   | 3/25/09            |   |   | 3.2 |   |   |
| 3.3     |   | Certificate of Correction                                                               |   | 10-K                      |   | 3/25/09            |   |   | 3.3 |   |   |
| 3.4     |   | Bylaws                                                                                  |   | 10-QSB                    |   | 12/11/06           |   |   | 3.2 |   |   |
| 3.5     |   | Amendment to the Bylaws adopted June 17, 2008                                           |   | 10-Q                      |   | 11/13/08           |   |   | 3.3 |   |   |
| 3.6     |   | Amendment to the Bylaws adopted August 12, 2010                                         |   | 10-Q                      |   |  8/16/10      |   |   | 3.6 |   |   |
| 10.1    |   | Amended and Restated 2006 Equity Incentive Plan                                         |   | 10-Q                      |   |  8/16/10      |   |   | 10.1 |   |   |
| 10.2    |   | Secured Line of Credit Agreement dated May 12, 2008                                     |   | 10-Q                      |   | 11/13/08           |   |   | 10.1 |   |   |
| 10.3    |   | Secured Line of Credit Agreement dated August 28, 2008                                  |   | 10-Q                      |   | 11/13/08           |   |   | 10.2 |   |   |
| 10.4    |   | Summary of Vinick Employment Arrangement*                                               |   |                      |   |               |   |   |   |   | Filed |
| 10.5    |   | Form of Director Restricted Stock Agreement dated July 1, 2010                          |   |                      |   |               |   |   |   |   | Filed |
| 10.6    |   | Form of Director Option Agreement dated July 1, 2010                                    |   |                      |   |               |   |   |   |   | Filed |
| 10.7    |   | Southwestern Energy Services Agreement**                                                |   | 10-Q                      |   |  8/16/10      |   |   | 10.16 |   |   |
| 10.8    |   | Newfield Exploration Services Agreement **                                              |   | 10-Q                      |   |  8/16/10      |   |   |   10.17 |   |   |
| 10.9    |   | Summary of McGuire Option Agreement*                                                    |   |                      |   |               |   |   |   |   | Filed |
| 10.10   |   | Assignments of Technology                                                               |   |                      |   |               |   |   |   |   | Filed |
| 31.1    |   | Certification of Principal Executive Officer (Section 302)                         |   |                      |   |               |   |   |   |   | Filed |
| 31.2    |   | Certification of Principal Financial Officer (Section 302)                         |   |                      |   |               |   |   |   |   | Filed |
| 32.1    |   | Certification of Chief Executive Officer and Chief Financial Officer (Section 906) |   |                      |   |               |   |   |   |   | Furnished |

----

|              |         | ECOSPHERE TECHNOLOGIES, INC.                         |   |
|-------------------|--------------|------------------------------------------------------|--------|
|              |         |                                                 |   |
| November 22, 2010 |    | /s/ Dennis McGuire                              |   |
|              |         | Dennis McGuire                                       |   |
|              |         | Chief Executive Officer(Principal Executive Officer) |   |
|              |         |                                                 |   |
| November 22, 2010 |         | /s/ Adrian Goldfarb                             |   |
|              |         | Adrian Goldfarb                                      |   |
|              |         | Chief Financial Officer(Principal Financial Officer) |   |