| Florida                                        | 0-27574                  | 59-3350778                              |
|------------------------------------------------|--------------------------|-----------------------------------------|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |

|   | Large accelerated filer o | Accelerated filer o         |
|--------|---------------------------|-----------------------------|
|   | Non-accelerated filer o   | Smaller reporting company x |

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Table of Contents

|    |                                                                                             | Page   |
|--------------|--------------------------------------------------------------------------------------------------|--------|
|         | Explanatory Note                                                                            |   |
| PART I       |
|         |                                                                                             |   |
| Item 1.      | Business.                                                                                        | 4      |
|         |                                                                                             |   |
| Item 1A.     | Risk Factors.                                                                                    | 9      |
|         |                                                                                             |   |
| Item 1B.     | Unresolved Staff Comments.                                                                       | 17     |
|         |                                                                                             |   |
| Item 2.      | Properties.                                                                                      | 17     |
|         |                                                                                             |   |
| Item 3.      | Legal Proceedings.                                                                               | 17     |
|         |                                                                                             |   |
| Item 4.      | (Removed and Reserved).                                                                          | 17     |
|         |                                                                                             |   |
| PART II      |
|         |                                                                                             |   |
| Item 5.      | Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. | 18     |
|         |                                                                                             |   |
| Item 6.      | Selected Financial Data.                                                                         | 19     |
|         |                                                                                             |   |
| Item 7.      | Management’s Discussion and Analysis of Financial Condition and Results of Operations.     | 19     |
|         |                                                                                             |   |
| Item 7A.     | Quantitative and Qualitative Disclosures About Market Risk.                                      | 24     |
|         |                                                                                             |   |
| Item 8.      | Financial Statements and supplementary Data.                                                     | 24     |
|         |                                                                                             |   |
| Item 9.      | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.            | 26     |
|         |                                                                                             |   |
| Item 9A.     | Controls and Procedures.                                                                         | 26     |
|         |                                                                                             |   |
| Item 9B.     | Other Information.                                                                               | 27     |
|         |                                                                                             |   |
| PART III     |
|         |                                                                                             |   |
| Item 10.     | Directors, Executive Officers, and Corporate Governance.                                         | 28     |
|         |                                                                                             |   |
| Item 11.     | Executive Compensation.                                                                          | 30     |
|         |                                                                                             |   |
| Item 12.     | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.  | 31     |
|         |                                                                                             |   |
| Item 13.     | Certain Relationships and Related Transactions, and Director Independence.                       | 32     |
|         |                                                                                             |   |
| Item 14.     | Principal Accountant Fees and Services.                                                          | 32     |
|         |                                                                                             |   |
| PART IV      |
|         |                                                                                             |   |
| Item 15.     | Exhibits, Financial Statement Schedules.                                                         | 32     |

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----

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

| ·   | Many observers believe consumers are not willing to “pay” for internet or any other radio service.  More accurately, they will never “pay” for radio service or the numbers of consumers that will pay are finite.  Management believes these views about the market are incorrect.  Radioio believes consumers will pay for premium, more compelling, or proprietary exclusive content if internet radio actually provides a superior listening alternative and/or has a true interactive experience with its consumers.   Properly marketed and distributed, premium paid internet radio would be able to attract significantly more listeners.  Both the belief that people won’t pay and that the market is small and finite are disproven by the popularity of satellite radio and Sirus/XM’s ability to attract in excess of 21+ million subscribers on what management believes is a significantly inferior and much more restrictive delivery platform than Radioio’s.   Radioio’s management believes that these numbers can be dramatically increased and, with superior exclusive programming and interactive functionality coupled with an aggressive marketing plan, it can grow and compete for these consumers spending dollars. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | Internet Radio and Radioio have a distinct advantage over both terrestrial and satellite radio by providing two way interactive communication with its listeners.  This two-way communication provides listening data metrics and preferences along with interactive experiences with listeners, setting it apart from both terrestrial and satellite radio.  Terrestrial and satellite radio require special receivers that capture the distributed signals sent from the distribution point.  Neither terrestrial nor satellite providers have any real time accurate way of knowing who is listening nor to what or how long they are listening as that distribution and information sharing is one-way, from the distribution point to the receiver.  The receiver sends no data and has no way of communicating back anything even to the extent that it is on. Internet radio operators, on the other hand, can acquire information regarding who is listening to what, when and for how long.  In turn, they can data mine information about that listener which provides an interactivity that is not possible with terrestrial and satellite radio. Listeners may download and purchase music made available on their desired Radioio “station” as they are listened to. They may buy other related products and can register opinions and interact with all the major social networking interfaces including Facebook, MySpace and Twitter about what they hear and how it relates to them and their social network.  Radioio also provides forums regarding other commentary that creates a community for its listeners to participate in and define their lifestyle.  This interactive two way communication provides demographic and geographic targeting data about its listening audience and preference that can be accessed in real time-thus making internet radio and specifically Radioio far more dynamic and interactive as a content distribution medium than the general public may know or believe, and we believe this makes it more valuable to advertisers |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Consumer oriented listening stations.  Here, there are three basic packages/three different prices for three levels of music service: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | For $0.99 a month, or $9.99 for a yearlong subscription, listeners are provided with 52 channels of 128kbps, 64kbps or 32kbps music that is supported by advertising. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | For $4.99 a month, or $49.99 for a yearlong subscription, listeners receive 52 channels of pre-selected and 3 channels of holiday channels all delivered in ad-free, 128kbps, 64kbps or 32kbps format. In addition, subscribers have access to customer & technical support, access to the “iocommunity”, the ability to set favorite “io channel presets”, the ability to rate songs, the ability to buy music that you hear, and even tweet different songs. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | The Audiophile Package, which sells for $9.99 per month, or $99.99 per yearlong subscription, provides the 52 basic and 3 holiday ad-free channels in 192kbps, 128kbps, 64kbps or 32kbps delivery streams plus 25 audiophile only streams in interruption-free channels also available in all bit rates including 192kbps high-fidelity quality delivery streams.  One also receives the necessary device application to support the delivery of the music on either mobile or desk-top players. And, there is access to technical support, to the “io community”, to set favorite “io channel presets” plus the ability to rate songs, buy music you hear and want to save, and to tweet songs. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | There is free access offered whereby users can receive all 55 channels of ad-supported internet radio that can be listened to just about anywhere.  These free streams are only available free at 32kbps and 64kbps. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| (1)   | No inappropriate content, ever. The client will never have to worry about any inappropriate content, whether in music or messages. The io4business music programming package is specific, commercial-free, and always appropriate for the business, because it’s completely focused on the client’s brand and if a change is necessary it is made real-time and updated immediately. If management from a client wants a specific artist and all of their material removed from their custom stream due to as an example poor behavior in the public eye that they don’t want their brand associated with in any way it can be removed in minutes. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | All music licensing is included. The client will never have to worry about receiving fines for playing music unlawfully in their business.  io4business takes care of all BMI, ASCAP, SESAC, and Sound Exchange fees for you. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | It’s just easier! After the client plugs it in, they point and click the remote, and that’s it – a truly convenient business music solution.  |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

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

| ·   | our relatively new, evolving and unproven business model; |
|--------------------|-----------------------------------------------------------|

| ·   | our ability to retain our current listenership, build our listener base and increase listener hours; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | our ability to effectively monetize listener hours, particularly with respect to listener hours on mobile devices; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | our ability to attract new advertisers, retain existing advertisers and prove to advertisers that our advertising platform is effective enough to justify a pricing structure that is profitable for us; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our ability to maintain relationships with makers of mobile devices, consumer electronic products and automobiles; and |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | our operation under an evolving music industry licensing structure that may change or cease to exist, which in turn may result in a significant increase in our operating expenses. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | whether the Company can attract and retain enough subscribers to Radioio; |
|--------------------|---------------------------------------------------------------------------|

| ·   | whether the Company can adequately control the costs of obtaining and retaining subscribers and programming; |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | whether the Company can compete successfully; and |
|--------------------|---------------------------------------------------|

| ·   | whether the Company can obtain and retain sufficient advertising revenues and other sources of income from its operations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

----

| ·   | increasing the number of listener hours; |
|--------------------|------------------------------------------|

| ·   | keeping pace with changes in technology and our competitors; |
|--------------------|--------------------------------------------------------------|

| ·   | competing effectively for advertising dollars from other online marketing and media companies; |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | penetrating the market for local radio advertising; |
|--------------------|-----------------------------------------------------|

| ·   | continuing to develop and diversify our advertisement platform, which currently includes delivery of display, audio and video advertising products through multiple delivery channels, including traditional computers, mobile and other connected devices, including automobiles; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | coping with ad blocking technologies that have been developed and are likely to continue to be developed that can block the display of our ads. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | providing listeners with a consistent high quality, user-friendly and personalized experience; |
|--------------------|------------------------------------------------------------------------------------------------|

| ·   | continuing to build our catalog of music content that our listeners enjoy; |
|--------------------|----------------------------------------------------------------------------|

| ·   | continuing to innovate and keep pace with changes in technology and our competitors; and |
|--------------------|------------------------------------------------------------------------------------------|

| ·   | maintaining and building our relationships with makers of consumer products such as mobile devices, other consumer electronic products and automobiles to make our service available through their products. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| ·   | our ability to retain our current listenership, build our listener base and increase listener hours; |
|--------------------|------------------------------------------------------------------------------------------------------|

| ·   | our ability to more effectively monetize mobile listener hours, particularly as the number of listener hours on mobile devices grow; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our ability to attract and retain existing advertisers and prove that our advertising products are effective enough to justify a pricing structure that is profitable for us; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | our ability to effectively manage our growth; |
|--------------------|-----------------------------------------------|

| ·   | our ability to continue to operate under the statutory licenses set forth in the Copyright Act; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | our ability to enjoy the benefit of rates negotiated below those established by the CRB in 2007; |
|--------------------|--------------------------------------------------------------------------------------------------|

| ·   | the effects of increased competition in our business; |
|--------------------|-------------------------------------------------------|

| ·   | our ability to keep pace with changes in technology and our competitors; |
|--------------------|--------------------------------------------------------------------------|

| ·   | interruptions in service, whether or not we are responsible for such interruptions, and any related impact on our reputation; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------|

| ·   | costs associated with defending any litigation, including intellectual property infringement litigation; |
|--------------------|----------------------------------------------------------------------------------------------------------|

| ·   | our ability to pursue, and the timing of, entry into new geographic or content markets and, if pursued, our management of this expansion; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | the impact of general economic conditions on our revenue and expenses; and |
|--------------------|----------------------------------------------------------------------------|

| ·   | changes in government regulation affecting our business. |
|--------------------|----------------------------------------------------------|

----

----

----

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

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

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

| Item 4.  | (Removed and Reserved). |
|---------------|-------------------------|

----

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

|                         |   | High   |   |   | Low    |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
| Year ended December 31, 2009 |   |   | .08    |   |   |   | .001 |   |
| 1st Quarter                  |   |   | .03    |   |   |   | .01 |   |
| 2nd Quarter                  |   |   | .07    |   |   |   | .01 |   |
| 3rd Quarter                  |   |   | .05    |   |   |   | .001 |   |
| 4th Quarter                  |   |   |   |   |   |   |   |   |
|                         |   |   |   |   |   |   |   |   |
| Year ended December 31, 2010 |   |   |   |   |   |   |   |   |
| 1st Quarter                  |   |   | .02    |   |   |   | .006 |   |
| 2nd Quarter                  |   |   | .07    |   |   |   | .01 |   |
| 3rd Quarter                  |   |   | .20    |   |   |   | .05 |   |
| 4th Quarter                  |   |   | .25    |   |   |   | .06 |   |

----

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

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

----

|                                   |   | Years ended December 31 |      |   |   |   |
|----------------------------------------|--------|-------------------------|-----------|--------|--------|--------|
|                                   |   | 2010                    |      |   | 2009   |   |   | % Change |   |
| Sales                                  |   | $                       | 841,120   |   |   | $      | 855,620 |   |   |   | (1.7 | )% |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                     |   |                    | 430,824   |   |   |   | 427,981 |   |   |   | 0.7 | % |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Gross profit                           |   |                    | 410,296   |   |   |   | 427,639 |   |   |   | (4.1 | )% |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Operating expenses:                    |   |                    |      |   |   |   |   |   |   |   |   |   |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative |   |                    | 1,194,150 |   |   |   | 1,449,380 |   |   |   | (17.6 | )% |
| Depreciation and amortization          |   |                    | 109,830   |   |   |   | 200,177 |   |   |   | (45.1 | )% |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Total expenses                         |   |                    | 1,303,980 |   |   |   | 1,649,557 |   |   |   | (20.9 | )% |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Net operating income                   |   |                    | (893,684  | )      |   |   | (1,221,918 | ) |   |   | (26.9 | )% |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Interest expense                       |   |                    | (27,147   | )      |   |   | (40,672 | ) |   |   | (33.3 | )% |
|                                   |   |                    |      |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes  |   |                    | (920,831  | )      |   |   | (1,262,590 | ) |   |   | (27.1 | )% |

