| Delaware(State or other jurisdiction of incorporation or organization) | 94-2790442(I.R.S. Employer Identification No.) |
|------------------------------------------------------------------------|------------------------------------------------|

| 275 Shoreline Drive, Suite 500 Redwood Shores, California(Address of principal executive offices) |   | 94065(Zip Code) |
|---------------------------------------------------------------------------------------------------|--------|-----------------|

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|                                                                                                                 | Page     |
|----------------------------------------------------------------------------------------------------------------------|----------|
| PART I                                                                                                               | 3        |
| Item 1. Business                                                                                                     | 3        |
| Item 1A. Risk Factors                                                                                                | 7        |
| Item 1B.  Unresolved Staff Comments                                                                        | 7        |
| Item 2. Properties                                                                                                   | 7        |
| Item 3. Legal Proceedings                                                                                            | 7        |
| PART II                                                                                                              | 7        |
| Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  8  |
| Item 6. Selected Financial Data                                                                                      | 8        |
| Item 7. Management's Discussion and Analysis of Financial Conditionand Results of Operations                         |  8  |
| Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                                  | 17       |
| Item 8. Financial Statements and Supplementary Data                                                                  | 17       |
| Item 9. Changes in and Disagreements With Accountants on Accountingand Financial Disclosure                          |  17 |
| Item 9A. Controls and Procedures                                                                                     | 17       |
| Item 9B.  Other Information                                                                                | 18       |
| PART III                                                                                                             | 19       |
| Item 10. Directors and Executive Officers and Corporate Governance                                                   | 19       |
| Item 11. Executive Compensation                                                                                      | 22       |
| Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters              |  25 |
| Item 13. Certain Relationships and Related Transactions and Director Independence                                    | 28       |
| Item 14. Principal Accountant Fees and Services                                                                      | 38       |
| PART IV                                                                                                              | 31       |
| Item 15. Exhibits, Financial Statement Schedules                                                                     | 31       |

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| SignatureOne® Ceremony® Server™ | The SignatureOne® Ceremony® Server™ (“Ceremony Server”) is a J2EE server product that provides the capability to define and manage an electronic signature process within a service oriented architecture and that can be deployed both on-premise and on a SaaS basis. Application program interfaces, web services, notification services, reporting, tracking and flexible XML schema enable virtually seamless integration with most electronic content management, enterprise resource planning or other workflow, content management and storage/repository systems for the automation of any document process that requires signatures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|-------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| SignatureOne® Console™               | The SignatureOne® Console™ (“Console”) product is a server based offering that leverages CIC’s patented Ceremony® process and allows users to manage and control the set up and delivery of documents for electronic signatures in an easy and flexible way and with a strong audit trail for non-repudiation. The Console works independently from advanced document management systems and represents an intuitive front-end solution for small-to-medium enterprises to rapidly integrate electronic signatures in the business processes. Its principal features include the ability to upload multiple documents for review and/or execution, to select an electronic signature method, such as click-to-sign or biometric, choose signature field placement, manage the signature process via invites and preset email reminders and secure the process with passcodes.                                                                                                                                                                                                                                                                      |
| Sign-it®                                   | Sign-it® is a family of software products that enable the real-time capture of electronic and digital signatures, as well as their verification and binding within a standard set of applications, including Adobe Acrobat and Microsoft Word, web based applications using HTML, XML and XHTML, and custom applications for .NET, C# and similar development environments for the enterprise market. The Sign-it® family of products combines the strengths of biometrics, and other forms of electronic signatures, with cryptography in a patented process that insures the creation of documents containing legally compliant electronic signatures. These signatures have the same legal standing as a traditional, wet signature on paper and are created pursuant to the Electronic Signature in National and Global Commerce Act, as well as other related legislation and regulations. With Sign-it® products, organizations wishing to process electronic forms, requiring varying levels of security, can reduce the cost and other inefficiencies inherent with paper documents by adding electronic signature technologies to their workflow solutions.  |
| SignatureOne Profile Server™              | The SignatureOne Profile Server™ (“Profile Server”) is a server compliment to CIC's Sign-It® software and provides server-based enterprise administration and authentication of electronic signatures, as well as maintenance of signature transaction logs for electronically signed documents. The SignatureOne® architecture implements a common process and methodology that provides a uniform program interface for multiple signature methods and multiple capture devices, simplifying enterprise wide integration of business process automation tasks requiring electronic signatures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| iSign®                                     | iSign® is a suite of application development tools for electronic signature capture, encryption and verification in custom applications and web-based processes. iSign® captures and analyzes the image, speed, stroke sequence and acceleration of a person's handwritten electronic signature and can provide an effective and inexpensive solution for immediate authentication of handwritten                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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| iSign® (continued) | signatures. iSign® also stores certain forensic elements of an electronic signature for use in determining whether a person’s electronic signature is legally valid. iSign® includes software libraries for industry standard encryption and hashing to protect the sensitive nature of a user’s signature, as well as the data captured in the Ceremony® process. iSign® is used internally by the Company as an underlying technology for its SignatureOne® and Sign-it® suite of products. |
|-------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| iSign® v4.3.0.1                                     |
|----------------------------------------------------------|
| iSign® v4.3.1.2                                     |
| iSign® v4.3.1.3                                     |
| iSign® v4.4                                         |
| SignatureOne®  Sign-it® XF v2.1 Java      |
| SignatureOne® Ceremony® Server v1.13           |
| SignatureOne® Ceremony® Server v1.2.1          |
| SignatureOne® Ceremony® Server v1.2.2          |
| SignatureOne® Ceremony® Server v1.4            |
| SignatureOne® Ceremony® Server v1.5            |
| SignatureOne® Ceremony® Server v1.5.1          |
| SignatureOne® Sign-it® v7.1 for Acrobat®  |
| SignatureOne® Sign-it® v7.11 for Acrobat® |
| SignatureOne® Sign-it® v7.12 for Acrobat® |
| SignatureOne® Sign-it® v7.2 for Acrobat®  |
| Sign-it® Viewer v2.2 for Acrobat®              |

|   | Patent No. | Expiration |   |
|--------|------------|------------|--------|
|   | 5544255    | 2013       |   |
|   | 5647017    | 2014       |   |
|   | 5818955    | 2015       |   |
|   | 5933514    | 2016       |   |
|   | 6064751    | 2017       |   |
|   | 6091835    | 2017       |   |
|   | 6212295    | 2018       |   |
|   | 6381344    | 2019       |   |
|   | 6487310    | 2019       |   |

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|   | Market Information |
|--------|--------------------|

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Sale PricePer Share     |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------|
| Year   | Period                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | High                    | Low |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                    |   |
| 2009   | First Quarter                                                                                                | $   0.12 | $   0.04 |
|   | Second Quarter                                                                                               | $   0.11 | $   0.05 |
|   | Third Quarter                                                                                                | $   0.18 | $   0.07 |
|   | Fourth Quarter                                                                                               | $   0.23 |  $   0.10 |
| 2010   | First Quarter                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | $   0.14 | $   0.08 |
|   | Second Quarter                                                                                               | $   0.14 | $   0.05 |
|   | Third Quarter                                                                                                | $   0.08 | $   0.03 |
|   | Fourth Quarter                                                                                               | $   0.06 |  $   0.03 |

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| ·   | whether there are legal, regulatory or contractual provisions known to the Company that limit the useful life of any patent to less than the assigned useful life; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | whether the Company needs to incur material costs or make modifications in order for it to continue to be able to realize the protection afforded by the patents; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | whether any effects of obsolescence or significant competitive pressure on the Company’s current or future products are expected to reduce the anticipated cash flow from the products covered by the patents; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | whether demand for products utilizing the patented technology will diminish, remain stable or increase; and |
|--------------------|-------------------------------------------------------------------------------------------------------------|

| ·   | whether the current markets for the products based on the patented technology will remain constant or will change over the useful lives assigned to the patents. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                               |   | Payments due by period |   |
|------------------------------------|--------|------------------------|--------|
| Contractual obligations            |   | Total                  |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | 2014 |   |   | 2015 |   |   | Thereafter |   |
| Operating lease commitments (1)    |   |                   | 1,650  |   |   |   | 284 |   |   |   | 267 |   |   |   | 275 |   |   |   | 283 |   |   |   | 292 |   |   |   | 249 |   |
| Total contractual cash obligations |   | $                      | 1,650  |   |   | $ | 284 |   |   | $ | 267 |   |   | $ | 275 |   |   | $ | 283 |   |   | $ | 292 |   |   | $ | 249 |   |

| 1.   | The Company extended the lease on its offices in April 2010.  The base rent will decrease approximately 6% in November 2011 and then increase approximately 3% per annum over the term of the lease, which expires on October 31, 2016. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Name                         | Age | Positions with the Company                   |
|------------------------------|-----|----------------------------------------------|
| Philip S. Sassower, Chairman | 71  | Chairman and Chief Executive Officer         |
| Andrea Goren                 | 43  | Director and Acting Chief Financial Officer  |
| William Keiper               | 60  | Acting President and Chief Operating Officer |
| Kurt Amundson                | 57  | Director                                     |
| Francis J. Elenio            | 44  | Director                                     |
| David E. Welch               | 62  | Director                                     |