----

----

|                                   |   | Years ended December 31 |       |   |   |   |
|----------------------------------------|--------|-------------------------|------------|--------|--------|--------|
|                                   |   | 2009                    |       |   | 2008   |   |   | % Change |   |
| Sales                                  |   | $                       | 855,620    |   |   | $      | 226,661 |   |   |   | 277.5 | % |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                     |   |                    | 427,981    |   |   |   | 18,992 |   |   |   | 2,153.5 | % |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Gross profit                           |   |                    | 427,639    |   |   |   | 207,669 |   |   |   | 105.9 | % |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Operating expenses:                    |   |                    |       |   |   |   |   |   |   |   |   |   |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative |   |                    | 1,449,380  |   |   |   | 2,946,824 |   |   |   | (50.8 | )% |
| Depreciation and amortization          |   |                    | 200,177    |   |   |   | 326,665 |   |   |   | (38.7 | )% |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Total expenses                         |   |                    | 1,649,557  |   |   |   | 3,273,489 |   |   |   | (49.6 | )% |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Net operating income                   |   |                    | (1,221,918 | )      |   |   | (3,065,820 | ) |   |   | (60.1 | )% |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Interest expense                       |   |                    | (40,672    | )      |   |   | (42,186 | ) |   |   | (3.6 | )% |
|                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes  |   | $                       | (1,262,590 | )      |   | $      | (3,108,006 | ) |   |   | (59.4 | )% |

----

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

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

----

|                                                                                                          | Page   |
|---------------------------------------------------------------------------------------------------------------|--------|
| Report of Independent Registered Public Accounting Firm                                                       | F-1    |
|                                                                                                          |   |
| Balance Sheet for the Years Ended December 31, 2010, 2009, 2008, 2007, 2006 and 2005                          | F-2    |
|                                                                                                          |   |
| Statements of Operations for the Years Ended December 31, 2010, 2009, 2008, 2007, 2006 and 2005               | F-3    |
|                                                                                                          |   |
| Balance Sheets for the Years Ended December 31, 2010 and 2009                                                 | F-4    |
|                                                                                                          |   |
| Statements of Operations for the Years Ended December 31, 2010 and 2009                                       | F-5    |
|                                                                                                          |   |
| Statements of Shareholders’ Equity for the Years Ended December, 2005, 2006, 2007 , 2008, 2009 and 2010 | F-6    |
|                                                                                                          |   |
| Statements of Cash Flows for the Years Ended December 31, 2010, 2009, 2008, 2007, 2006 and 2005               | F-7    |
|                                                                                                          |   |
| Notes to Consolidated Financial Statements                                                                    | F-8    |
|                                                                                                          |   |

----

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| IOWORLDMEDIA, INCORPORATED AND SUBSIDIARIES                                                                                                                                                                                                                                     |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Balance Sheet                                                                                                                                                                                                                                                                   |   |
| For the Years Ended December 31, 2010, 2009, 2008, 2007, 2006 and 2005                                                                                                                                                                                                          |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   | 2010 |   |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                                                                                                                                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                                                                                                                                                                                                            |   | $ | 2,057 |   |   | $ | 5,085 |   |   | $ | (5,730 | ) |   | $ | 94,043 |   |   | $ | 39,536 |   |   | $ | (33,943 | ) |
| Accounts receivable                                                                                                                                                                                                                                                             |   |   |   |   |   |   | 6,269 |   |   |   | (6,686 | ) |   |   | 8,000 |   |   |   |   |   |   |   | 16,827 |   |
| Prepaid expense                                                                                                                                                                                                                                                                 |   |   | 1,500 |   |   |   | 597 |   |   |   | 1,492 |   |   |   | 596 |   |   |   | 1,492 |   |   |   |   |   |
| Accrued revenue                                                                                                                                                                                                                                                                 |   |   | 17,899 |   |   |   | - |   |   |   | 248 |   |   |   | 622 |   |   |   | 14,872 |   |   |   | 1,285 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current assets                                                                                                                                                                                                                                                            |   |   | 21,456 |   |   |   | 11,951 |   |   |   | (10,676 | ) |   |   | 103,261 |   |   |   | 55,900 |   |   |   | (15,831 | ) |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation                                                                                                                                                                                                                         |   |   | 88,966 |   |   |   | 161,601 |   |   |   | 234,236 |   |   |   | 306,871 |   |   |   | 15,258 |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                                                                                                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intellectual Property Intangible, net of accumulated amortization                                                                                                                                                                                                               |   |   |   |   |   |   | 37,195 |   |   |   | 164,737 |   |   |   | 418,766 |   |   |   | 672,796 |   |   |   | 926,825 |   |
| Acquisition Intangibles, net of impairment                                                                                                                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 1,055,352 |   |   |   | 2,561,294 |   |   |   | 2,561,295 |   |
| Security deposit                                                                                                                                                                                                                                                                |   |   | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other assets                                                                                                                                                                                                                                                              |   |   | 1,046 |   |   |   | 38,241 |   |   |   | 165,783 |   |   |   | 1,475,164 |   |   |   | 3,234,090 |   |   |   | 3,488,120 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                                                                                                                                                                                                    |   | $ | 111,468 |   |   | $ | 211,793 |   |   | $ | 389,343 |   |   | $ | 1,885,296 |   |   | $ | 3,305,248 |   |   | $ | 3,472,289 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                                                                                                                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Note payable related party shareholders                                                                                                                                                                                                                                         |   |   | 5,403,794 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Note payable                                                                                                                                                                                                                                                                    |   |   | 400,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current portion of capital lease payable                                                                                                                                                                                                                                        |   |   | 4,072 |   |   |   | 44,100 |   |   |   | 99,673 |   |   |   | 86,559 |   |   |   |   |   |   |   |   |   |
| Accounts payable and accrued expenses                                                                                                                                                                                                                                           |   |   | 983,896 |   |   |   | 816,166 |   |   |   | 534,931 |   |   |   | 287,320 |   |   |   | 373,212 |   |   |   | 841,293 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities                                                                                                                                                                                                                                                       |   |   | 6,791,762 |   |   |   | 860,266 |   |   |   | 634,604 |   |   |   | 373,878 |   |   |   | 373,212 |   |   |   | 841,293 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes payable related party shareholders                                                                                                                                                                                                                                        |   |   |   |   |   |   | 5,004,368 |   |   |   | 4,420,890 |   |   |   | 3,832,390 |   |   |   | 3,664,095 |   |   |   | 1,764,986 |   |
| Capital lease payable, net of current portion                                                                                                                                                                                                                                   |   |   |   |   |   |   | 4,072 |   |   |   | 48,172 |   |   |   | 147,845 |   |   |   |   |   |   |   |   |   |
| Note payable-long-term                                                                                                                                                                                                                                                          |   |   |   |   |   |   | 320,000 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                                                                                                                                                                                                                               |   |   | 6,791,762 |   |   |   | 6,188,706 |   |   |   | 5,103,666 |   |   |   | 4,354,113 |   |   |   | 4,037,307 |   |   |   | 2,606,279 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 250,000,000 and 90,000,000 shares authorized, 108,702,874, 86,957,874, 86,957,874, 75,707,874, shares issued and 44,640,307 and 36,189,537 shares issued and outstanding at December 31, 2010, 2009, 2008, 2007, 2006 and 2005 respectively |   |   | 108,803 |   |   |   | 87,058 |   |   |   | 87,058 |   |   |   | 75,808 |   |   |   | 44,741 |   |   |   | 36,290 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,                                                                                                                                                                                                                  |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |
| 25,000 shares issued and no shares outstanding                                                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Additional paid-in capital                                                                                                                                                                                                                                                      |   |   | 56,934,164 |   |   |   | 56,738,459 |   |   |   | 56,738,459 |   |   |   | 55,887,209 |   |   |   | 54,364,898 |   |   |   | 53,369,964 |   |
| Treasury stock,25,000 shares of preferred, at cost                                                                                                                                                                                                                              |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                                                                                                                                                                                                                                              |   |   | (63,697,355 | ) |   |   | (62,776,524 | ) |   |   | (61,513,934 | ) |   |   | (58,405,928 | ) |   |   | (55,115,792 | ) |   |   | (52,514,338 | ) |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                                                                                                                                                                                                                                      |   |   | (6,680,294 | ) |   |   | (5,976,913 | ) |   |   | (4,714,323 | ) |   |   | (2,468,817 | ) |   |   | (732,059 | ) |   |   | 866,010 |   |
|                                                                                                                                                                                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                                                                                                                                                                                                                      |   | $ | 111,468 |   |   | $ | 211,793 |   |   | $ | 389,343 |   |   | $ | 1,885,296 |   |   | $ | 3,305,248 |   |   | $ | 3,472,289 |   |

----

|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |
|---------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|
|                                        |   | 2010   |       |   | 2009   |   |       | 2008   |   |   | 2007       |   |   | 2006   |       |   | 2005   |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |
| Sales                                       |   | $      | 841,120    |   |   | $      | 855,620    |   |   | $      | 226,661    |   |   | $      | 231,607    |   |   | $      | 300,265 |   |   | $ | 21,880 |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Cost of  goods sold                    |   |   | 430,824    |   |   |   | 427,981    |   |   |   | 18,992     |   |   |   | 10,233     |   |   |   | 5,925 |   |   |   | 228 |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Gross profit                                |   |   | 410,296    |   |   |   | 427,639    |   |   |   | 207,669    |   |   |   | 221,374    |   |   |   | 294,340 |   |   |   | 21,652 |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Operating expenses:                         |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative      |   |   | 1,194,150  |   |   |   | 1,449,380  |   |   |   | 2,946,824  |   |   |   | 3,119,418  |   |   |   | 2,641,311 |   |   |   | 602,647 |   |
| Depreciation and amortization               |   |   | 109,830    |   |   |   | 200,177    |   |   |   | 326,665    |   |   |   | 309,881    |   |   |   | 254,483 |   |   |   | 21,169 |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Total expenses                              |   |   | 1,303,980  |   |   |   | 1,649,557  |   |   |   | 3,273,489  |   |   |   | 3,429,299  |   |   |   | 2,895,794 |   |   |   | 623,816 |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net operating income                        |   |   | (893,684   | )      |   |   | (1,221,918 | )      |   |   | (3,065,820 | )      |   |   | (3,207,925 | )      |   |   | (2,601,454 | ) |   |   | (602,164 | ) |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Other income (expense)                      |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                  |   |   | -          |   |   |   | -          |   |   |   | -          |   |   |   | -          |   |   |   | - |   |   |   | 82,605 |   |
| Interest expense                            |   |   | (27,147    | )      |   |   | (40,672    | )      |   |   | (42,186    | )      |   |   | (82,211    | )      |   |   | - |   |   |   | (27 | ) |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Total other income (expense)                |   |   | (27,147    | )      |   |   | (40,672    | )      |   |   | (42,186    | )      |   |   | (82,211    | )      |   |   | - |   |   |   | 82,578 |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes       |   |   | (920,831   | )      |   |   | (1,262,590 | )      |   |   | (3,108,006 | )      |   |   | (3,290,136 | )      |   |   | (2,601,454 | ) |   |   | (519,586 | ) |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                  |   |   | -          |   |   |   | -          |   |   |   | -          |   |   |   | -          |   |   |   | - |   |   |   | - |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net income (loss)                           |   | $      | (920,831   | )      |   | $      | (1,262,590 | )      |   | $      | (3,108,006 | )      |   | $      | (3,290,136 | )      |   | $      | (2,601,454 | ) |   | $ | (519,586 | ) |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Net loss per weighted share,                |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| basic and fully diluted                     |   | $      | (0.01      | )      |   | $      | (0.01      | )      |   | $      | (0.04      | )      |   | $      | (0.04      | )      |   | $      | (0.06 | ) |   | $ | (0.08 | ) |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
|                                        |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| Weighted average number of common           |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |   |   |   |   |
| shares outstanding, basic and fully diluted |   |   | 97,830,374 |   |   |   | 86,957,874 |   |   |   | 86,957,874 |   |   |   | 75,707,874 |   |   |   | 41,882,760 |   |   |   | 6,156,825 |   |

----

| IOWORLDMEDIA, INCORPORATED AND SUBSIDIARIES                       |    |
|-------------------------------------------------------------------|---------|
| Balance Sheets                                                    |    |
| For the Years Ended December 31, 2010 and 2009                    |    |
|                                                              |    |   |
|                                                              |    | December 31, |   |
|                                                              |    |   |   |   |   |   |
|                                                              |    | 2010 |   |   | 2009 |   |
|                                                              |    |   |   |   |   |   |
| ASSETS                                                            |    |   |   |
|                                                              |    |   |   |   |   |   |
| Current assets                                                    |    |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |
| Cash                                                              |    | $ | 2,057 |   |   | $ | 5,085 |   |
| Accounts receivable                                               |    |   |   |   |   |   | 6,269 |   |
| Prepaid expense                                                   |    |   | 1,500 |   |   |   | 597 |   |
| Accrued revenue                                                   |    |   | 17,899 |   |   |   | - |   |
|                                                              |    |   |   |   |   |   |   |   |
| Total current assets                                              |    |   | 21,456 |   |   |   | 11,951 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation           | 88,966  |   |   |   | 161,601 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Other assets                                                      |    |   |   |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
| Intellectual Property Intangible, net of accumulated amortization |    |   |   |   | 37,195 |   |
| Security deposit                                                  |    |   | 1,046 |   |   |   | 1,046 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Total other assets                                                |    |   | 1,046 |   |   |   | 38,241 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Total assets                                                      |    | $ | 111,468 |   |   | $ | 211,793 |   |
|                                                              |    |   |   |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                              |    |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
| Current liabilities                                               |    |   |   |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
| Note payable related party shareholders                           | $       | 5,403,794 |   |   | $ | - |   |
| Note payable                                                      |    |   | 400,000 |   |   |   |   |   |
| Current portion of capital lease payable                          | 4,072   |   |   |   | 44,100 |   |
| Accounts payable and accrued expenses                             | 983,896 |   |   |   | 816,166 |   |
|                                                              |    |   |   |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
| Total current liabilities                                         |    |   | 6,791,762 |   |   |   | 860,266 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Notes payable related party shareholders                          |    |   |   | 5,004,368 |   |
| Capital lease payable, net of current portion                     |    |   |   | 4,072 |   |
| Note payable-long-term                                            |    |   | - |   |   |   | 320,000 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Total liabilities                                                 |    |   | 6,791,762 |   |   |   | 6,188,706 |   |
|                                                              |    |   |   |   |   |   |   |   |
| Stockholders' equity                                              |    |   |   |   |   |   |   |   |
|                                                              |    |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 250,000,000 shares                 |    |   |   |   |   |
| authorized, 108,702,874 and 86,957,874 shares issued and          |    |   |   |   |   |   |
| outstanding at December 31, 2010 and 2009, respectively           | 108,803 |   |   |   | 87,058 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,    |    |   |   |   |   |
| 25,000 shares issued and no shares outstanding                    | 25      |   |   |   | 25 |   |
| Additional paid-in capital                                        |    |   | 56,934,164 |   |   |   | 56,738,459 |   |
| Treasury stock, 25,000 shares of preferred, at cost               | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                                |    |   | (63,697,355 | ) |   |   | (62,776,524 | ) |
|                                                              |    |   |   |   |   |   |   |   |
| Total stockholders' equity                                        |    | (6,680,294 | ) |   |   | (5,976,913 | ) |
|                                                              |    |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                        |    | $ | 111,468 |   |   | $ | 211,793 |   |

----

| IOWORLDMEDIA, INCORPORATED AND SUBSIDIARIES    |   |
|------------------------------------------------|--------|
| Statements of Operations                       |   |
| For the Years Ended December 31, 2010 and 2009 |   |
|                                           |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |
|                                           |   | Years Ended December 31, |   |
|                                           |   | 2010 |   |   | 2009 |   |
|                                           |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |
| Sales                                          |   | $ | 841,120 |   |   | $ | 855,620 |   |
|                                           |   |   |   |   |   |   |   |   |
| Cost of goods sold                             |   |   | 430,824 |   |   |   | 427,981 |   |
|                                           |   |   |   |   |   |   |   |   |
| Gross profit                                   |   |   | 410,296 |   |   |   | 427,639 |   |
|                                           |   |   |   |   |   |   |   |   |
| Operating expenses:                            |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |
| Selling and general and administrative         |   |   | 1,194,150 |   |   |   | 1,449,380 |   |
| Depreciation and amortization                  |   |   | 109,830 |   |   |   | 200,177 |   |
|                                           |   |   |   |   |   |   |   |   |
| Total expenses                                 |   |   | 1,303,980 |   |   |   | 1,649,557 |   |
|                                           |   |   |   |   |   |   |   |   |
| Net operating income                           |   |   | (893,684 | ) |   |   | (1,221,918 | ) |
|                                           |   |   |   |   |   |   |   |   |
| Other income (expense)                         |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |
| Interest expense                               |   |   | (27,147 | ) |   |   | (40,672 | ) |
|                                           |   |   |   |   |   |   |   |   |
| Total other income (expense)                   |   |   | (27,147 | ) |   |   | (40,672 | ) |
|                                           |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes          |   |   | (920,831 | ) |   |   | (1,262,590 | ) |
|                                           |   |   |   |   |   |   |   |   |
| Provision for income taxes                     |   |   | - |   |   |   | - |   |
|                                           |   |   |   |   |   |   |   |   |
| Net income (loss)                              |   | $ | (920,831 | ) |   | $ | (1,262,590 | ) |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |
| Net loss per weighted share,                   |   |   |   |   |   |   |   |   |
| basic and fully diluted                        |   | $ | (0.01 | ) |   | $ | (0.01 | ) |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   |   |   |   |   |   |   |   |
| Weighted average number of common              |   |   |   |   |   |   |   |   |
| shares outstanding, basic and fully diluted    |   |   | 97,830,374 |   |   |   | 86,957,874 |   |

----

|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   | Accumulated |    |   |   |   |
|------------------------------------------------|--------|--------------|-------------|--------|-----------------|--------|---------|---------|--------|--------|----------|--------|--------|------------|--------|--------|----------|--------|------------|---------------|--------|--------|----------|--------|--------|-------------|---------|--------|--------|--------|
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   | Additional |   |   |     |   |       | Common        |   |   |     |   |   | Other       |    |   |   |   |
|                                           |   | Common Stock |        |   | Preferred Stock |   |    | Paid-in |   |   | Treasury |   |   | Stock      |   |   | Retained |   |       | Comprehensive |   |   |     |   |
|                                           |   | Shares       |        |   | Amount          |   |    | Shares  |   |   | Amount   |   |   | Capital    |   |   | Stock    |   |       | Subscribed    |   |   | Earnings |   |   | Income      |    |   | Total  |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |
| Balance, December 31, 2004                     |   |         | 2,209,537   |   |            | $      | 2,310   |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 51,704,944 |          |   | $      | (25,931  | )      |   | $           | (44,925 | )      |   | $      | (51,994,752 | ) |   | $ | 84,868 |   |   | $ | (273,461 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Collection of subscription receivable          |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     | 44,925 |   |        |    |   |   |   |   |   |   |   |   | 44,925 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Recognition of unrealized investment gain      |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |
| upon disposal of investments                   |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   | (84,868 | ) |   |   | (84,868 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued in acquisition            |   |         | 2,180,000   |   |            |   | 2,180   |    |   |   |     |   |   |       |   |   |     |   | 106,820    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 109,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for debt                  |   |         | 5,370,000   |   |            |   | 5,370   |    |   |   |     |   |   |       |   |   |     |   | 263,130    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 268,500 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for intellectual property |   |         | 16,430,000  |   |            |   | 16,430  |    |   |   |     |   |   |       |   |   |     |   | 805,070    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 821,500 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for intellectual property |   |         | 10,000,000  |   |            |   | 10,000  |    |   |   |     |   |   |       |   |   |     |   | 490,000    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 500,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                       |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   | (519,586 | ) |   |   |   |   |   |   | (519,586 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2005                     |   |         | 36,189,537  |   |            | $      | 36,290  |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 53,369,964 |          |   | $      | (25,931  | )      |   | $           | -       |   |   | $      | (52,514,338 | ) |   | $ | - |   |   | $ | 866,010 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued in lieu of compensation          |   |         | 2,160,000   |   |            |   | 2,160   |    |   |   |     |   |   |       |   |   |     |   | 105,840    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 108,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shares issued for stock subscriptions          |   |         | 500,000     |   |            |   | 500     |    |   |   |     |   |   |       |   |   |     |   | 249,500    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 250,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for services              |   |         | 4,000,000   |   |            |   | 4,000   |    |   |   |     |   |   |       |   |   |     |   | 196,000    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 200,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued in settlement             |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |
|   of debt obligations                |   |         | 790,770     |   |            |   | 791     |    |   |   |     |   |   |       |   |   |     |   | 394,594    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 395,385 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for services              |   |         | 1,000,000   |   |            |   | 1,000   |    |   |   |     |   |   |       |   |   |     |   | 49,000     |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 50,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                       |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   | (2,601,454 | ) |   |   |   |   |   |   | (2,601,454 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2006                     |   |         | 44,640,307  |   |            | $      | 44,741  |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 54,364,898 |          |   | $      | (25,931  | )      |   | $           | -       |   |   | $      | (55,115,792 | ) |   | $ | - |   |   | $ | (732,059 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued in settlement             |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |
|   of debt obligations                |   |         | 31,067,567  |   |            |   | 31,067  |    |   |   |     |   |   |       |   |   |     |   | 1,522,311  |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 1,553,378 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                       |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   | (3,290,136 | ) |   |   |   |   |   |   | (3,290,136 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2007                     |   |         | 75,707,874  |   |            | $      | 75,808  |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 55,887,209 |          |   | $      | (25,931  | )      |   | $           | -       |   |   | $      | (58,405,928 | ) |   | $ | - |   |   | $ | (2,468,817 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for services              |   |         | 1,250,000   |   |            |   | 1,250   |    |   |   |     |   |   |       |   |   |     |   | 61,250     |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 62,500 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued in settlement             |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |
|   of debt obligations                |   |         | 10,000,000  |   |            |   | 10,000  |    |   |   |     |   |   |       |   |   |     |   | 790,000    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 800,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                       |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   | (3,108,006 | ) |   |   |   |   |   |   | (3,108,006 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                     |   |         | 86,957,874  |   |            | $      | 87,058  |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 56,738,459 |          |   | $      | (25,931  | )      |   | $           | -       |   |   | $      | (61,513,934 | ) |   | $ | - |   |   | $ | (4,714,323 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                       |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   | (1,262,590 | ) |   |   |   |   |   |   | (1,262,590 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                     |   |         | 86,957,874  |   |            | $      | 87,058  |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 56,738,459 |          |   | $      | (25,931  | )      |   | $           | -       |   |   | $      | (62,776,524 | ) |   | $ | - |   |   | $ | (5,976,913 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued for services              |   |         | 2,000,000   |   |            |   | 2,000   |    |   |   |     |   |   |       |   |   |     |   | 18,000     |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 20,000 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common shares issued in settlement             |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |
|   of debt obligations                |   |         | 19,745,000  |   |            |   | 19,745  |    |   |   |     |   |   |       |   |   |     |   | 177,705    |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   | 197,450 |   |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                       |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   | (920,831 | ) |   |   |   |   |   |   | (920,831 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010                     |   |         | 108,702,874 |   |            | $      | 108,803 |    |   |   | 25,000   |   |   | $          | 25     |   |     | $      | 56,934,164 |          |   | $      | (25,931  | )      |   | $           | -       |   |   | $      | (63,697,355 | ) |   | $ | - |   |   | $ | (6,680,294 | ) |
|                                           |   |         |        |   |            |   |    |    |   |   |     |   |   |       |   |   |     |   |       |          |   |   |     |   |   |        |    |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                 |   | Years Ended December 31, |     |
|------------------------------------------------------|--------|--------------------------|----------|
|                                                 |   | 2010                     |     |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from operations                           |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                    |   | $                        | (920,831 | ) |   | $ | (1,262,590 | ) |   | $ | (3,108,006 | ) |   | $ | (3,290,136 | ) |   | $ | (2,601,454 | ) |   | $ | (519,586 | ) |
| Adjustment to reconcile net loss to net cash:        |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                        |   |                     | 109,830  |   |   |   | 200,177 |   |   |   | 326,665 |   |   |   | 309,881 |   |   |   | 254,483 |   |   |   | 21,169 |   |
| Expenses settled by issuance of common stock         |   |                     | 20,000   |   |   |   | - |   |   |   | 62,500 |   |   |   | - |   |   |   | 358,000 |   |   |   | - |   |
| Loss (gain) on sale of marketable securities         |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Adjust marketable securities to market               |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (77,748 | ) |
| Impairment charge on acquisition intangibles         |   |                     | -        |   |   |   | - |   |   |   | 1,055,352 |   |   |   | 1,505,942 |   |   |   | - |   |   |   | - |   |
| Changes in operating assets and liabilities:         |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Accounts receivable                                  |   |                     | 6,269    |   |   |   | (12,955 | ) |   |   | 14,686 |   |   |   | (8,000 | ) |   |   | 16,827 |   |   |   | (16,827 | ) |
| Deposits                                             |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | (1,046 | ) |   |   | - |   |   |   | - |   |
| Accounts payable and accrued expenses                |   |                     | 167,730  |   |   |   | 281,235 |   |   |   | 247,611 |   |   |   | (85,892 | ) |   |   | 177,304 |   |   |   | 470,913 |   |
| Accrued revenue                                      |   |                     | (17,899  | ) |   |   | 248 |   |   |   | 374 |   |   |   | 14,250 |   |   |   | (13,587 | ) |   |   | (1,285 | ) |
| Prepaid expenses                                     |   |                     | (903     | ) |   |   | 895 |   |   |   | (896 | ) |   |   | 895 |   |   |   | (1,492 | ) |   |   | - |   |
| Net cash provided by (used for) operating activities |   |                     | (635,804 | ) |   |   | (792,990 | ) |   |   | (1,401,714 | ) |   |   | (1,554,106 | ) |   |   | (1,809,919 | ) |   |   | (123,364 | ) |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intellectual property purchased                      |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (947,994 | ) |
| Asset acquisition, net of stock issued               |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (862,295 | ) |
| Capital expenditures                                 |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | (347,464 | ) |   |   | (15,711 | ) |   |   | - |   |
| Proceeds from sale of marketable securities          |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 147,715 |   |
| Net cash used for investing activities               |   |                     | -        |   |   |   | - |   |   |   | - |   |   |   | (347,464 | ) |   |   | (15,711 | ) |   |   | (1,662,574 | ) |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Due to related party shareholders                    |   |                     | 596,876  |   |   |   | 583,478 |   |   |   | 1,388,500 |   |   |   | 1,721,673 |   |   |   | 1,899,109 |   |   |   | 1,686,277 |   |
| Collection of stock subscription receivable          |   |                     |     |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 44,925 |   |
| Proceeds from long-term borrowing                    |   |                     | 80,000   |   |   |   | 320,000 |   |   |   | - |   |   |   | 287,108 |   |   |   | - |   |   |   | - |   |
| Payments on capital lease obligation                 |   |                     | (44,100  | ) |   |   | (99,673 | ) |   |   | (86,559 | ) |   |   | (52,704 | ) |   |   | - |   |   |   | - |   |
| Net cash provided by financing activities            |   |                     | 632,776  |   |   |   | 803,805 |   |   |   | 1,301,941 |   |   |   | 1,956,077 |   |   |   | 1,899,109 |   |   |   | 1,731,202 |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash                      |   |                     | (3,028   | ) |   |   | 10,815 |   |   |   | (99,773 | ) |   |   | 54,507 |   |   |   | 73,479 |   |   |   | (54,736 | ) |
| Cash, beginning of period                            |   |                     | 5,085    |   |   |   | (5,730 | ) |   |   | 94,043 |   |   |   | 39,536 |   |   |   | (33,943 | ) |   |   | 20,793 |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash, end of period                                  |   | $                        | 2,057    |   |   | $ | 5,085 |   |   | $ | (5,730 | ) |   | $ | 94,043 |   |   | $ | 39,536 |   |   | $ | (33,943 | ) |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosures:                            |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid during the year for:                       |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                             |   | $                        | 27,147   |   |   | $ | 40,672 |   |   | $ | 42,186 |   |   | $ | 82,211 |   |   | $ | 0 |   |   | $ | 27 |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Noncash financing activities:                        |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock issued In settlement of debt obligation |   | $                        | 197,450  |   |   | $ | 0 |   |   | $ | 800,000 |   |   | $ | 1,553,378 |   |   | $ | 645,385 |   |   | $ | 0 |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock issued for services                     |   | $                        | 20,000   |   |   | $ | 0 |   |   | $ | 62,500 |   |   | $ | 0 |   |   | $ | 358,000 |   |   | $ | 0 |   |
|                                                 |   |                     |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| 1.   | Nature of operations |
|----------------|----------------------|