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|      Name andPrincipalPosition |   |       Year |           |      Salary($) |                   |      Bonus($) |   |     StockAwards($)(4) |                       |     OptionAwards($) (5) |    |    Non-EquityIncentive PlanCompensation($) |   | Change inPension ValueAndNonqualifiedDeferred CompensationEarnings($) |                      |     All OtherCompensation($) |    |      Total($) |   |
|---------------------------------------------------------|--------|------------------------------------------|----------------|-----------------------------------------|------------------------|----------------------------------------|--------|-------------------------------------------|----------------------------|---------------------------------------------|---------|-----------------------------------------------------------|--------|-----------------------------------------------------------------------|---------------------------|--------------------------------------------------|---------|----------------------------------------|--------|
| Philip S. SassowerChairman and CEO                      |   | 2010                                     |           |                                    |    -(1) |                                   |   | −                              |                       |                                        | − |                                                      |   | −                                                          |                      |                                             | − |                                   |   | − |   |   |  − |   |   | − |   |
|  Andrea Goren Acting CFO                           |   |                                     | 2010      |                                    |                   | -(2)                                   |   |                                      | –               |                                        |    | –                                                   |   |                                                                  | –                   |                                             |    | –                                |   |   | – |   |   | – |   |   | – |   |
|  Guido DiGregorioFormer President & COO        |   |                                     | 2010 2009 |                                    |                   | 262,156(3)285,000(3)                   |   |                                      | − −  |                                        |    | 31,038 −                                       |   |                                                                  | − 51,297  |                                             |    | −−                         |   |   | −− |   |   | 10,388 10,388 |   |   | 303,582 346,685 |   |
|  Frank DaneFormer CLO & CFO                    |   |                                     | 20102009       |                                    |                   | 169,157 145,500                   |   |                                      | − −  |                                        |    |   3,485 −                            |   |                                                                  | − 14,484  |                                             |    | − −                   |   |   | −− |   |   |  −  − |   |   | 172,642 159,984 |   |
|                                                    |   |                                     |           |                                    |                   |                                   |   |                                      |                       |                                        |    |                                                      |   |                                                                  |                      |                                             |    |                                   |   |   |   |   |   |   |   |   |   |   |

| 1.   | Mr. Sassower was appointed Chairman of the Board and Chief Executive Officer on August 5, 2010, and receives no compensation. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Mr. Goren was appointed Acting Chief Financial Officer on December 7, 2010, and receives no compensation. |
|----------------|-----------------------------------------------------------------------------------------------------------|

| 3.   | Mr. DiGregorio's 2010 salary includes $35,000 paid in August 2010 that he had voluntarily deferred from his 2009 salary. Mr. DiGregorio's 2009 salary includes $85,000 paid in June 2009 that he had voluntarily deferred from his 2008 salary. In connection with the Recapitalization and Series B Financing, in June 2010, Mr. DiGregorio gave up 25% of his 2010 annual salary, or $71,250, in exchange for shares of restricted stock which shares vested over a 12-month period. Mr. DiGregorio gave up 18% of his 2009 salary, or $50,000, as part of the overall Company salary reduction per the May 2009 financing. Mr. DiGregorio resigned on December 7, 2010. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | The amounts provided in this column represent the aggregate grant date fair value of restricted stock awards granted  to our officers, as calculated in accordance with FASB ASC Topic 718, Stock Compensation. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | The amounts provided in this column represent the aggregate grant date fair value of option awards granted to our officers, as calculated in accordance with FASB ASC Topic 718, Stock Compensation. Mr. DiGregorio has 2,902,713 options that are vested and exercisable within sixty days of December 31, 2010.  Mr. Dane has 684,764 options that are vested and exercisable within sixty days of December 31, 2010. In accordance with applicable regulations, the value of such options does not reflect an estimate for features related to service-based vesting used by the Company for financial statement purposes. See footnote 6 in the Notes to Consolidated Financial Statements included with this report on Form 10-K. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   |     Name andPrincipalPosition | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable                                                                                  | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable                                                                                                                                            |     OptionExercisePrice ($) (3)                                                                                                                                                                                                                                                                                                                              |     OptionExpirationDate (10)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Philip S. Sassower, Chairman and CEO              | −                                                                                                                                        |  −                                                                                                                                                                                              | −                                                                                                                                                                                                                                                                                                                                                                          |   –                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Guido DiGregorio, Former President & CEO      | 1,275,000(1)425,000(2)559,090(3)184,701(4)69,646(4)63,721(4)56,567(4)53,202(4)34,613(4)24,926(4)21,619(4)23,347(4)29,737(4)37,107(4)44,437(4)  |  − − − − − − − − − − − − − − −        | $   0.75$   0.39$   0.15$   0.08$   0.07$   0.08$   0.08$   0.09$   0.13$   0.18$   0.19$   0.18$   0.15$   0.12$   0.10                        |           06/07/2012          06/07/2012          06/07/2012          07/15/2012          07/31/2012          08/14/2012          08/31/2012          09/15/2012          09/30/2012          10/15/2012          10/30/2012          11/13/2012          11/30/2012          12/15/2012          12/31/2012                                                                       |
|   | Frank Dane, Former CLO & CFO                  | 35,985(5)107,958(6)100,000(7)279,545(8)52,151(9)19,665(9)17,922(9)15,972(9)15,022(9)9,733(9)7,038(9)6,104(9)6,593(9)8,396(9)10,478(9)12,547(9) |  − − − − − − − − − − − − −– − − | $   0.39$   0.75$   0.55$   0.15$   0.08$   0.07$   0.08$   0.08$   0.09$   0.13$   0.18$   0.19$   0.18$   0.15$   0.12$   0.10 |           06/07/2012          06/07/2012          06/07/2012          06/07/2012          07/15/2012          07/31/2012          08/14/2012          08/31/2012          09/15/2012          09/30/2012          10/15/2012          10/30/2012          11/13/2012          11/30/2012          12/15/2012          12/31/2012 |

|    | (1) Mr. DiGregorio's 1,275,000 options were granted on December 19, 2005, vested pro rata quarterly over three years, and expire on June 7, 2012. |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) Mr. DiGregorio's 425,000 options were granted on December 19, 2005, vested pro rata quarterly over three years, and expire on June 7, 2012. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3)Mr. DiGregorio's 559,090 options were granted on July 25, 2008, vest pro rata quarterly over three years, and expire on June 7, 2012. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) Mr. DiGregorio was granted an aggregate of 643,623 options granted in 2009. Each of those options was 100% vested on its respective date of grant and expires three years from the date of grant.   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (5) Mr. Dane's 35,985 options were granted on December 19, 2005, vested pro rata quarterly over three years, and expire on June 7, 2012. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) Mr. Dane's 107,958 options were granted on December 19, 2005, vested pro rata quarterly over three years, and expire on June 7, 2012. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7)  Mr. Dane's 100,000 options were granted on November 11, 2007, vested pro rata quarterly over three years, and expire on June 7, 2012. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) Mr. Dane's 279,545 options were granted on July 25, 2008, vest pro rata quarterly over three years, and expire on June 7, 2012. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) Mr. Dane was granted an aggregate of 263,549 options granted in 2009. Each of those options was 100% vested on its respective date of grant and expires three years from the date of grant. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (10)  | All options granted will expire upon the earlier of (i) 18 months from December 7, 2010, or June 7, 2012 or (ii) the seven-year anniversary of the grant date, except for those fully vested stock options granted in lieu of salary, which options will expire on the three-year anniversary of the grant date. |
|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                            | Common Stock               |                | Series A-1 Preferred Stock |                       | Series B Preferred Stock |   | Series C Preferred Stock   |
|-----------------------------------------------------------------|----------------------------|---------------------|----------------------------|----------------------------|--------------------------|--------|----------------------------|
|   Name of Beneficial Owner                            |  Number of Shares (1) | PercentOf Class (1) |                       |  Number of Shares (2) | PercentOf Class (2)      |   |  Number of Shares (3) | PercentOf Class (3) |   |  Number of Shares (4) | PercentOf Class (4) |
| Andrea Goren (5)                                                | 304,136,996                | 70.6%               |                       | −                    | −                  |   | 4,898,965                  | 58.6% |   | 1,200,000 | 54.3% |
| Philip S. Sassower (6)                                          | 301,117,996                | 70.6%               |                       | −                    | −                  |   | 4,898,965                  | 58.6% |   | 1,200,000 | 54.3% |
| Kurt Amundson (7)                                               |  158,333              | *                   |                       | −                    | −                  |   | −                    |   |   | − | − |
| Francis J. Elenio (8)                                           | 83,333                     | *                   |                       | −                    | −                  |   | −                    | − |   | − | − |
| David E. Welch (9)                                              |  308,333              | *                   |                       | −                    | −                  |   | −                    | − |   | − | − |
| William Keiper (10)                                             | 8,666,666                  | 4.3%                |                       |                    | −                  |   | −                    | − |   | 97,500 | 4.2% |
|                                                            |                       |                |                       |                       |                     |   |                       |   |   |   |   |
| All directors and executive officers as a group(6 persons) (11) |  313,353,661          |  71.3%         |                       |  −              |  −            |   |  4,898,965            |  58.6% |   |  1,297,500 |  56.2% |
|                                                            |                       |                |                       |                       |                     |   |                       |   |   |   |   |
| 5% Shareholders                                                 |                       |                |                       |                       |                     |   |                       |   |   |   |   |
| Phoenix Venture Fund LLC (12)                                   | 304,034,663                | 70.6%               |                       | −                    | −                  |   | 4,898,965                  | 58.6% |   | 1,200,000 | 52.0% |
| Michael W. Engmann (13)                                         | 68,166,292                 | 25.6%               |                       | 578,983                    | 71.2%                    |   | 1,374,077                  | 16.5% |   | 200,000 | 8.7% |