----

| 2.   | Liquidity |
|----------------|-----------|

| 3.   | Summary of significant accounting policies |
|----------------|--------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

| Computers and office equipment | 5 years |
|--------------------------------|---------|
| Furniture and fixtures         |    |   | 7 years |

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

----

| 3.   | Summary of significant accounting policies (continued) |
|----------------|--------------------------------------------------------|

| 4.   | Property and equipment |
|----------------|------------------------|

|                                      |   | December 31, |     |   | December 31, |   |     | December 31, |   |   | December 31, |   |   | December 31, |    |   | December 31, |   |
|-------------------------------------------|--------|--------------|----------|--------|--------------|--------|----------|--------------|--------|--------|--------------|--------|--------|--------------|---------|--------|--------------|--------|
|                                      |   | 2010         |     |   | 2009         |   |     | 2008         |   |   | 2007         |   |   | 2006         |    |   | 2005         |   |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |    |   |         |   |
| Captialized leases                        |   | $            | 248,077  |   |         | $      | 248,077  |         |   | $      | 248,077      |   |   | $            | 248,077 |   |         | $      | 0 |   |   | $ | 0 |   |
| Equipment                                 |   |         | 115,098  |   |         |   | 115,098  |         |   |   | 115,098      |   |   |         | 115,098 |   |         |   | 15,712 |   |   |   | 0 |   |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |    |   |         |   |   |   |   |   |   |   |
|                                      |   |         | 363,175  |   |         |   | 363,175  |         |   |   | 363,175      |   |   |         | 363,175 |   |         |   | 15,712 |   |   |   | 0 |   |
| Less:  accumulated depreciation |   |         | (274,209 | )      |         |   | (201,574 | )            |   |   | (128,939     | )      |   |         | (56,304 | )      |         |   | (454 | ) |   |   | 0 | ) |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |    |   |         |   |   |   |   |   |   |   |
|                                      |   | $            | 88,966   |   |         | $      | 161,601  |         |   | $      | 234,236      |   |   | $            | 306,871 |   |         | $      | 15,258 |   |   | $ | 0 |   |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |    |   |         |   |   |   |   |   |   |   |

----

| 5.   | Notes Payable—Related Party Shareholders |
|----------------|------------------------------------------------|

|                                     |   |      | 2010       |   |   |      | 2009      |   |   |      | 2008      |   |   |      | 2007      |   |   |      | 2006      |   |   |      | 2005      |   |
|------------------------------------------|--------|-----------|------------|--------|--------|-----------|-----------|--------|--------|-----------|-----------|--------|--------|-----------|-----------|--------|--------|-----------|-----------|--------|--------|-----------|-----------|--------|
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| Note payable--shareholder, unsecured,    |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| non-interest bearing, and due on demand. | $      | 80,000    |       |   | $      | 140,000   |      |   | $      | 140,000   |      |   | $      |      |      |   | $      |      |      |   | $      |      |      |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| Note payable--shareholder, unsecured,    |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| non-interest bearing, and due on demand. |   | 1,853,271 |       |   |   | 1,853,271 |      |   |   | 1,853,271 |      |   |   | 2,173,271 |      |   |   | 3,085,195 |      |   |   | 1,209,486 |      |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| Note payable--shareholder, unsecured,    |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| non-interest bearing, and due on demand. |   | 1,519,497 |       |   |   | 1,519,497 |      |   |   | 1,519,693 |      |   |   | 826,000   |      |   |   |      |      |   |   |      |      |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| Note payable--shareholder, unsecured,    |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| non-interest bearing, and due on demand. |   | 1,425,107 |       |   |   | 952,295   |      |   |   | 393,620   |      |   |   | 833,119   |      |   |   | 578,900   |      |   |   | 555,500   |      |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| Unsecured convertible promissory note    |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| payable to shareholder, interest rate    |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| at 5% per annum, due June 5, 2013;       |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| note converted into preferred stock      |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| on April 5, 2011.                        |   |      | 306,738    |   |   |      | 539,306   |   |   |      | 514,306   |   |   |      |      |   |   |      |      |   |   |      |      |   |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| Unsecured convertible promissory note,   |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| interest rate at 5% per annum, due       |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
| June 5, 2013; note converted into common |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |
| stock on April 5, 2011.                  |   |      | 219,181    |   |   |      | -         |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
|                                     |   |      | 5,403,794  |   |   |      | 5,004,368 |   |   |      | 4,420,890 |   |   |      | 3,832,390 |   |   |      | 3,664,095 |   |   |      | 1,764,986 |   |
| Less: current portion                    |   |      | (5,403,794 | )      |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |
|                                     |   | $         | -          |   |   | $         | 5,004,368 |   |   | $         | 4,420,890 |   |   | $         | 3,832,390 |   |   | $         | 3,664,095 |   |   | $         | 1,764,986 |   |
|                                     |   |      |       |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |   |      |      |   |

----

| 6.   | Notes Payable |
|----------------|---------------|

| 7.   | Intellectual Property |
|----------------|-----------------------|

|                                      |   | December 31, |     |   | December 31, |   |     | December 31, |   |   | December 31, |   |   | December 31, |     |   | December 31, |   |
|-------------------------------------------|--------|--------------|----------|--------|--------------|--------|----------|--------------|--------|--------|--------------|--------|--------|--------------|----------|--------|--------------|--------|
|                                      |   | 2010         |     |   | 2009         |   |     | 2008         |   |   | 2007         |   |   | 2006         |     |   | 2005         |   |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |     |   |         |   |
| Patents pending and developed technology  |   | $            | 758,922  |   |         | $      | 758,922  |         |   | $      | 758,922      |   |   | $            | 758,922  |   |         | $      | 758,922 |   |   | $ | 758,922 |   |
| Trademarks and other                      |   |         | 189,072  |   |         |   | 189,072  |         |   |   | 189,072      |   |   |         | 189,072  |   |         |   | 189,072 |   |   |   | 189,072 |   |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |     |   |         |   |   |   |   |   |   |   |
| Total                                     |   |         | 947,994  |   |         |   | 947,994  |         |   |   | 947,994      |   |   |         | 947,994  |   |         |   | 947,994 |   |   |   | 947,994 |   |
| Less:  accumulated amortization |   |         | (947,994 | )      |         |   | (910,799 | )            |   |   | (783,257     | )      |   |         | (529,228 | )      |         |   | (275,198 | ) |   |   | (21,169 | ) |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |     |   |         |   |   |   |   |   |   |   |
| Unamortized intellectual property         |   | $            | 0        |   |         | $      | 37,195   |         |   | $      | 164,737      |   |   | $            | 418,766  |   |         | $      | 672,796 |   |   | $ | 926,825 |   |
|                                      |   |         |     |   |         |   |     |         |   |   |         |   |   |         |     |   |         |   |   |   |   |   |   |   |

| 8.   | Income Taxes |
|----------------|--------------|

----

| 8.   | Income Taxes (continued) |
|----------------|--------------------------|

|                                      |   | December 31, |        |   | December 31, |   |        | December 31, |   |   | December 31, |   |   | December 31, |        |   | December 31, |   |
|-------------------------------------------|--------|--------------|-------------|--------|--------------|--------|-------------|--------------|--------|--------|--------------|--------|--------|--------------|-------------|--------|--------------|--------|
|                                      |   | 2010         |        |   | 2009         |   |        | 2008         |   |   | 2007         |   |   | 2006         |        |   | 2005         |   |
| Deferred tax asset:                       |   |         |        |   |         |   |        |         |   |   |         |   |   |         |        |   |         |   |
|                                      |   |         |        |   |         |   |        |         |   |   |         |   |   |         |        |   |         |   |
| Net operating loss carryforwards          |   | $            | 18,400,000  |   |         | $      | 18,900,000  |         |   | $      | 18,900,000   |   |   | $            | 17,700,000  |   |         | $      | 16,500,000 |   |   | $ | 15,500,000 |   |
|                                      |   |         |        |   |         |   |        |         |   |   |         |   |   |         |        |   |         |   |   |   |   |   |   |   |
| Deferred tax liability                    |   |         | 18,400,000  |   |         |   | 18,900,000  |         |   |   | 18,900,000   |   |   |         | 17,700,000  |   |         |   | 16,500,000 |   |   |   | 15,500,000 |   |
|                                      |   |         |        |   |         |   |        |         |   |   |         |   |   |         |        |   |         |   |   |   |   |   |   |   |
| Less:  accumulated amortization |   |         | (18,400,000 | )      |         |   | (18,900,000 | )            |   |   | (18,900,000  | )      |   |         | (17,700,000 | )      |         |   | (16,500,000 | ) |   |   | (15,500,000 | ) |
|                                      |   |         |        |   |         |   |        |         |   |   |         |   |   |         |        |   |         |   |   |   |   |   |   |   |
| Unamortized intellectual property         |   | $            | -           |   |         | $      | -           |         |   | $      | -            |   |   | $            | -           |   |         | $      | - |   |   | $ | - |   |
|                                      |   |         |        |   |         |   |        |         |   |   |         |   |   |         |        |   |         |   |   |   |   |   |   |   |

|                                  |   | December 31, |   |   | December 31, |   |   | December 31, |   |   | December 31, |   |   | December 31, |   |   | December 31, |   |
|---------------------------------------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|--------|--------------|--------|
|                                  |   | 2010         |   |   | 2009         |   |   | 2008         |   |   | 2007         |   |   | 2006         |   |   | 2005         |   |
|                                  |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |
| Statutory federal income tax expense  |   |         | (34    | )%     |         |   | (34    | )%           |   |   | (34          | )%     |   |         | (34    | )%     |         |   | (34 | )% |   |   | (34 | )% |
|                                  |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |   |   |   |   |   |
| State and local income tax            |   |         | (4     | )      |         |   | (4     | )            |   |   | (4           | )      |   |         | (4     | )      |         |   | (4 | ) |   |   | (4 | ) |
|   (net of federal benefits) |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |   |   |   |   |   |
|                                  |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |   |   |   |   |   |
| Valuation allowance                   |   |         | 38     |   |         |   | 38     |         |   |   | 38           |   |   |         | 38     |   |         |   | 38 |   |   |   | 38 |   |
|                                  |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |   |   |   |   |   |
|                                  |   |         | -      | %      |         |   | -      | %            |   |   | -            | %      |   |         | -      | %      |         |   | - | % |   |   | - | % |
|                                  |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |         |   |   |   |   |   |   |   |