| 1.   | Shares of Common Stock beneficially owned and the respective percentages of beneficial ownership of Common Stock assumes the exercise or conversion of all options, warrants and other securities convertible into Common Stock, including shares of Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock beneficially owned by such person or entity currently exercisable or exercisable within 60 days of March 28, 2011. Shares issuable pursuant to the exercise of stock options and warrants exercisable within 60 days of March 28, 2011, or securities convertible into Common Stock within 60 days of March 28, 2011 are deemed outstanding and held by the holder of such shares of Common Stock, options, warrants, or other convertible securities, including shares of Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, for purposes of computing the percentage of outstanding Common Stock beneficially owned by such person, but are not deemed outstanding for computing the percentage of outstanding Common Stock beneficially owned by any other person. The percentage of beneficial ownership of Common Stock beneficially owned is based on 191,489,901 shares of Common Stock, 813,311 shares of Series A-1 Preferred Stock, 8,380,547 shares of Series B Preferred Stock and 2,308,000 shares of Series C Preferred Stock outstanding as of March 28, 2011. The shares of Common Stock beneficially owned and the respective percentages of beneficial ownership of Common Stock stated in these columns assume conversion of shares of Series A-1 Preferred Stock, Series B Preferred Stock and Series C Preferred Stock. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | Each outstanding share of Series A-1 Preferred Stock is presently convertible into 7.1429 shares of Common Stock. The shares of Series A-1 Preferred Stock beneficially owned and the respective percentages of beneficial ownership of Series A-1 Preferred Stock stated in these columns reflect ownership of shares of Series A-1 Preferred Stock, and not shares of Common Stock issuable upon conversion of shares of Series A-1 Preferred Stock at this ratio. The percentage of beneficial ownership of Series A-1 Preferred Stock beneficially owned is based on 813,311 shares of Series A-1 Preferred Stock outstanding as of March 28, 2011. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 3.   | Each outstanding share of Series B Preferred Stock is presently convertible into 23.0947 shares of Common Stock. The shares of Series B Preferred Stock beneficially owned and the respective percentages of beneficial ownership of Series B Preferred Stock stated in these columns reflect ownership of shares of Series B Preferred Stock, and not shares of Common Stock issuable upon conversion of shares of Series B Preferred Stock at this ratio. The percentage of beneficial ownership of Series B Preferred Stock beneficially owned is based on 8,380,547 shares of Series B Preferred Stock outstanding as of March 28, 2011. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Each outstanding share of Series C Preferred Stock is presently convertible into 44.444 shares of Common Stock. The shares of Series C Preferred Stock beneficially owned and the respective percentages of beneficial ownership of Series C Preferred Stock stated in these columns reflect ownership of shares of Series C Preferred Stock, and not shares of Common Stock issuable upon conversion of shares of Series C Preferred Stock at this ratio. The percentage of beneficial ownership of Series C Preferred Stock beneficially owned is based on 2,308,000 shares of Series C Preferred Stock outstanding as of March 28, 2011. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Includes shares of Common Stock beneficially owned by Phoenix. Please see footnote 12 below for information concerning shares of Common Stock beneficially owned by Phoenix. Along with Mr. Goren, Mr. Sassower is the co-manager of SG Phoenix Ventures LLC, which has the shared power to vote and dispose of the shares of Common Stock held by Phoenix and, accordingly, Mr. Sassower may be deemed to be the beneficial owner of the shares owned by Phoenix. SG Phoenix Ventures LLC, Mr. Goren and Mr. Sassower each disclaim beneficial ownership of the shares owned by Phoenix, except to the extent of their respective pecuniary interests therein. Mr. Sassower’s address is 110 East 59th Street, Suite 1901, New York, NY 10022. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | Includes shares of Common Stock beneficially owned by Phoenix. Please see footnote 12 below for information concerning shares of Common Stock beneficially owned by Phoenix. Along with Mr. Sassower, Mr. Goren is the co-manager of SG Phoenix Ventures LLC, which has the shared power to vote and dispose of the shares of Common Stock held by Phoenix and, accordingly, Mr. Goren may be deemed to be the beneficial owner of the shares owned by Phoenix. SG Phoenix Ventures LLC, Mr. Goren and Mr. Sassower each disclaim beneficial ownership of the shares owned by Phoenix, except to the extent of their respective pecuniary interests therein. In addition to the shares beneficially owned by Phoenix, Mr. Goren beneficially owns 19,000 shares of Common Stock. Mr. Goren’s address is 110 East 59th Street, Suite 1901, New York, NY 10022. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | Represents 158,333 shares issuable upon the exercise of options exercisable within 60 days hereof. |
|----------------|----------------------------------------------------------------------------------------------------|

| 8.   | Represents 83,333 shares issuable upon the exercise of options exercisable within 60 days hereof. |
|----------------|---------------------------------------------------------------------------------------------------|

| 9.   | Represents 308,333 shares issuable upon the exercise of options exercisable within 60 days hereof. |
|----------------|----------------------------------------------------------------------------------------------------|

| 10.   | Represents (a) 4,333,333 shares issuable upon the conversion of 97,500 shares of Series C Preferred Stock, and (b) an aggregate of 4,333,333 shares issuable upon exercise of warrants exercisable within 60 days hereof beneficially owned by FirstGlobal Partners LLC (“FirstGlobal”).  Mr. Keiper is the manager of FirstGlobal, which has the power to vote and dispose of the shares of Common Stock held by FirstGlobal and, accordingly, Mr. Keiper may be deemed to be the beneficial owner of the shares owned by FirstGlobal. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11.   | Includes shares of Common Stock beneficially owned by Phoenix. Please see footnote 12 below for information concerning shares of Common Stock beneficially owned by Phoenix. Mr. Sassower and Mr. Goren are the co-managers of SG Phoenix Ventures LLC, which has the shared power to vote and dispose of the shares of Common Stock held by Phoenix and, accordingly, Mr. Sassower and Mr. Goren may be deemed to be the beneficial owner of the shares owned by Phoenix. SG Phoenix Ventures LLC, Mr. Sassower and Mr. Goren each disclaim beneficial ownership of the shares owned by Phoenix, except to the extent of their respective pecuniary interests therein. The amount stated above includes 716,665 shares issuable upon the exercise of options within 60 days of March 28, 2011. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 12.   | Represents (a) 62,283,625 shares held by Phoenix Venture Fund LLC ( “Phoenix”), (b) 2,792,429 shares held by SG Phoenix LLC, Phoenix’s management company and (c) 72,485,207 shares issuable upon the exercise of warrants, 113,140,069 shares issuable upon the conversion of 4,898,965 shares of Series B Preferred stock and 53,333,333 shares issuable upon the exercise of 1,200,000 shares of Series C Preferred Stock. SG Phoenix Ventures LLC is the Managing Member of Phoenix, with the power to vote and dispose of the shares of Common Stock held by Phoenix. Accordingly, SG Phoenix Ventures LLC may be deemed to be the beneficial owner of such shares. Andrea Goren is the co-manager of SG Phoenix Ventures LLC, has the shared power to vote and dispose of the shares of Common Stock held by Phoenix and, as such, may be deemed to be the beneficial owner of the common shares owned by Phoenix and by SG Phoenix LLC, of which he is a member. Philip Sassower is the co-manager of SG Phoenix Ventures LLC, has the shared power to vote and dispose of the shares of Common Stock held by Phoenix and, as such, may be deemed to be the beneficial owner of the common shares owned by Phoenix and by SG Phoenix LLC, of which he is a member. SG Phoenix Ventures LLC, Mr. Goren and Mr. Sassower each disclaim beneficial ownership of the shares owned by Phoenix, and Mr. Goren and Mr. Sassower each disclaim beneficial ownership of the shares owned by SG Phoenix LLC, except to the extent of their respective pecuniary interests therein. The address of these stockholders is 110 East 59th Street, Suite 1901, New York, NY 10022. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 13.   | Represents (a) 5,956,197 shares beneficially owned by Mr. Engmann, of which 743,128 are held by MDNH Partners, L.P. and 1,171,617 are held by KENDU Partners Company, (b) an aggregate of 22,158,341 shares issuable upon exercise of warrants beneficially owned by Mr. Engmann, of which 10,630,772 are held by MDNH Partners, L.P. and 150,435 are held by KENDU Partners Company, (c) 4,135,593 shares of Common Stock issuable upon the conversion of shares of Series A-1 Preferred Stock beneficially owned by Mr. Engmann, of which 1,255,366 are issuable to MDNH Partners, L.P. and 2,845,450 are issuable to KENDU Partners Company, (d) 31,733,880 shares of Common Stock issuable upon the conversion of shares of Series B Preferred Stock beneficially owned by Mr. Engmann, of which 7,362,286 are issuable to MDNH Partners, L.P. and 2,642,379 are issuable to KENDU Partners Company; and (e) 8,888,888 shares of Common Stock issuable upon the conversion of shares of Series C Preferred Stock beneficially owned by Mr. Engmann, of which 4,444,444 are issuable to MDNH Partners, L.P. Mr. Engmann’s address is 220 Bush Street, No. 660, San Francisco, CA 94104. (See note 5 to the Consolidated Financial Statements). |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                             |   | Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights |         |   | Weighted-Average Exercise Price Of Outstanding Options, Warrants and Rights |   |       | Number of Securities Remaining Available For Future Issuance Under Equity Compensation Plans |   |
|------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------------|--------|-----------------------------------------------------------------------------|--------|------------|----------------------------------------------------------------------------------------------|--------|
| Equity Compensation Plans Approved by Security Holders           |   |                                                                                        |         |   |                                                                        |   |       |                                                                                         |   |
|  1999 Stock Option Plan                                     |   |                                                                                        | 2,154        |   |                                                                        | $      | 0.61       |                                                                                         |   |   | − |   |
|  Equity Compensation Plans Not Approved by Security Holders |   |                                                                                        |   7,874 |   |                                                                        | $      |  0.26 |                                                                                         |   |   |   3,182 |   |
|                                                             |   |                                                                                        |         |   |                                                                        |   |       |                                                                                         |   |   |   |   |
| Total:                                                           |   |                                                                                        | 10,028       |   |                                                                        | $      | 0.38       |                                                                                         |   |   | 3,182 |   |

----

----

|               | Amount and percentage of fees       |
|--------------------|-------------------------------------|
| Nature of Services | 2010                                |   | 2009 |
|               |                                |   |   |   |   |
| Audit Fees         |  Audit fees are expected to be |  $    109,000 (76%) |   |  Audit Fees |  $      103,300(72%) |
| Audit-Related Fees |                                | $      25,000 (18%) |   | Audit-Related fees | $        29,400(20%) |
| Tax Fees           |  Tax fees are expected to be   |  $          9,000 (6%) |   |  Tax Fees |  $         12,000( 8%) |
| All Other Fees     |                                | $                −           |   | All Other Fees | $                  −          |
| Total              |                                | $      143,000          |   | Total | $       144,700          |