----

| 9.   | Common Stock |
|----------------|--------------|

| 10.   | Preferred stock |
|-----------------|-----------------|

| 11.   | Stockholders’ Equity |
|-----------------|----------------------------|

----

| 11.   | Stockholders’ Equity (continued) |
|-----------------|----------------------------------------|

| 12.   | Capital Lease - Future Minimum Lease Payments |
|-----------------|-----------------------------------------------|

| For the year ending December 31,            |   | 2011   |   |
|---------------------------------------------|--------|--------|--------|
|                                        |   |   |   |
|                                        |   | $      | 4,186  |   |
|                                        |   |   |   |   |
| Total minimum lease payments                |   |   | 4,186  |   |
|                                        |   |   |   |   |
|                                        |   |   |   |   |
| Less: Amount representing interest          |   |   | (114   | ) |
|                                        |   |   |   |   |
| Present value of net minimum lease payments |   | $      | 4,072  |   |
|                                        |   |   |   |   |
|                                        |   |   |   |   |

----

| 13.   | Related Party |
|-----------------|---------------|

----

| 14.   | Subsequent Events |
|-----------------|-------------------|

| ·   | The issuance of 3,000,000 restricted common shares to each of the directors, Thomas Bean, John Stanton, and Alex Edwards, in lieu of any compensation, which would have been received during the previous five years of service through December 31, 2010; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Converted the balance due Zanett Opportunity Fund, Ltd, a related party shareholder, against the unsecured, 5% convertible promissory note, due April 5, 2103, into 1,942,905 shares of the Company’s common stock; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The issuance of 2,420,000 restricted common shares for services provided by nine individuals since the inception of the Company; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The issuance of 3.0 million shares of preferred stock to convert all outstanding debt obligations of related party shareholders, exclusive of the debt obligation due the Zanett Opportunity Fund, Ltd, whose debt obligation was converted into common shares. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | At various dates during the year 2008, a related party shareholder advanced the Company funds, aggregating to a total $80,000 and $140,000 at December 31, 2010 and 2009, respectively. The advances are non-interest bearing and due on demand.  The unsecured note obligation was converted into preferred stock on April 5, 2011. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | At various dates during the years 2004 through 2007, a related party shareholder advanced the Company funds, aggregating to a total $1,853,271 at December 31, 2010 and 2009, respectively. The advances are non-interest bearing and due on demand.  The unsecured note obligation was converted into preferred stock on April 5, 2011. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | At various dates during the years 2007 through 2009, a related party shareholder advanced the Company funds, aggregating to a total $1,519,496 at December 31, 2010 and 2009, respectively. The advances are non-interest bearing and due on demand.  The unsecured note obligation was converted into preferred stock on April 5, 2011. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | At various dates during the years 2005 through 2010, a related party shareholder advanced the Company funds, aggregating to a total $1,425,107 and $952,295 at December 31, 2010 and 2009, respectively. The advances are non-interest bearing and due on demand.  The unsecured note obligation was converted into preferred stock on April 5, 2011. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On June 5, 2008, a related party shareholder loaned the Company $500,000, subsequently reduced to $250,000, which resulted from the sale of one-half of the original note total to a third party.  The unsecured convertible promissory note bears interest at 5% per annum and due June 5, 2013.  At December 31, 2010 and 2009, the balance due, including accrued interest, was $306,738 and $539,306, respectively.  The note obligation was converted to preferred stock on April 5, 2011. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | On May 2010, a third party, and related party shareholder, purchased one-half of a note obligation from a related party shareholder in the amount of $250,000.  During 2010, a portion of the note obligation was converted to common stock.  The unsecured convertible promissory note bears interest at 5% and due June 5, 2013.  The note obligation was converted to common stock on April 5, 2011. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 16.   | Quarterly Financials |
|-----------------|----------------------|