----

|   |                                                                                                           | Page      |
|--------|----------------------------------------------------------------------------------------------------------------|-----------|
| (a)(1) | Financial Statements                                                                                           |      |
|   | Report of GHP Horwath, P.C., Independent Registered Public Accounting Firm                                     | F-1       |
|   | Consolidated Balance Sheets at December 31, 2010 and 2009                                                 | F-2       |
|   | Consolidated Statements of Operations for the years ended December 31, 2010 and 2009                      | F-3       |
|   | Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2010 and 2009 |  F-4 |
|   | Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009                      | F-5       |
|   | Notes to Consolidated Financial Statements                                                                     | F-7       |

|   | (2) Financial Statement Schedules |
|--------|-----------------------------------|

| ExhibitNumber |  Document                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1           | Certificate of Incorporation of the Company, as amended, incorporated herein by reference to Exhibits 3.1, 3.2, 3.3 and 3.4 to the Company's Registration Statement on Form 10 (File No. 000-19301).                                                                                                                                                                                                          |
| 3.2           | Certificate of Amendment to the Company's Certificate of Incorporation (authorizing the reclassification of the Class A Common Stock and Class B Common Stock into one class of Common Stock) filed with the Delaware Secretary of State on November 1, 1991, incorporated herein by reference to Exhibit 3 to Amendment 1 on Form 8 to the Company's Form 8-A (File No. 000-19301). |
| 3.3           | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State June 12, 1998, incorporated herein by reference to Exhibit 10.24 to the Company’s 1998 Form 10-K filed on April 6, 1999.                                                                                                                                             |
| 3.4           | By-laws of the Company adopted on October 6, 1986, incorporated herein by reference to Exhibit 3.5 to the Company's Registration Statement on Form 10 (File No. 000-19301).                                                                                                                                                                                                                              |
| 3.5           | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State January 24, 2001, incorporated herein by reference to Exhibit 3.5 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.                                                                                                                    |
| 3.6           | Certificate of Elimination of the Company’s Certificate of Designation of the Series A Preferred Stock filed with the Delaware Secretary of State August 17, 2001, incorporated herein by reference to Exhibit 3.6 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.                                                                                                          |
|          |                                                                                                                                                                                                                                                                                                                                                                                                                    |

----

|          |                                                                                                                                                                                                                                                                                                             |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  Document                                                                                                                                                                                                                                                                                                   |
| 3.7           | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State August 17, 2007, incorporated herein by reference to Exhibit 3.7 to the Company’s Registration Statement on Form S/1 filed on December 28, 2007.              |
| 3.8           | Amended and Restated Certificate of Incorporation of the Company filed with the Delaware Secretary of State on May 18, 1995, incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                      |
| 3.9           | Certificate of Designations, Powers, Preferences and Rights of the Series A Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on June 4, 2008, incorporated herein by reference to Exhibit 4.23 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.   |
| 3.10          | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on June 30, 2008, incorporated herein by reference to Exhibit 3.7 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                    |
| 3.11          | Certificate of Designations, Powers, Preferences and Rights of the Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on October 30, 2008, incorporated herein by reference to Exhibit 3.11 to the Company’s Annual Report on Form 10-K filed on March 12, 2009. |
| 3.12          | Certificate of Elimination of the Company’s Series A Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on December 30, 2008, incorporated herein by reference to Exhibit 3.12 to the Company’s Annual Report on Form 10-K filed on March 12, 2009.                   |
| 3.13          | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on June 30, 2009, incorporated herein by reference to Exhibit 3.13 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                   |
| 3.14          | Amendment No. 1 to By-laws dated June 17, 2010, incorporated herein by reference to Exhibit 3.14 to the Company’s Quarterly Report on Form 10-Q filed on August 16, 2010.                                                                                                                                  |
| 3.15          | Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State on August 4, 2010, incorporated herein by reference to Exhibit 3.15 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.                |
| 3.16          | Amended and Restated Certificate of Designation of Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on August 4, 2010, incorporated herein by reference to Exhibit 3.16 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.             |
| 3.17          | Certificate of Designation of Series B Participating Convertible Preferred Stock filed with the Delaware Secretary of State on August 4, 2010, incorporated herein by reference to Exhibit 3.17to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.                                  |
| *3.18         | Certificate of Amendment to Amended And Restated Certificate of Incorporation filed with the Delaware Secretary of State on December 31, 2010.                                                                                                                                                                   |
| *3.19         | Second Amended and Restated Certificate of Designation of Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2010.                                                                                                                                     |
| *3.20         | Second Amended and Restated Certificate of Designation of Series B Participating Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2010.                                                                                                                                    |
| *3.21         | Certificate of Designation of Series C Participating Convertible Preferred Stock filed with the Delaware Secretary of State on December 31, 2010.                                                                                                                                                                |
| †4.10   | 1999 Stock Option Plan, as amended, incorporated herein by reference to Exhibit 4.2 to the Company's Form S-8 filed on September 19, 2008.                                                                                                                                                                       |
| 4.11          | Form of Convertible Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.3 to the Company's Form 8-K filed on November 3, 2004.                                                                                                                                            |
| 4.12          | Form of Warrant issued by the Company, incorporated herein by reference to Exhibit 10.4 to the Company's Form 8-K filed on November 3, 2004.                                                                                                                                                                |
| 4.13          | Form of Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.36 to the Company's Form 8-K filed on August 12, 2006.                                                                                                                                                             |

----

|                                                    |                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber                                           |  Document                                                                                                                                                                                                                                                                                                   |
| 4.14                                                    | Form of Warrant issued by the Company, incorporated herein by reference to Exhibit 10.37 to the Company's Form 8-K filed on August 12, 2006.                                                                                                                                                                     |
| 4.15                                                    | Form of Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.36 to the Company’s Form 8-K filed on February 9, 2007.                                                                                                                                                      |
| 4.16                                                    | Form of Warrant issued by the Company, incorporated herein by reference to Exhibit 10.37 to the Company’s Form 8-K filed on February 9, 2007.                                                                                                                                                              |
| 4.17                                                    | Form of Promissory Note issued by the Company, incorporated herein by reference to Exhibit 10.36 to the Company’s Form 8-K filed on June 20, 2007.                                                                                                                                                         |
| 4.18                                                    | Form of Warrant issued the Company, incorporated herein by reference to Exhibit 10.37 to the Company’s Form 8-K filed on June 20, 2007.                                                                                                                                                                    |
| 4.19                                                    | Form of Common Stock Purchase Warrant issued by the Company, incorporated herein by reference to Exhibit 4.19 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                     |
| 4.20                                                    | Form of Additional Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.20 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                                |
| 4.21                                                    | Form of Secured Promissory Note issued by the Company dated June 5, 2008, incorporated herein by reference to Exhibit 4.21 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                        |
| 4.22                                                    | Form of Additional Secured Promissory Note, incorporated herein by reference to Exhibit 4.22 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                                                                                                                                      |
| 4.23                                                    | Certificate of Designations, Powers, Preferences and Rights of the Series A-1 Cumulative Convertible Preferred Stock filed with the Delaware Secretary of State on October 30, 2008, incorporated herein by reference to Exhibit 4.23 to the Company’s Annual Report on Form 10-K filed on March 12, 2009. |
| 4.24                                                    | Form of Secured Promissory Note issued by the Company dated May 28, 2009, incorporated herein by reference to Exhibit 4.24 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                                                        |
| 4.25                                                    | Form of Additional Secured Promissory Note, incorporated herein by reference to Exhibit 4.25 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                                                                                      |
| 4.26                                                    | Form of Common Stock Purchase Warrant issued by the Company, incorporated herein by reference to Exhibit 4.26 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                                                                     |
| 4.27                                                    | Form of Additional Common Stock Purchase Warrant, incorporated herein by reference to Exhibit 4.27 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                                                                                |
| ††10.19       | Software Development and License Agreement dated December 4, 1998 between Ericsson Mobile Communications AB and the Company incorporated herein by reference to Exhibit 10.26 of the Company's 1998 Form 10-K (File No. 0-19301).                                                                 |
| 10.24                                                   | Form of Note and Warrant Purchase Agreement dated October 28, 2004, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed on November 3, 2004.                                                                   |
| 10.25                                                   | Form of Registration Rights Agreement dated October 28, 2004, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.2 to the Company's Form 8-K filed on November 3, 2004.                                                                            |
| 10.26                                                   | Form of Note and Warrant Purchase Agreement dated August 10, 2006, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on August 12, 2006.                                                                         |
| 10.26                                                   | Form of Note and Warrant Purchase Agreement dated August 10, 2006, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on August 12, 2006.                                                                         |
| 10.27                                                   | Form of Registration Rights Agreement dated August 10, 2006, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.35 to the Company's Form 8-K filed on August 12, 2006.                                                                                  |

----

| ExhibitNumber                                      |  Document                                                                                                                                                                                                                                                  |
|----------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| †††10.28     | Amendment dated May 31, 2005 to the License agreement dated December 22, 2000 between the Company and eCom Asia Pacific, Ltd., incorporated by reference to Exhibit 10.26 of the Company’s Form 10-K/A filed on September 15, 2005.                       |
| †††10.29     | License agreement dated June 2, 2005 between the Company and SnapOn Credit LLC, incorporated herein by reference to Exhibit 10.27 of the Company’s Form 10-K/A filed on September 15, 2005.                                                               |
| †10.30                                       | Amendment to employment agreement with Guido DiGregorio, incorporated herein by reference to the Company's Form 8-K filed on September 21, 2005.                                                                                                                |
| †10.31                                       | Amendment to employment agreement with Francis V. Dane, incorporated herein by reference to the Company's Form 8-K filed on September 21, 2005.                                                                                                                 |
| †10.32                                       | Form of stock option agreement dated August 31, 2005 with Russel L. Davis, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                                           |
| †10.33                                       | Form of stock option agreement dated December 19, 2005 with Guido DiGregorio, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                                        |
| †10.34                                       | Form of stock option agreement dated August 31, 2005 with Francis V. Dane, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                                           |
| †10.35                                       | Form of stock option agreement dated August 31, 2005 with C. B. Sung, incorporated by reference to Exhibit 10.30 of the Company’s Form 10-K/A filed on September 15, 2006.                                                                                |
|  10.36                                        | Form of Note and Warrant Purchase Agreement dated February 5, 2007, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on February 5, 2007.                      |
|  10.37                                        | Form of Registration Rights Agreement dated February 5, 2007, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.35 to the Company's Form 8-K filed on February 5, 2007.                               |
|  10.38                                        | Amendment to the Note and Warrant Purchase Agreement dated February 5, 2007, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 99.1 to the Company's Form 8-K filed on March 15, 2007.                   |
|  10.39                                        | Form of Note and Warrant Purchase Agreement dated June 15, 2007, by and among the Company and the Purchasers identified therein, incorporated herein by reference to Exhibit 10.34 to the Company's Form 8-K filed on June 15, 2007.                            |
|  10.40                                        | Form of Registration Rights Agreement dated June 15, 2007, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.35 to the Company's Form 8-K filed on June 15, 2007.                                     |
|  10.41                                        | Form of Securities Purchase and Registration Rights Agreement dated August 24, 2007, by and among the Company and Phoenix Venture Fund LLC, incorporated herein by reference to Exhibit 10.36 to the Company's Form 8-K filed on August 27, 2007.               |
| †10.42                                       | Consulting Agreement dated January 9, 2008 between the Company and GS Meyer & Associates LLC - Incorporated by reference to Exhibit 10.42 to the Company’s Annual Report on Form 10-K filed on March 12, 2007.                                        |
|  10.43                                        | Credit Agreement dated June 5, 2008, by and among the Company and the Lenders Party Hereto and SG Phoenix as Collateral Agent, incorporated herein by reference to Exhibit 10.41 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008. |
|  10.44                                        | Pledge and Security Agreement dated June 5, 2008, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.42 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                 |
|  10.44                                        | Securities Purchase Agreement dated June 5, 2008, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.43 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                 |
|  10.45                                        | Registration Rights Agreement dated June 5, 2008, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.44 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2008.                 |
|                                               |                                                                                                                                                                                                                                                            |

----

|          |                                                                                                                                                                                                                                                                                                                                      |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  Document                                                                                                                                                                                                                                                                                                                            |
|  10.46   | Amendment No. 1 to Credit Agreement dated May 28, 2009, by and among the Company, the Lenders and Additional Lenders Parties Hereto and SG Phoenix as Collateral Agent, incorporated herein by reference to Exhibit 10.46 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                  |
|  10.47   | Amendment No. 1 to Registration Rights Agreement dated May 28, 2009, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.47 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                                        |
|  10.48   | Salary Reduction Plan for Executive Officers of Communication Intelligence Corporation under Amendment No. 1 to Credit Agreement dated May 28, 2009, incorporated herein by reference to Exhibit 10.48 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2009.                                                     |
|  10.53   | Amendment No. 3 to Credit Agreement dated July 22, 2010, by and among the Company, the Lenders and Additional Lenders Parties Hereto and SG Phoenix as Collateral Agent, incorporated herein by reference to Exhibit 10.53 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.                               |
|  10.54   | Amendment No. 3 to Registration Rights Agreement dated July 22, 2010, by and among the Company and the parties identified therein, incorporated herein by reference to Exhibit 10.54 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.                                                                     |
|  10.55   | Registration Rights Agreement dated August 5, 2010, by and among the Company and the Persons Executing the Agreement as Investors, incorporated herein by reference to Exhibit 10.55 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010.                                                                     |
|  10.56   | Investor Rights Agreement dated August 5, 2010, by and among the Company and Phoenix Venture Fund LLC, SG Phoenix LLC, Michael Engmann, Ronald Goodman, Kendu Partners Company and MDNH Partners L.P., incorporated herein by reference to Exhibit 10.56 to the Company’s Quarterly Report on Form 10-Q filed on November 12, 2010. |
|  10.57   | Securities Purchase Agreement dated December 9, 2010, by and among the Company, Phoenix Venture Fund LLC, and the Investors signatory thereto, incorporated herein by reference to Exhibit 10.57 to the Company’s Current Report on Form 8-K filed on December 9, 2010.                                                             |
|  10.58   | Registration Rights Agreement dated December 31, 2010, by and among the Company and the Persons Executing the Agreement as Investors, incorporated herein by reference to Exhibit 10.58 to the Company’s Current Report on Form 8-K filed on January 6, 2011.                                                                       |
|   14.1   | Code of Ethics, incorporated by reference to Exhibit 14 to the Company’s Annual Report on Form 10-K filed on March 30, 2004.                                                                                                                                                                                                        |
| *21.1         | Schedule of Subsidiaries.                                                                                                                                                                                                                                                                                                                 |
| *23.1         | Consent of GHP Horwath, P.C., Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                              |
| *31.1         | Certification of Company’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                        |
| *31.2         | Certificate of Company’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                          |
| *32.1         | Certification of Chief Executive Officer pursuant to 18 USC Section 1750, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                            |
| *32.2         | Certification of Chief Financial Officer pursuant to 18 USC Section 1750, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                            |

|   | * | Filed herewith. |
|--------|---|-----------------|

|   | † | Indicates management contract or compensatory plan, contract or arrangement. |
|--------|---------|------------------------------------------------------------------------------|

|   | †† | Confidential treatment of certain portions of this exhibit have been requested from the SEC pursuant to a request for confidentiality dated March 30, 1999, filed pursuant to the Securities and Exchange Act of 1934. |
|--------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ††† | Confidential treatment of certain portions of this exhibit have been requested from the SEC pursuant to a request for confidentiality dated March 30, 2006 filed pursuant to the Securities and Exchange Act of 1934. |
|--------|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (c) Financial Statement Schedules |
|--------|-----------------------------------|

----

|   | Communication Intelligence Corporation |
|--------|----------------------------------------|
|   | By:                                    |  /s/ Andrea Goren           Andrea Goren(Principal Financial Officer and Officer Duly Authorized to Sign on Behalf of the Registrant) |

| Signature                                      | Title                                                                                      |
|------------------------------------------------|--------------------------------------------------------------------------------------------|
|                                           |                                                                                       |
|  /s/ Philip S. SassowerPhilip S. Sassower |  Chairman and Chief Executive Officer(Principal Executive Officer)                    |
|  /s/ Andrea GorenAndrea Goren             |  Director, Acting Chief Financial Officer(Principal Financial and Accounting Officer) |
|  /s/ Kurt AmundsonKurt Amundson           |  Director                                                                             |
|  /s/ Francis J. ElenioFrancis J. Elenio   |  Director                                                                             |
|  /s/ David WelchDavid Welch               |  Director                                                                             |

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | December 31, |         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | 2010         |         |   | 2009 |   |
| Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |         |         |   |   |   |
| Current assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |         |         |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $            | 1,879        |   |   | $ | 1,021 |   |
| Accounts receivable, net of allowance of $9 and $117 at December 31, 2010 and 2009, respectively                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         | 103          |   |   |   | 227 |   |
| Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         | 44           |   |   |   | 66 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total current assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | 2,026        |   |   |   | 1,314 |   |
| Property and equipment, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         | 26           |   |   |   | 31 |   |
| Patents, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |         | 2,392        |   |   |   | 2,771 |   |
| Capitalized software development costs, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |         | 452          |   |   |   | 1,515 |   |
| Deferred financing costs (Note 3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |         | –      |   |   |   | 218 |   |
| Other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |         | 29           |   |   |   | 29 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total assets                                                                                        |   | $            | 4,925        |   |   | $ | 5,878 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Current liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Current portion of long-term debt –net of discount of $2,222, including related party debt of $4,918, net of discount of $2,138 at December 31, 2009 (Note 3)                                                                                                                                                                                                                                                                                                                                                                                    |   |  $      | –      |   |   |  $ | 2,869 |   |
| Accounts payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         | 450          |   |   |   | 118 |   |
| Accrued compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | 446          |   |   |   | 327 |   |
| Other accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         | 159          |   |   |   | 169 |   |
| Deferred revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |         | 456          |   |   |   | 458 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         |         |   |   |   |   |   |
| Total current liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |         | 1,511        |   |   |   | 3,941 |   |
| Deferred revenue long-term                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |         | 650          |   |   |   | 867 |   |
| Deferred rent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |         | 183          |   |   |   | – |   |
| Derivative liability                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | 499          |   |   |   | 422 |   |
| Total liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |         | 2,843        |   |   |   | 5,230 |   |
| Commitments and contingencies (Note 6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |         |         |   |   |   |   |   |
| Stockholders' equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |         |         |   |   |   |   |   |
| Series A-1 Preferred Stock, $.01 par value; 2,000 shares authorized; 813 and 751 shares outstanding at December 31, 2010 and 2009, respectively ($813 liquidation preference at December 31, 2010)                                                                                                                                                                                                                                                                                                                                                     |   |         |   813   |   |   |   |   751 |   |
| Series B Preferred Stock, $.01 par value; 14,000 shares authorized; 8,380 shares outstanding at December 31, 2010 ($12,570 liquidation preference at December 31, 2010)                                                                                                                                                                                                                                                                                                                                                                           |   |         |   6,350 |   |   |   |   – |   |
| Series C Preferred Stock, $.01 par value; 4,100 shares authorized; 2,211 shares outstanding at December 31, 2010 ($3,317 liquidation preference at December 31, 2010)                                                                                                                                                                                                                                                                                                                                                                                  |   |         |   2,032 |   |   |   |   – |   |
| Common stock, $.01 par value; 1,050,000 shares authorized; 191,489 and 190,026 shares issued and outstanding at December 31, 2010 and 2009, respectively                                                                                                                                                                                                                                                                                                                                                                                               |   |         |   1,915 |   |   |   |   1,900 |   |
| Additional paid-in capital                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |         | 98,347       |   |   |   | 101,221 |   |
| Accumulated deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |         | (107,337     | ) |   |   | (103,178 | ) |
| Accumulated other comprehensive loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |         | (38          | ) |   |   | (46 | ) |
| Total stockholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |         | 2,082        |   |   |   | 648 |   |
| Total liabilities and stockholders' equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $            | 4,925        |   |   | $ | 5,878 |   |