----

|                                                              |   | Unaudited2005 Quarter Ending |        |
|-------------------------------------------------------------------|--------|------------------------------|-------------|
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                              |   | March 31                     |        |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |
| ASSETS                                                            |   |                         |        |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |
| Current assets                                                    |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |
| Cash                                                              |   | $                            | 69,484      |   |   | $ | 123,980 |   |   | $ | (10 | ) |   | $ | (33,943 | ) |
| Accounts receivable                                               |   |                         |        |   |   |   |   |   |   |   |   |   |   |   | 16,827 |   |
| Prepaid expense                                                   |   |                         | 145,569     |   |   |   |   |   |   |   |   |   |   |   | 1,285 |   |
| Accrued revenue                                                   |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current assets                                              |   |                         | 215,053     |   |   |   | 123,980 |   |   |   | (10 | ) |   |   | (15,831 | ) |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation           |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                      |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intellectual Property Intangible, net of accumulated amortization |   |                         |        |   |   |   |   |   |   |   | - |   |   |   | - |   |
| Intangible assets, net of impairment                              |   |                         | 120,000     |   |   |   | 348,195 |   |   |   | 535,128 |   |   |   | 3,488,120 |   |
| Security deposit                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other assets                                                |   |                         | 120,000     |   |   |   | 348,195 |   |   |   | 535,128 |   |   |   | 3,488,120 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                      |   | $                            | 335,053     |   |   | $ | 472,175 |   |   | $ | 535,118 |   |   | $ | 3,472,289 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                              |   |                         |        |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                               |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current portion of capital lease payable                          |   | $                            | -           |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Accounts payable and accrued expenses                             |   |                         | 372,097     |   |   |   | 362,936 |   |   |   | 387,875 |   |   |   | 591,293 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities                                         |   |                         | 372,097     |   |   |   | 362,936 |   |   |   | 387,875 |   |   |   | 591,293 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party loans payable                                       |   |                         | 199,486     |   |   |   | 339,486 |   |   |   | 449,486 |   |   |   | 1,764,986 |   |
| Common stock subscription advances                                |   |                         |        |   |   |   | 250,000 |   |   |   | 250,000 |   |   |   | 250,000 |   |
| Long term debt                                                    |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                 |   |                         | 571,583     |   |   |   | 952,422 |   |   |   | 1,087,361 |   |   |   | 2,606,279 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 90,000,000 shares                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| authorized, 2,209,537, 2,209,537, 2,209,537 and 36,189,537        |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares issued and outstanding at each quarter end, respectively   |   |                         | 2,310       |   |   |   | 2,310 |   |   |   | 2,310 |   |   |   | 36,290 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,    |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 25,000 shares issued and no shares outstanding                    |   |                         | 25          |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |
| Additional paid-in capital                                        |   |                         | 51,704,944  |   |   |   | 51,704,944 |   |   |   | 51,704,944 |   |   |   | 53,369,964 |   |
| Treasury stock, 25,000 shares of preferred, at cost               |   |                         | (25,931     | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                                |   |                         | (51,917,878 | ) |   |   | (52,161,595 | ) |   |   | (52,233,591 | ) |   |   | (52,514,338 | ) |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                        |   |                         | (236,530    | ) |   |   | (480,247 | ) |   |   | (552,243 | ) |   |   | 866,010 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                        |   | $                            | 335,053     |   |   | $ | 472,175 |   |   | $ | 535,118 |   |   | $ | 3,472,289 |   |
|                                                              |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                   |   | Unaudited           |      |
|------------------------------------------------------------------------|--------|---------------------|-----------|
|                                                                   |   | 2005 Quarter Ending |      |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |
|                                                                   |   | March 31            |      |   | June 30 |   |   | September 30 |   |   | 31-Dec |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |
| Sales                                                                  |   | $                   | -         |   |   | $ | - |   |   | $ | - |   |   | $ | 21,880 |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                          |   |                |      |   |   |   |   |   |   |   |   |   |   |   | 228 |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Gross profit                 |   |                | -         |   |   |   | - |   |   |   | - |   |   |   | 21,652 |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                    |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative                                 |   |                | 3,584     |   |   |   | 245,863 |   |   |   | 71,997 |   |   |   | 302,399 |   |
| Depreciation and amortization                                          |   |                |      |   |   |   | - |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Total expenses               |   |                | 3,584     |   |   |   | 245,863 |   |   |   | 71,997 |   |   |   | 302,399 |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net operating income         |   |                | (3,584    | ) |   |   | (245,863 | ) |   |   | (71,997 | ) |   |   | (280,747 | ) |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                                                 |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                                             |   |                | 4,857     |   |   |   | 77,748 |   |   |   | - |   |   |   | - |   |
| Interest expense                                                       |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Total other income (expense) |   |                | 4,857     |   |   |   | 77,748 |   |   |   | - |   |   |   | - |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes                                  |   |                | 1,273     |   |   |   | (168,115 | ) |   |   | (71,997 | ) |   |   | (280,747 | ) |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                                             |   |                | -         |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                      |   | $                   | 1,273     |   |   | $ | (168,115 | ) |   | $ | (71,997 | ) |   | $ | (280,747 | ) |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per weighted share,                                           |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basic and fully diluted                                                |   | $                   | 0.00      |   |   | $ | (0.08 | ) |   | $ | (0.03 | ) |   | $ | (0.02 | ) |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common                                      |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares outstanding, basic and fully diluted                            |   |                | 2,209,537 |   |   |   | 2,209,537 |   |   |   | 2,209,537 |   |   |   | 17,869,972 |   |
|                                                                   |   |                |      |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                            |   | Unaudited2006 Quarter Ending |        |
|-----------------------------------------------------------------|--------|------------------------------|-------------|
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                            |   | March 31                     |        |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |
| ASSETS                                                          |   |                         |        |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |
| Current assets                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |
| Cash                                                            |   | $                            | (28,640     | ) |   | $ | 49,762 |   |   | $ | 42,416 |   |   | $ | 39,536 |   |
| Accounts receivable                                             |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Prepaid expense                                                 |   |                         |        |   |   |   |   |   |   |   | 1,715 |   |   |   | 1,491 |   |
| Accrued revenue                                                 |   |                         | 1,015       |   |   |   | 3,237 |   |   |   | 8,518 |   |   |   | 14,872 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current assets                                            |   |                         | (27,625     | ) |   |   | 52,999 |   |   |   | 52,649 |   |   |   | 55,899 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation         |   |                         |        |   |   |   |   |   |   |   |   |   |   |   | 15,258 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                    |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intangible assets, net of impairment and accum amortization     |   |                         | 3,424,613   |   |   |   | 3,361,106 |   |   |   | 3,297,598 |   |   |   | 3,234,091 |   |
| Security deposit                                                |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other assets                                              |   |                         | 3,424,613   |   |   |   | 3,361,106 |   |   |   | 3,297,598 |   |   |   | 3,234,091 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                    |   | $                            | 3,396,988   |   |   | $ | 3,414,105 |   |   | $ | 3,350,247 |   |   | $ | 3,305,248 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                            |   |                         |        |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                             |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current portion of capital lease payable                        |   | $                            | -           |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Accounts payable and accrued expenses                           |   |                         | 516,518     |   |   |   | 322,112 |   |   |   | 342,001 |   |   |   | 373,212 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities                                       |   |                         | 516,518     |   |   |   | 322,112 |   |   |   | 342,001 |   |   |   | 373,212 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party loans payable                                     |   |                         | 2,332,061   |   |   |   | 2,787,739 |   |   |   | 3,133,756 |   |   |   | 3,664,095 |   |
| Common stock subscription advances                              |   |                         | 200,000     |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long term debt                                                  |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                               |   |                         | 3,048,579   |   |   |   | 3,109,851 |   |   |   | 3,475,757 |   |   |   | 4,037,307 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 90,000,000 shares                |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| authorized, 36,289,537, 44,640,307, 44,640,307 and 44,640,307   |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares issued and outstanding at each quarter end, respectively |   |                         | 36,390      |   |   |   | 44,741 |   |   |   | 44,741 |   |   |   | 44,741 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,  |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 25,000 shares issued and no shares outstanding                  |   |                         | 25          |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |
| Additional paid-in capital                                      |   |                         | 53,419,864  |   |   |   | 54,364,898 |   |   |   | 54,364,898 |   |   |   | 54,364,898 |   |
| Treasury stock, 25,000 shares of preferred, at cost             |   |                         | (25,931     | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                              |   |                         | (53,081,939 | ) |   |   | (54,079,479 | ) |   |   | (54,509,243 | ) |   |   | (55,115,792 | ) |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                      |   |                         | 348,409     |   |   |   | 304,254 |   |   |   | (125,510 | ) |   |   | (732,059 | ) |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                      |   | $                            | 3,396,988   |   |   | $ | 3,414,105 |   |   | $ | 3,350,247 |   |   | $ | 3,305,248 |   |
|                                                            |   |                         |        |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                   |   | Unaudited           |       |
|------------------------------------------------------------------------|--------|---------------------|------------|
|                                                                   |   | 2006 Quarter Ending |       |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |
|                                                                   |   | March 31            |       |   | June 30 |   |   | September 30 |   |   | 31-Dec |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |
| Sales                                                                  |   | $                   | 46,960     |   |   | $ | 51,487 |   |   | $ | 114,246 |   |   | $ | 87,573 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                          |   |                | 1,783      |   |   |   | 1,284 |   |   |   | 1,219 |   |   |   | 1,640 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Gross profit                 |   |                | 45,177     |   |   |   | 50,203 |   |   |   | 113,027 |   |   |   | 85,933 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                    |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative                                 |   |                | 549,271    |   |   |   | 984,236 |   |   |   | 479,283 |   |   |   | 628,522 |   |
| Depreciation and amortization                                          |   |                | 63,507     |   |   |   | 63,507 |   |   |   | 63,507 |   |   |   | 63,961 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Total expenses               |   |                | 612,778    |   |   |   | 1,047,743 |   |   |   | 542,790 |   |   |   | 692,483 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net operating income         |   |                | (567,601   | ) |   |   | (997,540 | ) |   |   | (429,763 | ) |   |   | (606,550 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                                             |   |                |       |   |   |   |   |   |   |   | - |   |   |   | - |   |
| Interest expense                                                       |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Total other income (expense) |   |                | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes                                  |   |                | (567,601   | ) |   |   | (997,540 | ) |   |   | (429,763 | ) |   |   | (606,550 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                                             |   |                | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                      |   | $                   | (567,601   | ) |   | $ | (997,540 | ) |   | $ | (429,763 | ) |   | $ | (606,550 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per weighted share,                                           |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basic and fully diluted                                                |   | $                   | (0.02      | ) |   | $ | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.01 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common                                      |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares outstanding, basic and fully diluted                            |   |                | 36,278,426 |   |   |   | 42,565,480 |   |   |   | 44,642,307 |   |   |   | 44,642,307 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                            | Unaudited           |     |
|-----------------------------------------------------------------|---------------------|----------|
|                                                            | 2007 Quarter Ending |     |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
|                                                            |                | March 31 |   |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                          |                |     |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                  |                |     |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
| Cash                                                            |                | $        | 12,610 |   |   | $ | 2,603 |   |   | $ | 8,843 |   |   | $ | 94,043 |   |
| Accounts receivable                                             |                |     | 3,486 |   |   |   |   |   |   |   |   |   |   |   | 8,000 |   |
| Prepaid expense                                                 |                |     | 1,269 |   |   |   | 43,426 |   |   |   | 820 |   |   |   | 597 |   |
| Accrued revenue                                                 |                |     |   |   |   |   | 3,708 |   |   |   | 9,988 |   |   |   | 622 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current assets                                            |                |     | 17,365 |   |   |   | 49,737 |   |   |   | 19,651 |   |   |   | 103,262 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation         |                |     | 41,775 |   |   |   | 338,516 |   |   |   | 323,990 |   |   |   | 306,871 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                    |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intangible assets, net of impairment and accum amortization     |                |     | 3,170,583 |   |   |   | 3,107,076 |   |   |   | 3,043,569 |   |   |   | 1,474,118 |   |
| Security deposit                                                |                |     |   |   |   |   | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other assets                                              |                |     | 3,170,583 |   |   |   | 3,108,122 |   |   |   | 3,044,615 |   |   |   | 1,475,164 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                    |                | $        | 3,229,723 |   |   | $ | 3,496,375 |   |   | $ | 3,388,256 |   |   | $ | 1,885,297 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                            |                |     |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                             |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current portion of capital lease payable                        |                | $        | - |   |   | $ | 125,664 |   |   | $ | 113,559 |   |   | $ | 86,558 |   |
| Accounts payable and accrued expenses                           |                |     | 403,460 |   |   |   | 269,462 |   |   |   | 267,203 |   |   |   | 287,320 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities                                       |                |     | 403,460 |   |   |   | 395,126 |   |   |   | 380,762 |   |   |   | 373,878 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party loans payable                                     |                |     | 2,499,595 |   |   |   | 2,968,590 |   |   |   | 3,354,390 |   |   |   | 3,832,390 |   |
| Common stock subscription advances                              |                |     | - |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long term debt                                                  |                |     |   |   |   |   | 192,650 |   |   |   | 170,642 |   |   |   | 147,845 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                               |                |     | 2,903,055 |   |   |   | 3,556,366 |   |   |   | 3,905,794 |   |   |   | 4,354,113 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 90,000,000 shares                |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| authorized, 75,707,874, 75,707,874, 75,707,874 and 75,707,874   |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares issued and outstanding at each quarter end, respectively |                |     | 75,808 |   |   |   | 75,808 |   |   |   | 75,808 |   |   |   | 75,808 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,  |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 25,000 shares issued and no shares outstanding                  |                |     | 25 |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |
| Additional paid-in capital                                      |                |     | 55,887,209 |   |   |   | 55,887,209 |   |   |   | 55,887,209 |   |   |   | 55,887,209 |   |
| Treasury stock, 25,000 shares of preferred, at cost             |                |     | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                              |                |     | (55,610,443 | ) |   |   | (55,997,102 | ) |   |   | (56,454,649 | ) |   |   | (58,405,927 | ) |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                      |                |     | 326,668 |   |   |   | (59,991 | ) |   |   | (517,538 | ) |   |   | (2,468,816 | ) |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                      |                | $        | 3,229,723 |   |   | $ | 3,496,375 |   |   | $ | 3,388,256 |   |   | $ | 1,885,297 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
|------------------------------------------------------------------------|--------|---------------------|------------|--------|---------|--------|------------|--------------|--------|--------|------------|--------|
|                                                                   |   | Unaudited           |
|                                                                   |   | 2007 Quarter Ending |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
|                                                                   |   | March 31            |       |   | June 30 |   |       | September 30 |   |   | 31-Dec     |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
| Sales                                                                  |   | $                   | 75,587     |   |    | $      | 63,666     |         |   | $      | 41,430     |   |   | $ | 50,924 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Cost of sales                                                          |   |                | 2,151      |   |    |   | 3,224      |         |   |   | 2,265      |   |   |   | 2,591 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Gross profit                 |   |                | 73,436     |   |    |   | 60,442     |         |   |   | 39,165     |   |   |   | 48,333 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Operating expenses:                                                    |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Selling and general and administrative                                 |   |                | 449,475    |   |    |   | 355,243    |         |   |   | 405,470    |   |   |   | 1,909,231 |   |
| Depreciation and amortization                                          |   |                | 65,234     |   |    |   | 81,439     |         |   |   | 81,587     |   |   |   | 81,621 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Total expenses               |   |                | 514,709    |   |    |   | 436,682    |         |   |   | 487,057    |   |   |   | 1,990,852 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Net operating income         |   |                | (441,273   | )      |    |   | (376,240   | )            |   |   | (447,892   | )      |   |   | (1,942,519 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Other income (expense)                                                 |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Other comprehensive income                                             |   |                |       |   |    |   |       |         |   |   | -          |   |   |   | - |   |
| Interest expense                                                       |   |                | (53,378    | )      |    |   | (10,418    | )            |   |   | (9,655     | )      |   |   | (8,759 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Total other income (expense) |   |                | (53,378    | )      |    |   | (10,418    | )            |   |   | (9,655     | )      |   |   | (8,759 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Net income (loss) before income taxes                                  |   |                | (494,651   | )      |    |   | (386,658   | )            |   |   | (457,547   | )      |   |   | (1,951,278 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Provision for income taxes                                             |   |                | -          |   |    |   | -          |         |   |   | -          |   |   |   | - |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Net income (loss)                                                      |   | $                   | (494,651   | )      |    | $      | (386,658   | )            |   | $      | (457,547   | )      |   | $ | (1,951,278 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Net loss per weighted share,                                           |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| basic and fully diluted                                                |   | $                   | (0.01      | )      |    | $      | (0.01      | )            |   | $      | (0.01      | )      |   | $ | (0.03 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Weighted average number of common                                      |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| shares outstanding, basic and fully diluted                            |   |                | 75,707,874 |   |    |   | 75,707,874 |         |   |   | 75,707,874 |   |   |   | 75,707,874 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |

----

|                                                            | Unaudited           |     |
|-----------------------------------------------------------------|---------------------|----------|
|                                                            | 2008 Quarter Ending |     |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
|                                                            |                | March 31 |   |   | June 30 |   |   | September 30 |   |   | December 31 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                          |                |     |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                  |                |     |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |
| Cash                                                            |                | $        | 20,731 |   |   | $ | 37,844 |   |   | $ | 14,091 |   |   | $ | (5,730 | ) |
| Accounts receivable                                             |                |     |   |   |   |   | 1,500 |   |   |   | 1,658 |   |   |   | (6,687 | ) |
| Prepaid expense                                                 |                |     | 373 |   |   |   | 149 |   |   |   | 1,715 |   |   |   | 1,492 |   |
| Accrued revenue                                                 |                |     | 504 |   |   |   | 239 |   |   |   | 350 |   |   |   | 249 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current assets                                            |                |     | 21,608 |   |   |   | 39,732 |   |   |   | 17,814 |   |   |   | (10,676 | ) |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation         |                |     | 288,712 |   |   |   | 270,553 |   |   |   | 252,395 |   |   |   | 234,236 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                    |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intangible assets, net of impairment and accum amortization     |                |     | 1,410,611 |   |   |   | 1,347,103 |   |   |   | 1,283,597 |   |   |   | 164,737 |   |
| Security deposit                                                |                |     | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other assets                                              |                |     | 1,411,657 |   |   |   | 1,348,149 |   |   |   | 1,284,643 |   |   |   | 165,783 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                    |                | $        | 1,721,977 |   |   | $ | 1,658,434 |   |   | $ | 1,554,852 |   |   | $ | 389,343 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                            |                |     |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                             |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current portion of capital lease payable                        |                | $        | 89,666 |   |   | $ | 92,885 |   |   | $ | 96,219 |   |   | $ | 99,673 |   |
| Accounts payable and accrued expenses                           |                |     | 370,387 |   |   |   | 457,286 |   |   |   | 473,447 |   |   |   | 534,931 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities                                       |                |     | 460,053 |   |   |   | 550,171 |   |   |   | 569,666 |   |   |   | 634,604 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Related party loans payable                                     |                |     | 3,272,890 |   |   |   | 3,636,205 |   |   |   | 3,940,113 |   |   |   | 4,420,890 |   |
| Common stock subscription advances                              |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Long term debt                                                  |                |     | 124,229 |   |   |   | 99,766 |   |   |   | 74,424 |   |   |   | 48,172 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                               |                |     | 3,857,172 |   |   |   | 4,286,142 |   |   |   | 4,584,203 |   |   |   | 5,103,666 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 90,000,000 shares                |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| authorized, 86,957,874, 86,957,874, 86,957,874 and 86,957,874   |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares issued and outstanding at each quarter end, respectively |                |     | 87,058 |   |   |   | 87,058 |   |   |   | 87,058 |   |   |   | 87,058 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,  |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 25,000 shares issued and no shares outstanding                  |                |     | 25 |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |
| Additional paid-in capital                                      |                |     | 56,738,459 |   |   |   | 56,738,459 |   |   |   | 56,738,459 |   |   |   | 56,738,459 |   |
| Treasury stock, 25,000 shares of preferred, at cost             |                |     | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                              |                |     | (58,934,806 | ) |   |   | (59,427,319 | ) |   |   | (59,828,962 | ) |   |   | (61,513,934 | ) |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                      |                |     | (2,135,195 | ) |   |   | (2,627,708 | ) |   |   | (3,029,351 | ) |   |   | (4,714,323 | ) |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                      |                | $        | 1,721,977 |   |   | $ | 1,658,434 |   |   | $ | 1,554,852 |   |   | $ | 389,34 3 |   |
|                                                            |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
|------------------------------------------------------------------------|--------|---------------------|------------|--------|---------|--------|------------|--------------|--------|--------|------------|--------|
|                                                                   |   | Unaudited           |       |
|                                                                   |   | 2008 Quarter Ending |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
|                                                                   |   | March 31            |       |   | June 30 |   |       | September 30 |   |   | 31-Dec     |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |
| Sales                                                                  |   | $                   | 62,129     |   |    | $      | 42,727     |         |   | $      | 45,498     |   |   | $ | 76,307 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Cost of sales                                                          |   |                | 2,165      |   |    |   | 2,400      |         |   |   | 3,267      |   |   |   | 11,160 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Gross profit                 |   |                | 59,964     |   |    |   | 40,327     |         |   |   | 42,231     |   |   |   | 65,147 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Operating expenses:                                                    |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Selling and general and administrative                                 |   |                | 499,127    |   |    |   | 442,056    |         |   |   | 349,304    |   |   |   | 1,656,444 |   |
| Depreciation and amortization                                          |   |                | 81,666     |   |    |   | 81,666     |         |   |   | 81,665     |   |   |   | 81,666 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Total expenses               |   |                | 580,793    |   |    |   | 523,722    |         |   |   | 430,969    |   |   |   | 1,738,110 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Net operating income         |   |                | (520,829   | )      |    |   | (483,395   | )            |   |   | (388,738   | )      |   |   | (1,672,963 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Other income (expense)                                                 |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Other comprehensive income                                             |   |                |       |   |    |   |       |         |   |   | -          |   |   |   | - |   |
| Interest expense                                                       |   |                | (8,049     | )      |    |   | (9,118     | )            |   |   | (12,905    | )      |   |   | (12,010 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|        Total other income (expense) |   |                | (8,049     | )      |    |   | (9,118     | )            |   |   | (12,905    | )      |   |   | (12,010 | ) |
|                                          |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Net income (loss) before income taxes                                  |   |                | (528,878   | )      |    |   | (492,513   | )            |   |   | (401,643   | )      |   |   | (1,684,973 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Provision for income taxes                                             |   |                | -          |   |    |   | -          |         |   |   | -          |   |   |   | - |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Net income (loss)                                                      |   | $                   | (528,878   | )      |    | $      | (492,513   | )            |   | $      | (401,643   | )      |   | $ | (1,684,973 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Net loss per weighted share,                                           |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| basic and fully diluted                                                |   | $                   | (0.01      | )      |    | $      | (0.01      | )            |   | $      | (0.00      | )      |   | $ | (0.02 | ) |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| Weighted average number of common                                      |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |
| shares outstanding, basic and fully diluted                            |   |                | 86,957,874 |   |    |   | 86,957,874 |         |   |   | 86,957,874 |   |   |   | 86,957,874 |   |
|                                                                   |   |                |       |   |    |   |       |         |   |   |       |   |   |   |   |   |