----

|                                                                                                                                               |   | Years Ended December 31, |    |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|
|                                                                                                                                               |   | 2010                     |    |   | 2009 |   |
| Revenue:                                                                                                                                           |   |                     |    |   |   |   |
| Product                                                                                                                                            |   | $                        | 197     |   |   | $ | 1,185 |   |
| Maintenance                                                                                                                                        |   |                     | 654     |   |   |   | 751 |   |
|                                                                                                                                               |   |                     | 851     |   |   |   | 1,936 |   |
| Operating costs and expenses:                                                                                                                      |   |                     |    |   |   |   |   |   |
|  Cost of sales:                                                                                                                               |   |                     |    |   |   |   |   |   |
| Product                                                                                                                                            |   |                     | 635     |   |   |   | 724 |   |
| Maintenance                                                                                                                                        |   |                     | 244     |   |   |   | 161 |   |
|      Acceleration of amortization of certain capitalized software development         costs |   |                     | 1,009   |   |   |  |   |
| Research and development                                                                                                                           |   |                     | 431     |   |   |   | 343 |   |
| Sales and marketing                                                                                                                                |   |                     | 1,531   |   |   |   | 1,501 |   |
| General and administrative                                                                                                                         |   |                     | 2,255   |   |   |   | 1,977 |   |
|                                                                                                                                               |   |                     |    |   |   |   |   |   |
|                                                                                                                                               |   |                     | 6,105   |   |   |   | 4,706 |   |
|                                                                                                                                               |   |                     |    |   |   |   |   |   |
| Loss from operations                                                                                                                               |   |                     | (5,254  | ) |   |   | (2,770 | ) |
|                                                                                                                                               |   |                     |    |   |   |   |   |   |
| Interest and other (expense) income, net                                                                                                           |   |                     | (2      | ) |   |   | 2 |   |
| Interest expense:                                                                                                                                  |   |                     |    |   |   |   |   |   |
| Related party (Note 3)                                                                                                                             |   |                     | (255    | ) |   |   | (312 | ) |
| Other (Note 3)                                                                                                                                     |   |                     | (8      | ) |   |   | (43 | ) |
| Amortization of debt discount and deferred financing cost:                                                                                         |   |                     |    |   |   |   |   |   |
| Related party (Note 3)                                                                                                                             |   |                     | (1,719  | ) |   |   | (1,600 | ) |
| Other (Note 3)                                                                                                                                     |   |                     | (57     | ) |   |   | (78 | ) |
| Loss on extinguishment of long-term debt                                                                                                           |   |                     | – |   |   |   | (829 | ) |
| Gain (loss) on derivative liability                                                                                                                |   |                     | 3,136   |   |   |   | (5,136 | ) |
| Net loss                                                                                                                                           |   |                     | (4,159  | ) |   |   | (10,766 | ) |
| Preferred stock dividends:                                                                                                                         |   |                     |    |   |   |   |   |   |
| Related party                                                                                                                                      |   |                     | (292    | ) |   |   | (45 | ) |
| Other                                                                                                                                              |   |                     | (102    | ) |   |   | (16 | ) |
|                                                                                                                                               |   |                     |    |   |   |   |   |   |
| Net loss attributable to common stockholders                                                                                                       |   | $                        | (4,553  | ) |   | $ | (10,827 | ) |
|  Basic and diluted loss per common share                                                                                                      |   | $                        | (0.02   | ) |   | $ | (0.08 | ) |
|  Weighted average common shares outstanding, basic and diluted                                                                                |   |                     | 190,721 |   |   |   | 129,247 |   |
|                                                                                                                                               |   |                     |    |   |   |   |   |   |

----

|                                                                                                                                                          |   | Series A-1PreferredSharesOutstanding |   |   | Series A-1PreferredSharesAmount |    |   | Series B PreferredSharesOutstanding |   |   | Series B PreferredSharesAmount |   |   | Series C PreferredSharesOutstanding |         |   | Series C PreferredSharesAmount |   |    | CommonSharesOutstanding |   |    |  CommonStockAmount |   |   | AdditionalPaid-InCapital |    |   |  AccumulatedDeficit |    |   | AccumulatedOtherComprehensiveIncome (Loss) |   |    |   Total |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|--------|--------|---------------------------------|---------|--------|-------------------------------------|--------|--------|--------------------------------|--------|--------|-------------------------------------|--------------|--------|--------------------------------|--------|---------|-------------------------|--------|---------|-------------------------|--------|--------|--------------------------|---------|--------|--------------------------|---------|--------|--------------------------------------------|--------|---------|-------------------|--------|
| Balance as of December 31, 2008                                                                                                                               |   |                                 | 856    |   |                            |  $ | 856    |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    | 130,374                 |   |   |  $                  | 1,304   |   |                     |  $ | 95,174 |                                       |   |  $ | (94,569           | )      |   |  $ | 13 |   |   |  $ | 2,778 |   |
| Cumulative effect of change in accounting principle on January 1, 2009 – Reclassification of equity-linked financial instrument to derivative liability |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    | (3,510 | )                                          |   |    |   2,157      |   |   |   |   |   |   |   | (1,353 | ) |
| Stock-based employee compensation                                                                                                                             |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    | 318    |                                       |   |    |              |   |   |   |   |   |   |   | 318 |   |
| Conversion of preferred shares                                                                                                                                |   |                                 | (166   | )      |                            |    | (166   | )                                   |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    | 1,183                   |   |   |                     | 11      |   |                     |    | 155    |                                       |   |    |              |   |   |   |   |   |   |   | − |   |
| Cancellation of warrants recorded as derivative liability                                                                                                     |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    | 875    |                                       |   |    |              |   |   |   |   |   |   |   | 875 |   |
| Exercise of stock options                                                                                                                                     |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    | 85                      |   |   |                     | 1       |   |                     |    | 7      |                                       |   |    |              |   |   |   |   |   |   |   | 8 |   |
| Exercise of warrants                                                                                                                                          |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    | 58,384                  |   |   |                     | 584     |   |                     |    | 8,263  |                                       |   |    |              |   |   |   |   |   |   |   | 8,847 |   |
| Comprehensive loss:                                                                                                                                           |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                                                      |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | (10,766           | )      |   |   |   |   |   |   | (10,766 | ) |
| Foreign currency translation adjustment                                                                                                                       |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   | (59 | ) |   |   | (59 | ) |
| Total comprehensive (loss)                                                                                                                                    |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   | (10,825 | ) |
| Preferred share dividends, paid in kind                                                                                                                       |   |                                 | 61     |   |                            |    | 61     |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    | (61    | )                                          |   |    |              |   |   |   |   |   |   |   | − |   |
| Balances as of December 31, 2009                                                                                                                              |   |                                 | 751    |   |                            |    | 751    |                                |   |   | −                        |   |   |                                | −      |   |                           |   | − |                    |   |    | −                 |   |   |                     | 190,026 |   |                     |    | 1,900  |                                       |   |    | 101,221           |   |   |   | (103,178 | ) |   |   | (46 | ) |   |   | 648 |   |
| Conversion of long-term notes into Series B Preferred Shares, net of unamortized discount of $1,509                                                           |   |                                 |   |   |                            |    |   |                                |   |   |   6,608                   |   |   |  $                             |   6,608 |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | (1,509            | )      |   |   |   |   |   |   |   |   |   |   |   5,099 |   |
| Issuance of Series B Preferred Shares                                                                                                                         |   |                                 |   |   |                            |    |   |                                |   |   | 1,440                          |   |   |                                | 1,440        |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   | 1,440 |   |
| Financing cost on conversion of long-term notes and issuance of Series B Preferred Shares                                                                     |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | (580              | )      |   |   |   |   |   |   |   |   |   |   | (580 | ) |
| Conversion feature associated with the Series B Preferred Shares                                                                                              |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                | (2,000       | )      |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   | (2,000 | ) |
| Warrants issued for services                                                                                                                                  |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | (153              | )      |   |   |   |   |   |   |   |   |   |   | (153 | ) |
| Stock based employee compensation                                                                                                                             |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | 93                |   |   |   |   |   |   |   |   |   |   |   | 93 |   |
| Common stock issued for services                                                                                                                              |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     | 750     |   |                     |    | 8      |                                       |   |    | 58                |   |   |   |   |   |   |   |   |   |   |   | 66 |   |
| Restricted common stock issued in lieu of salaries                                                                                                            |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     | 713     |   |                     |    | 7      |                                       |   |    | (7                | )      |   |   |   |   |   |   |   |   |   |   | − |   |
| Restricted stock expense                                                                                                                                      |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | 40                |   |   |   |   |   |   |   |   |   |   |   | 40 |   |
| Issuance of Series C Preferred Shares                                                                                                                         |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   | 2,211   |                    |   |  $ | 2,211                   |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   | 2,211 |   |
| Financing cost on issuance of Series C Preferred Shares                                                                                                       |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | (422              | )      |   |   |   |   |   |   |   |   |   |   | (422 | ) |
| Conversion feature associated with the Series C Preferred Shares                                                                                              |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    | (179                    | )      |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   | (179 | ) |
| Comprehensive loss:                                                                                                                                           |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                                                                      |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   | (4,159 | ) |   |   |   |   |   |   | (4,159 | ) |
| Foreign currency translation adjustment                                                                                                                       |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   | 8 |   |   |   | 8 |   |
| Total comprehensive loss                                                                                                                                      |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                |         |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   | (4,151 | ) |
| Preferred share dividends                                                                                                                                     |   |                                 | 62     |   |                            |    | 62     |                                |   |   | 332                            |   |   |                                | 332          |   |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    | (394              | )      |   |   |   |   |   |   |   |   |   |   | − |   |
| Conversion feature, Preferred Share dividends                                                                                                                 |   |                                 |   |   |                            |    |   |                                |   |   |                           |   |   |                                | (30          | )      |                           |   |    |                    |   |    |                    |   |   |                     |    |   |                     |    |   |                                       |   |    |              |   |   |   |   |   |   |   |   |   |   |   | (30 | ) |
| Balances as of December 31, 2010                                                                                                                              |   |                                 | 813    |   |                            |  $ | 813    |                                |   |   | 8,380                          |   |   |  $                             | 6,350        |   |                           |   | 2,211   |                    |   |  $ | 2,032                   |   |   |                     | 191,489 |   |                     |  $ | 1,915  |                                       |   |  $ | 98,347            |   |   |  $ | (107,337 | ) |   |  $ | (38 | ) |   |  $ | 2,082 |   |

----

|                                                                                                                                                                 |   | 2010   |    |   | 2009   |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Cash flows from operating activities:                                                                                                                                |   |   |    |   |   |   |
| Net loss                                                                                                                                                        |   | $      | (4,159  | )      |   | $      | (10,766 | ) |
| Adjustments to reconcile net loss to net cashused for operating activities:                                                                                          |   |   |    |   |   |   |   |   |
| Depreciation and amortization                                                                                                                                   |   |   | 1,224   |   |   |   | 1,107 |   |
| Accelerated amortization of certain capitalized software                development costs |   |   | 1,009   |   |   |   | − |   |
| Amortization of debt discount and deferred financing costs                                                                                                           |   |   | 1,776   |   |   |   | 1,678 |   |
| Loss on extinguishment of long-term debt                                                                                                                        |   |   | − |   |   |   | 829 |   |
| Stock-based employee compensation                                                                                                                               |   |   | 93      |   |   |   | 318 |   |
| Restricted stock expense                                                                                                                                        |   |   | 40      |   |   |   | − |   |
| Stock issued for services                                                                                                                                       |   |   | 66      |   |   |   | − |   |
| (Gain) loss on derivative liability                                                                                                                             |   |   | (3,136  | )      |   |   | 5,136 |   |
| Non cash interest expense                                                                                                                                       |   |   | 291     |   |   |   | 337 |   |
| Changes in operating assets and liabilities:                                                                                                                         |   |   |    |   |   |   |   |   |
|    Accounts receivable, net                                                                                                                           |   |   | 124     |   |   |   | 473 |   |
|    Prepaid expenses and other assets                                                                                                             |   |   | 22      |   |   |   | 15 |   |
|    Accounts payable                                                                                                                                   |   |   | 332     |   |   |   | 26 |   |
|    Accrued compensation                                                                                                                               |   |   | 119     |   |   |   | (42 | ) |
|    Other accrued liabilities                                                                                                                          |   |   | 173     |   |   |   | (67 | ) |
|    Deferred revenue                                                                                                                                   |   |   | (219    | )      |   |   | 982 |   |
| Net cash (used for) provided by operating  activities                                                                                                      |   |   | (2,245  | )      |   |   | 26 |   |
|                                                                                                                                                                 |   |   |    |   |   |   |   |   |
| Cash flows from investing activities:Acquisition of property and equipment                                                                            |   |   | (14     | )      |   |   | (8 | ) |
| Capitalized software development costs                                                                                                                          |   |   | (772    | )      |   |   | (813 | ) |
| Net cash used for investing activities                                                                                                                               |   |   | (786    | )      |   |   | (821 | ) |
|                                                                                                                                                                 |   |   |    |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                                                |   |   |    |   |   |   |   |   |
| Deferred financing costs                                                                                                                                        |   |   | − |   |   |   | (174 | ) |
| Net proceeds from issuance of short-term debt                                                                                                                        |   |   | 1,390   |   |   |   | − |   |
| Net proceeds from exercise of stock options and warrants                                                                                                             |   |   |    |   |   |   | 26 |   |
| Net proceeds from issuance of long-term debt                                                                                                                         |   |   | − |   |   |   | 1,100 |   |
| Net proceeds from issuance of Series B preferred shares                                                                                                              |   |   | 860     |   |   |   | − |   |
| Net proceeds from issuance of Series C preferred shares                                                                                                              |   |   | 1,789   |   |   |   | − |   |
| Principal payments on short term debt                                                                                                                                |   |   | (150    | )      |   |   | (65 | ) |
| Net cash provided by financing activities                                                                                                                            |   |   | 3,889   |   |   |   | 887 |   |
|                                                                                                                                                                 |   |   |    |   |   |   |   |   |
| Net increase in cash and cash equivalents                                                                                                                       |   |   | 858     |   |   |   | 92 |   |
| Cash and cash equivalents at beginning of period                                                                                                                     |   |   | 1,021   |   |   |   | 929 |   |
| Cash and cash equivalents at end of period                                                                                                                 |   | $      | 1,879   |   |   | $      | 1,021 |   |
|                                                                                                                                                                 |   |   |    |   |   |   |   |   |

----

|                                                                                                                           |   | December 31 |    |
|--------------------------------------------------------------------------------------------------------------------------------|--------|-------------|---------|
|                                                                                                                           |   | 2010        |    |   |   |   | 2009 |   |
| Supplementary disclosure of cash flow information                                                                              |   |        |    |   |   |   |   |   |
|                                                                                                                           |   |        |    |   |   |   |   |   |   |
| Non-cash financing and investing transactions                                                                                  |   |        |    |   |   |   |   |   |   |
| Secured indebtedness and accrued interest exchanged for Series B convertible preferred stock                              |   | $           | 6,608   |   |   |   |   | $ | − |   |
| Conversion feature of Series B preferred shares classified as a derivative liability                                           |   | $           | 2,000   |   |   |   |   |   | − |   |
| Dividends on preferred shares                                                                                                  |   | $           | 394     |   |   |   |   | $ | 61 |   |
| Conversion feature of Series B preferred shares dividends issued as payment in-kind classified as a derivative liability       |   | $           | 30      |   |   |   |   |   | − |   |
| Conversion of Series A-1 preferred stock to common stock                                                                       |   | $           | − |   |   |   |   | $ | 166 |   |
| Issuance of long-term debt for payment of         interest in kind                          |   | $           | − |   |   |   |   | $ | 355 |   |
| Reclassification of equity linked instrument to derivative liability                                                           |   | $           | − |   |   |   |   | $ | 1,353 |   |
| Debt discount and related liability recorded in        connection with long-term debt  |   | $           | − |   |   |   |   | $ | 3,433 |   |
| Warrants issued as payment of financing services                                                                               |   | $           | 153     |   |   |   |   | $ | − |   |
| Warrants issued in connection with bridge loans recorded as derivative liabilities                                        |   | $           | 682     |   |   |   |   | $ | − |   |
| Warrants issued for interest recorded as a derivative liability                                                                |   | $           | 170     |   |   |   |   | $ | 291 |   |
| Conversion feature of Series C preferred shares classified as a derivative liability                                           |   | $           | 179     |   |   |   |   | $ | − |   |

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|                      | 2010   | 2009   |
|---------------------------|--------|--------|
| Cash in bank              | $      | 1,852  |   | $ | 124 |
| Money market funds        |   | 27     |   |   | 897 |
|                      |   |   |   |   |   |
| Cash and cash equivalents | $      | 1,879  |   | $ | 1,021 |
|                      |   |   |   |   |   |

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|                                           |   | 2010   |   |   | 2009   |   |
|------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Machinery and equipment                        |   | $      | 1,224  |   |   | $      | 1,210 |   |
| Office furniture and fixtures                  |   |   | 435    |   |   |   | 435 |   |
| Leasehold improvements                         |   |   | 90     |   |   |   | 90 |   |
| Purchased software                             |   |   | 323    |   |   |   | 323 |   |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   |   | 2,072  |   |   |   | 2,058 |   |
| Less accumulated depreciation and amortization |   |   | (2,046 | )      |   |   | (2,027 | ) |
|                                           |   |   |   |   |   |   |   |   |
|                                           |   | $      | 26     |   |   | $      | 31 |   |
|                                           |   |   |   |   |   |   |   |   |

| ·   | Patent numbers 5544255, 5647017, 5818955 and 6064751 involve (a) the electronic capture of a handwritten signature utilizing an electronic tablet device on a standard computer system within an electronic document, (b) the verification of the identity of the person providing the electronic signature through comparison of stored signature measurements, and (c) a system to determine whether an electronic document has been modified after signature. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Patent number 6091835 involves all of the foregoing and the recording of the electronic execution of a document regardless of whether execution occurs through a handwritten signature, voice pattern, fingerprint or other identifiable means. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Patent numbers 5933514, 6212295, 6381344, and 6487310 involve methods and processes related to handwriting recognition developed by the Company over the years.  Legal fees associated with these patents were immaterial and expensed as the fees were incurred. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                          |   |  Expiration |   | Estimated OriginalLife |   |  2010 |   |  2009 |   |
|-------------------------------|--------|------------------|--------|------------------------|--------|------------|--------|------------|--------|
| Patent (Various)              |   | Various          |   |                   | 5      |       | $      | 9          |   | $ | 9 |   |
| Patent (Various)              |   | Various          |   |                   | 7      |       |   | 476        |   |   | 476 |   |
|  5544255                 |   |             |   | 2013                   |   |       | 13     |       |   | 93 |   |   | 93 |   |
|  5647017                 |   |             |   | 2014                   |   |       | 14     |       |   | 187 |   |   | 187 |   |
|  5818955                 |   |             |   | 2015                   |   |       | 15     |       |   | 373 |   |   | 373 |   |
|  6064751                 |   |             |   | 2017                   |   |       | 17     |       |   | 1,213 |   |   | 1,213 |   |
|  6091835                 |   |             |   | 2017                   |   |       | 17     |       |   | 4,394 |   |   | 4,394 |   |
|                          |   |             |   |                   |   |       |   |       |   |   |   |   |   |   |
|                          |   |             |   |                   |   |       |   |       |   | 6,745 |   |   | 6,745 |   |
| Less accumulated amortization |   |             |   |                   |   |       |   |       | (4,353 |   |   | (3,974 | ) |
|                          |   |             |   |                   |   |       |   |       |   |   |   |   |   |   |
|                          |   |             |   |                   |   |       |   |       | $      | 2,392 |   | $ | 2,771 |   |
|                          |   |             |   |                   |   |       |   |       |   |   |   |   |   |   |