----

|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |
|-----------------------------------------------------------------|---------------------|----------|-------------|--------|---------|--------|-------------|--------------|--------|--------|-------------|--------|
|                                                            | Unaudited           |     |
|                                                            | 2009 Quarter Ending |     |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |
|                                                            |                | March 31 |        |   | June 30 |   |        | September 30 |   |   | December 31 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |
| ASSETS                                                          |                |     |        |   |    |   |        |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |
| Current assets                                                  |                |     |        |   |    |   |        |         |   |   |        |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |
| Cash                                                            |                | $        | 81,232      |   |    | $      | 83,920      |         |   | $      | 439         |   |   | $ | 5,085 |   |
| Accounts receivable                                             |                |     | (2,621      | )      |    |   | 1,056       |         |   |   | 1,536       |   |   |   | 6,269 |   |
| Prepaid expense                                                 |                |     | 1,268       |   |    |   | 1,044       |         |   |   | 820         |   |   |   | 597 |   |
| Accrued revenue                                                 |                |     | (2,702      | )      |    |   | (1,227      | )            |   |   | (604        | )      |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total current assets                                            |                |     | 77,177      |   |    |   | 84,793      |         |   |   | 2,191       |   |   |   | 11,951 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation         |                |     | 216,077     |   |    |   | 197,919     |         |   |   | 179,760     |   |   |   | 161,601 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Other assets                                                    |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Intangible assets, net of impairment and accum amortization     |                |     | 101,230     |   |    |   | 75,701      |         |   |   | 46,494      |   |   |   | 37,195 |   |
| Security deposit                                                |                |     | 1,046       |   |    |   | 1,046       |         |   |   | 1,046       |   |   |   | 1,046 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total other assets                                              |                |     | 102,276     |   |    |   | 76,747      |         |   |   | 47,540      |   |   |   | 38,241 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total assets                                                    |                | $        | 395,530     |   |    | $      | 359,459     |         |   | $      | 229,491     |   |   | $ | 211,793 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                            |                |     |        |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Current liabilities                                             |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Current portion of capital lease payable                        |                | $        | 103,252     |   |    | $      | 89,911      |         |   | $      | 67,413      |   |   | $ | 44,100 |   |
| Accounts payable and accrued expenses                           |                |     | 687,338     |   |    |   | 730,075     |         |   |   | 742,877     |   |   |   | 816,166 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total current liabilities                                       |                |     | 790,590     |   |    |   | 819,986     |         |   |   | 810,290     |   |   |   | 860,266 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Related party loans payable                                     |                |     | 4,722,739   |   |    |   | 4,923,279   |         |   |   | 4,954,145   |   |   |   | 5,004,368 |   |
| Common stock subscription advances                              |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Long term debt                                                  |                |     | 20,978      |   |    |   | 69,854      |         |   |   | 217,011     |   |   |   | 324,072 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total liabilities                                               |                |     | 5,534,307   |   |    |   | 5,813,119   |         |   |   | 5,981,446   |   |   |   | 6,188,706 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Stockholders' equity                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Common stock, $.001 par value; 90,000,000 shares                |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| authorized, 86,957,874, 86,957,874, 86,957,874 and 86,957,874   |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| shares issued and outstanding at each quarter end, respectively |                |     | 87,058      |   |    |   | 87,058      |         |   |   | 87,058      |   |   |   | 87,058 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,  |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| 25,000 shares issued and no shares outstanding                  |                |     | 25          |   |    |   | 25          |         |   |   | 25          |   |   |   | 25 |   |
| Additional paid-in capital                                      |                |     | 56,738,459  |   |    |   | 56,738,459  |         |   |   | 56,738,459  |   |   |   | 56,738,459 |   |
| Treasury stock, 25,000 shares of preferred, at cost             |                |     | (25,931     | )      |    |   | (25,931     | )            |   |   | (25,931     | )      |   |   | (25,931 | ) |
| Accumulated defcit                                              |                |     | (61,938,388 | )      |    |   | (62,253,271 | )            |   |   | (62,551,566 | )      |   |   | (62,776,524 | ) |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total stockholders' equity                                      |                |     | (5,138,777  | )      |    |   | (5,453,660  | )            |   |   | (5,751,955  | )      |   |   | (5,976,913 | ) |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |
| Total liabilities and stockholders' equity                      |                | $        | 395,530     |   |    | $      | 359,459     |         |   | $      | 229,491     |   |   | $ | 211,793 |   |
|                                                            |                |     |        |   |    |   |        |         |   |   |        |   |   |   |   |   |

----

|                                                                   |   | Unaudited           |       |
|------------------------------------------------------------------------|--------|---------------------|------------|
|                                                                   |   | 2009 Quarter Ending |       |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |
|                                                                   |   | March 31            |       |   | June 30 |   |   | September 30 |   |   | 31-Dec |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |
| Sales                                                                  |   | $                   | 177,016    |   |   | $ | 268,659 |   |   | $ | 203,764 |   |   | $ | 206,180 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                          |   |                | 113,565    |   |   |   | 125,498 |   |   |   | 92,306 |   |   |   | 96,503 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Gross profit                 |   |                | 63,451     |   |   |   | 143,161 |   |   |   | 111,458 |   |   |   | 109,677 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                    |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative                                 |   |                | 394,943    |   |   |   | 384,019 |   |   |   | 372,795 |   |   |   | 298,589 |   |
| Depreciation and amortization                                          |   |                | 81,666     |   |   |   | 63,596 |   |   |   | 27,457 |   |   |   | 27,457 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Total expenses               |   |                | 476,609    |   |   |   | 447,615 |   |   |   | 400,252 |   |   |   | 326,046 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Net operating income         |   |                | (413,158   | ) |   |   | (304,454 | ) |   |   | (288,794 | ) |   |   | (216,369 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                       |   |                | (11,296    | ) |   |   | (10,429 | ) |   |   | (9,501 | ) |   |   | (8,589 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        Total other income (expense) |   |                | (11,296    | ) |   |   | (10,429 | ) |   |   | (9,501 | ) |   |   | (8,589 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes                                  |   |                | (424,454   | ) |   |   | (314,883 | ) |   |   | (298,295 | ) |   |   | (224,958 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                                             |   |                | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                      |   | $                   | (424,454   | ) |   | $ | (314,883 | ) |   | $ | (298,295 | ) |   | $ | (224,958 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per weighted share,                                           |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basic and fully diluted                                                |   | $                   | (0.005     | ) |   | $ | (0.004 | ) |   | $ | (0.003 | ) |   | $ | (0.003 | ) |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common                                      |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares outstanding, basic and fully diluted                            |   |                | 86,957,874 |   |   |   | 86,957,874 |   |   |   | 86,957,874 |   |   |   | 86,957,874 |   |
|                                                                   |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                        | Unaudited           |     |
|-----------------------------------------------------------------------------|---------------------|----------|
|                                                                        | 2010 Quarter Ending |     |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                | March 31 |   |   | June 30 |   |   | September 30 |   |   | 31-Dec |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |
| ASSETS                                                                      |                |     |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |
| Current assets                                                              |                |     |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                        |                | $        | 6,983 |   |   | $ | 118,254 |   |   | $ | 3,620 |   |   | $ | 2,057 |   |
| Accounts receivable                                                         |                |     | 830 |   |   |   | 273 |   |   |   |   |   |   |   |   |   |
| Prepaid expense                                                             |                |     | 373 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued revenue                                                             |                |     |   |   |   |   | 149 |   |   |   |   |   |   |   | 19,399 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current assets                                                        |                |     | 8,186 |   |   |   | 118,676 |   |   |   | 3,620 |   |   |   | 21,456 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Property and equipment, net of accumulated depreciation                     |                |     | 143,442 |   |   |   | 125,284 |   |   |   | 107,125 |   |   |   | 88,966 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                                |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intellectual Property Intangible, net of accumulated amortization           |                |     | 27,897 |   |   |   | 18,598 |   |   |   | 9,299 |   |   |   |   |   |
| Security deposit                                                            |                |     | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |   |   | 1,046 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other assets                                                          |                |     | 28,943 |   |   |   | 19,644 |   |   |   | 10,345 |   |   |   | 1,046 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                |                | $        | 180,571 |   |   | $ | 263,604 |   |   | $ | 121,090 |   |   | $ | 111,468 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                        |                |     |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current liabilities                                                         |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Note payable related party shareholders                                     |                | $        | - |   |   | $ | 5,013,301 |   |   | $ | 5,276,799 |   |   | $ | 5,403,794 |   |
|  Note payable                                                          |                |     |   |   |   |   | 613,867 |   |   |   | 400,000 |   |   |   | 400,000 |   |
| Current portion of capital lease payable                                    |                |     | 19,943 |   |   |   | 9,854 |   |   |   | 7,011 |   |   |   | 4,072 |   |
| Accounts payable and accrued expenses                                       |                |     | 881,414 |   |   |   | 898,882 |   |   |   | 937,789 |   |   |   | 983,896 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total current liabilities                                                   |                |     | 901,357 |   |   |   | 6,535,904 |   |   |   | 6,621,599 |   |   |   | 6,791,762 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes payable related party shareholders                                    |                |     | 5,086,868 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Capital lease payable, net of current portion                               |                |     | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|  Note payable-long-term                                                |                |     | 401,035 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities                                                           |                |     | 6,389,260 |   |   |   | 6,535,904 |   |   |   | 6,621,599 |   |   |   | 6,791,762 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stockholders' equity                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common stock, $.001 par value; 250,000,000 as of April 1, 2010 and          |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| and 90,000,000 authorized, 86,957,874, 108,702,874, 108,872,874 and         |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 108,702,874 shares issued and outstanding at each quarter end, respectively |                |     | 87,058 |   |   |   | 108,803 |   |   |   | 108,803 |   |   |   | 108,803 |   |
| Preferred stock, $.001 par value, 5,000,000 shares authorized,              |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 25,000 shares issued and no shares outstanding                              |                |     | 25 |   |   |   | 25 |   |   |   | 25 |   |   |   | 25 |   |
| Additional paid-in capital                                                  |                |     | 56,738,459 |   |   |   | 56,934,164 |   |   |   | 56,934,164 |   |   |   | 56,934,164 |   |
| Treasury stock, 25,000 shares of preferred, at cost                         |                |     | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |   |   | (25,931 | ) |
| Accumulated defcit                                                          |                |     | (63,008,300 | ) |   |   | (63,289,361 | ) |   |   | (63,517,570 | ) |   |   | (63,697,355 | ) |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total stockholders' equity                                                  |                |     | (6,208,689 | ) |   |   | (6,272,300 | ) |   |   | (6,500,509 | ) |   |   | (6,680,294 | ) |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total liabilities and stockholders' equity                                  |                | $        | 180,571 |   |   | $ | 263,604 |   |   | $ | 121,090 |   |   | $ | 111,468 |   |
|                                                                        |                |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                 |   | Unaudited           |       |
|------------------------------------------------------|--------|---------------------|------------|
|                                                 |   | 2010 Quarter Ending |       |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |
|                                                 |   | March 31            |       |   | June 30 |   |   | September 30 |   |   | 31-Dec |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |
| Sales                                                |   | $                   | 181,647    |   |   | $ | 191,544 |   |   | $ | 207,302 |   |   | $ | 260,625 |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                        |   |                | 95,572     |   |   |   | 102,343 |   |   |   | 113,108 |   |   |   | 119,799 |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Gross profit                 |   |                | 86,075     |   |   |   | 89,201 |   |   |   | 94,194 |   |   |   | 140,826 |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                  |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling and general and administrative               |   |                | 282,779    |   |   |   | 336,067 |   |   |   | 288,868 |   |   |   | 287,171 |   |
| Depreciation and amortization                        |   |                | 27,457     |   |   |   | 27,457 |   |   |   | 27,457 |   |   |   | 27,458 |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total expenses               |   |                | 310,236    |   |   |   | 363,524 |   |   |   | 316,325 |   |   |   | 314,629 |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Net operating income         |   |                | (224,161   | ) |   |   | (274,323 | ) |   |   | (222,131 | ) |   |   | (173,803 | ) |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                               |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                     |   |                | (7,615     | ) |   |   | (6,738 | ) |   |   | (6,078 | ) |   |   | (5,982 | ) |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|     Total other income (expense) |   |                | (7,615     | ) |   |   | (6,738 | ) |   |   | (6,078 | ) |   |   | (5,982 | ) |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) before income taxes                |   |                | (231,776   | ) |   |   | (281,061 | ) |   |   | (228,209 | ) |   |   | (179,785 | ) |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision for income taxes                           |   |                | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                    |   | $                   | (231,776   | ) |   | $ | (281,061 | ) |   | $ | (228,209 | ) |   | $ | (179,785 | ) |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss per weighted share,                         |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| basic and fully diluted                              |   | $                   | (0.003     | ) |   | $ | (0.003 | ) |   | $ | (0.002 | ) |   | $ | (0.002 | ) |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common                    |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| shares outstanding, basic and fully diluted          |   |                | 86,957,874 |   |   |   | 87,196,830 |   |   |   | 108,702,874 |   |   |   | 108,702,874 |   |
|                                                 |   |                |       |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Item 9.  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
|---------------|---------------------------------------------------------------------------------------|

| Item 9A.  | Controls and Procedures. |
|----------------|--------------------------|

| ·   | There is a lack of sufficient accounting staff, which results in a lack of segregation of duties necessary for a good system of internal control; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | There is an over-reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company internally performed all aspects of our financial reporting process, but not limited to the underlying accounting records, recording journal entries and responsibility for the preparation of the financial statements.  Due to the fact that these duties were performed often times by the same personnel, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.  These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company does not have a sufficient number of independent directors for our board and audit committee.  We currently have no independent director on the board, which is comprised of two directors, and we do not have an audit committee.  As a publicly-traded company, we should strive to have a majority of our board of directors to be independent. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Hire a qualified accounting staff to manage, review, and verify day-to-day accounting and the financial statements; |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | Create and refine a structure in which critical accounting policies and estimates are identified, and together with other complex areas, are subject to multiple reviews by accounting personnel; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Recruit independent members to the board of directors; |
|--------------------|--------------------------------------------------------|

| ·   | Create an audit committee of the independent board members and implement procedures for its review of our disclosure controls and procedures. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------|

----

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

----

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

| Name                |   | Age    |   | Position                                                                                            |
|---------------------|--------|--------|--------|-----------------------------------------------------------------------------------------------------|
|                |   |   |   |                                                                                                |
| Thomas J. Bean      |   | 46     |   | Chief Executive Officer, Chief Financial Officer,  and Chairman of the Board of Directors |
| Alex H. Edwards III |   | 46     |   | Director and Secretary                                                                              |
| John D. Stanton     |   | 62     |   | Director                                                                                            |

----

----

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

|                                                                            |   |   | Annual Compensation |   |   | Long-Term |   |   | All Other                     |   |
|---------------------------------------------------------------------------------|--------|--------|---------------------|--------|--------|-----------|--------|--------|-------------------------------|--------|
| Name and Principal Position                                                     | Year   |   | Salary($) (1)       |   |   | Bonus ($) |   |   | Other Annual Compensation ($) |   |   | Underlying Options |   |   | Compensation |   |
| Thomas J. Bean – Chief Executive Officer (2)                              | 2005   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2006   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2007   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2008   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2009   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2010   |   |                | --     |   |      |   | ---    |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
| John D. Stanton (3) – Chief Executive Officer and Chief Financial Officer | 2005   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2006   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2007   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2008   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2009   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2010   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|  Alex H. Edwards IIISecretary(4)                                           | 2005   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2006   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2007   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2008   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2009   |   |                | --     |   |      |   | --     |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                            | 2010   |   |                | --     |   |      |   | ---    |                          |   |   | -- |   |   |   | -- |   |   |   | -- |   |

----

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

|                                        |   | Amount and Nature of |       |   | Percentage  |   |
|---------------------------------------------|--------|----------------------|------------|--------|-------------|--------|
| Name and Address of Beneficial Owner        |   | Beneficial Ownership |       |   | of Class(1) |   |
|                                        |   |                 |       |   |        |   |
| John Stanton (2)                            |   |                 |       |   |        |   |
| P.O. Box 24567, Tampa FL                    |   |                 | 30,645,111 |   |        |   | 28 | % |
|                                        |   |                 |       |   |        |   |   |   |
| Thomas Bean (2)                             |   |                 | 26,792,000 |   |        |   | 25 | % |
| 5025 W. Lemon St. Suite 200 Tampa FL 33609  |   |                 |       |   |        |   |   |   |
|                                        |   |                 |       |   |        |   |   |   |
| Alex Edwards(2)                             |   |                 | 11,735,000 |   |        |   | 11 | % |
| 5025 W. Lemon St. Suite 200, Tampa FL 33609 |   |                 |       |   |        |   |   |   |
|                                        |   |                 |       |   |        |   |   |   |
|                                        |   |                 |       |   |        |   |   |   |
| Directors and Executive Officers as a Group |   |                 | 72,172,111 |   |        |   | 66 | % |
| (three persons)                             |   |                 |       |   |        |   |   |   |
|                                        |   |                 |       |   |        |   |   |   |
|                                        |   |                 |       |   |        |   |   |   |
| IO Media Partners                           |   |                 | 16,430,000 |   |        |   | 15 | % |
|                                        |   |                 |       |   |        |   |   |   |
| Total                                       |   |                 | 85,602,111 |   |        |   | 79 | % |

| (1)    | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. For purposes of calculating the percentage beneficially owned, the number of shares deemed outstanding includes (108,702,874) shares outstanding as of December 31, 2010  and (ii) shares issuable by the Company pursuant to convertible debt held by the respective person which may be exercised within 60 days following the date of this document ("Presently Convertible Securities"). Presently Convertible Securities are deemed to be outstanding and to be beneficially owned by the person holding such security for the purpose of computing the percentage ownership of such person or group but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| (2)    | Includes shares owned by entities to which Mr. Stanton, Mr. Bean and Mr. Edwards have controlling interests.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

----

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

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

|          |   | 2010   |   |   | 2009   |   |
|---------------|--------|--------|--------|--------|--------|--------|
|          |   |   |   |   |   |   |
| Audit         |   | $      | 0      |   |   | $      | 0 |   |
| Audit-Related |   |   | -      |   |   |   | - |   |
| All Other     |   |   | 0      |   |   |   | 0 |   |
|          |   |   |   |   |   |   |   |   |
| Total Fees    |   | $      | 0      |   |   | $      | 0 |   |

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

----

| ExhibitNumber |   | Description                                                                                                                                                                                                                                                                                                                                         |
|---------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 3.1           |   | Articles of Incorporation of the Company effective as of January 1, 1996, as amended by the Articles of Amendment dated as of January 9, 1996 (incorporated herein by reference to Exhibit Number 3.1 to the Company’s Registration Statement on Form S-1 (File No. 333-00250)).                                                              |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 3.2           |   | Bylaws of the Company (incorporated herein by reference to Exhibit Number 3.2 to the Company’s Registration Statement on Form S-1 (File No. 333-00250)).                                                                                                                                                                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 3.3           |   | Articles of Amendment of the Articles of Incorporation of IoWorldMedia Corporation filed June 1, 2001. (incorporated herein by reference to Exhibit Number 3.3 of the Company's Annual Report on Form 10-KSB  filed August 23, 2005).                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 3.4           |   | Articles of Amendment of the Articles of Incorporation of PowerCerv Corporation for Designation of Preferences, Rights and Limitations of Series C Convertible Preferred Stock filed August 31, 2001. (incorporated herein by reference to Exhibit Number 3.4 of the Company's Annual Report on Form 10-KSB  filed August 23, 2005). |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 3.5           |   | Amendment to the Articles of Incorporation of Powercerv Corporation dated December 21, 2005. (incorporated herein by reference to Exhibit Number 3.5 of the Company's Amended Annual Report on Form 10-K/A filed April 21,2011).                                                                                                                    |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 10.5          |   | Employment, Noncompetition, Development and Confidentiality Agreement, dated April 10, 1997, between the Company and Marc J. Fratello (incorporated herein by reference from Exhibit Number 10.2 to the Company’s Quarterly Report on Form 10-Q for the calendar quarter ended March 31, 1997).                                               |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 10.6          |   | Employment, Noncompetition, Development and Confidentiality Agreement, dated April 10, 1997, between the Company and Roy E. Crippen, III (incorporated herein by reference from Exhibit Number 10.3 to the Company’s Quarterly Report on Form 10-Q for the calendar quarter ended March 31, 1997).                                            |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 10.8          |   | Asset Purchase Agreement, dated March 30, 1999, by and between the Company and R.O.I Consulting, Inc. (incorporated herein by reference from Exhibit Number 2 to the Company’s Current Report on Form 8-K filed on April 13, 1999).                                                                                                           |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 10.12         |   | Asset Purchase Agreement by and among PowerCerv Corporation, PowerCerv Technologies Corporation, PCV Acquisition, Inc. and ASA International, Ltd., dated as of October 1, 2002.(Included as Appendix C to PowerCerv's definitive proxy statement dated October 24, 2002 and incorporated herein by reference)                                      |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 10.13         |   | Management and Finance Agreement by and among PowerCerv Corporation and WhiteKnight SST, Inc. dated December 23, 2003. (incorporated herein by reference to Exhibit Number 10.13 of the Company's Annual Report on Form 10-KSB  filed August 23, 2005).                                                                                   |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 10.14         |   | Contribution Agreement dated September 21, 2005 (incorporated herein by reference to Exhibit Number 10.14 of the Company's Annual Report on Form 10-K filed April 18,2011).                                                                                                                                                                         |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 14.1          |   | Code of Ethics (incorporated herein by reference to Exhibit 14.1 of the Company's Annual Report on Form 10-k filed April 18,2001).                                                                                                                                                                                                                  |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 16.1          |   | Letter from Grant Thornton, LLP on change in certifying accountant (incorporated herein by reference from an exhibit to the Registrant’s Current Report on Form 8-K dated March 30, 2004, and incorporated herein by reference)                                                                                                          |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 21.1          |   | List of Subsidiaries (incorporated herein by reference to Exhibit Number 21.1 of the Company's Annual Report on Form 10-K filed April 18,2001).                                                                                                                                                                                                     |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 31.1          |   | Certification to Section 302 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer and Chief Financial Officer                                                                                                                                                                                                                                |
|          |   |                                                                                                                                                                                                                                                                                                                                                |
| 32.1          |   | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 - Chief Executive Officer and Chief Financial Officer                                                                                                                                                                        |
|          |   |                                                                                                                                                                                                                                                                                                                                                |

----

|                                        | IOMEDIAWORLD, INCORPORATED |                                               |
|---------------------------------------------|----------------------------|----------------------------------------------------|
|                                        |                       |                                               |   |
| Date:  June 4, 2012     | By:                        | /s/ Thomas Bean                               |   |
|                                        |                       | Thomas Bean                                        |   |
|                                        |                       | Chief Executive Officer and Chairman of the Board. |   |
|                                        |                       | (Principal Executive Officer)                      |   |

| Signature            |    | Title                                                                                                                              |    | Date         |
|----------------------|--------------|------------------------------------------------------------------------------------------------------------------------------------|--------------|--------------|
|            |    |                                                                                                                          |    |    |
| /s/ Thomas Bean |    | Chief Executive Officer, Chief Financial Officer and                                                                     |    | June 4, 2012 |
| Thomas Bean          |    | Chairman of the Board of Directors(Principal Executive Officer and Principal Financial Officer) |    |    |
|            |    |                                                                                                                          |    |    |