| ·   | The estimated cash flow from products based upon each patent are expected to exceed the value assigned to each patent; |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | There are no legal, regulatory or contractual provisions known to the Company that limit the useful life of each patent to less than the assigned useful life; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | No additional material costs need to be incurred or modifications made in order for the Company to continue to be able to realize the protection afforded by the patents; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The Company does not foresee any effects of obsolescence or significant competitive pressure on its current or future products, anticipates increasing demand for products utilizing the patented technology, and believes that the current markets for its products based on the patented technology will remain constant or will grow over the useful lives assigned to the patents because of a legal, regulatory and business environment encouraging the use of electronic signatures. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                          |   | 2010   |    |   | 2009   |   |
|-------------------------------|--------|--------|---------|--------|--------|--------|
| Accrued professional services |   | $      | 100     |   |   | $      | 102 |   |
| Rents                         |   |   | 19      |   |   |   | 39 |   |
| Interest                      |   |   | – |   |   |   | 1 |   |
| Other                         |   |   | 40      |   |   |   | 27 |   |
| Total                         |   | $      | 159     |   |   | $      | 169 |   |

|                               |   | Payments due by period |   |
|------------------------------------|--------|------------------------|--------|
| Contractual obligations            |   | Total                  |   | 2011 |   | 2012 |   | 2013 |   | 2014 |   | 2015 |   | Thereafter |   |
| Operating lease commitments (1)    |   |                   | 1,650  |   |   | 284 |   |   | 267 |   |   | 275 |   |   | 283 |   |   | 292 |   |   | 249 |   |
| Total contractual cash obligations |   | $                      | 1,650  |   | $ | 284 |   | $ | 267 |   | $ | 275 |   | $ | 283 |   | $ | 292 |   | $ | 249 |   |

| 1.   | The Company extended the lease on its offices in April 2010.  The base rent will decrease approximately 6% in November 2011 and then increase approximately 3% per annum over the term of the lease, which expires on October 31, 2016. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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----

----

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|                    |   | December 31, 2010  |   |   | December 31, 2009 |   |
|-------------------------|--------|--------------------|--------|--------|-------------------|--------|
| Expected term           |   | 0.5 to 4.00 years  |   |   | 0.5 to 3.00 years |   |
| Volatility              |   | 141.5% - 184.1%    |   |   | 139.0% - 156.0%   |   |
| Risk-free interest rate |   | 0.29 – 1.02% |   |   | 1.70%             |   |
| Dividend yield          |   | 0%                 |   |   | 0%                |   |

|                 |   | Value atDecember 31, 2010 |   |   | Quoted prices in active markets |   |    | Significant other observable inputs |   |   | Significant unobservable inputs |   |
|----------------------|--------|---------------------------|--------|--------|---------------------------------|--------|---------|-------------------------------------|--------|--------|---------------------------------|--------|
|                 |   |                      |   |   | (Level 1)                       |   |    | (Level 2)                           |   |   | (Level 3)                       |   |
| Derivative liability |   | $                         | 499    |   |                            | $      | − |                                |   | $      | −                         |   |   | $ | 499 |   |

----

|   | Level 2: Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Level 3: Unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                      |   | Derivative Liability |        |
|---------------------------------------------------------------------------------------------------------------------------|--------|----------------------|-------------|
| Balance at January 1, 2010                                                                                                |   | $                    | 422         |   |
| Additional liabilities recorded related to warrants issued for services                                                   |   |                 | 153         |   |
| Additional liabilities recorded related to warrants issued for interest paid in kind and bridge financing                 |   |                 | 851         |   |
| Additional liabilities recorded related to the conversion feature on Series B preferred shares and dividends paid in kind |   |                 |  2,030 |   |
| Additional liabilities recorded related to the conversion feature on Series C preferred shares                            |   |                 |  179   |   |
| Gain on derivative liability                                                                                              |   |                 | (3,136      | ) |
| Balance at December 31, 2010                                                                                              |   | $                    | 499         |   |

----

|                    |   | Year EndedDecember 31, 2010 | Year EndedDecember 31, 2009 |
|-------------------------|--------|-----------------------------|-----------------------------|
| Risk free interest rate |   | 1.12% - 5.11%               | 1.12% - 5.11%               |
| Expected life (years)   |   | 2.82 – 7.00           | 2.82 – 7.00           |
| Expected volatility     |   | 91.99% - 147.4%             | 91.99% - 145.0%             |
| Expected dividends      |   | None                        | None                        |

----

|                                                       |   | Year EndedDecember 31, 2010 |    |   | Year EndedDecember 31, 2009 |   |
|-----------------------------------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
| Research and development                                        |   | $                           | 21      |   |                        | $      | 59 |   |
| Sales and marketing                                             |   |                        | 52      |   |                        |   | 98 |   |
| General and administrative                                      |   |                        | 20      |   |                        |   | 137 |   |
| Director options                                                |   |                        | – |   |                        |   | 24 |   |
| Stock-based compensation expense included in operating expenses |   | $                           | 93      |   |                        | $      | 318 |   |

|                                                                        |   | December 31, 2010 |    |   | December 31, 2009             |   |
|-----------------------------------------------------------------------------|--------|-------------------|---------|--------|-------------------------------|--------|
|                                                                        |   |  Shares      |    |   | WeightedAverageExercise Price |   | Aggregate Intrinsic Value |   | Weighted Average Remaining Contractual Life |   |   |  Shares |   |   | WeightedAverageExercise Price |   | Aggregate Intrinsic Value |   | Weighted Average Remaining Contractual Life |   |
|                                                                        |   |              |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at beginning of period                                          |   |              | 10,231  |   |                          | $      | 0.34 |   |   |   |   |   |   |   | 7,608 |   |   | $ | 0.48 |   |   |   |   |   |
| Granted                                                                     |   |              | 2,550   |   |                          | $      | 0.08 |   |   |   |   |   |   |   | 3,976 |   |   | $ | 0.10 |   |   |   |   |   |
| Exercised                                                                   |   |              | – |   |                          | $      | 0.00 |   |   |   |   |   |   |   | (85 | ) |   | $ | 0.09 |   |   |   |   |   |
| Forfeited                                                                   |   |              | (2,753  | )      |                          | $      | 0.15 |   |   |   |   |   |   |   | (1,268 | ) |   | $ | 0.40 |   |   |   |   |   |
|                                                                        |   |              |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Outstanding at period end                                             |   |              | 10,028  |   |                          | $      | 0.33 |   |   |   |   | 3.2 |   |   |   | 10,231 |   |   | $ | 0.34 |   |   |   |   | 3.9 |   |
|                                                                        |   |              |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options vested and exercisable at period end                                |   |              | 8,309   |   |                          | $      | 0.38 |   |   |   |   | 2.6 |   |   |   | 8,249 |   |   | $ | 0.39 |   |   |   |   | 3.3 |   |
|                                                                        |   |              |    |   |                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average grant-date fair value of options granted during the period |   | $                 | 0.08    |   |                          |   |   |   |   |   |   |   |   |   | $ | 0.10 |   |   |   |   |   |   |   |   |   |   |

|                     |               |   | Options Outstanding      |   |   | Options Exercisable                                   |   |
|--------------------------|--------------------|--------|--------------------------|--------|--------|-------------------------------------------------------|--------|
| Range of Exercise Prices |               |   |  OptionsOutstanding |   |   | Weighted Average Remaining Contractual Life(in years) |   |   | Weighted Average Exercise Price |   |   |   Number Outstanding |   |   | Weighted Average Exercise Price |   |
| $                        | 0.00 – $0.50 |   |                     |   | 7,047  |                                                  |   |   | 3.8 |   |   | $ | 0.15 |   |   |   | 5,328 |   |   | $ | 0.18 |   |
| $                        | 0.51 – $1.00 |   |                     |   | 2,908  |                                                  |   |   | 1.8 |   |   | $ | 0.72 |   |   |   | 2,908 |   |   | $ | 0.72 |   |
| $                        | 1.01 – $2.00 |   |                     |   | 73     |                                                  |   |   | 1.2 |   |   | $ | 1.66 |   |   |   | 73 |   |   | $ | 1.66 |   |
|                     |               |   |                     |   | 10,028 |                                                  |   |   |   |   |   |   |   |   |   |   | 8,309 |   |   |   |   |   |

----

|   Non-vested Shares       |   |  Shares |   |   | Weighted AverageGrant-DateFair Value |   |
|-------------------------------------|--------|--------------|--------|--------|--------------------------------------|--------|
|  Non-vested at January 1, 2010 |   |         | 1,982  |   |                                 | $      | 0.10 |   |
| Granted                             |   |         | 2,550  |   |                                 | $      | 0.07 |   |
| Forfeited                           |   |         | (1,895 | )      |                                 | $      | 0.12 |   |
| Vested                              |   |         | (918   | )      |                                 | $      | 0.18 |   |
| Non-vested                          |   |         | 1,719  |   |                                 | $      | 0.06 |   |

----

----

----

|                              |   | 2010   |    |   | 2009   |   |
|-----------------------------------|--------|--------|---------|--------|--------|--------|
| Deferred tax assets:              |   |   |    |   |   |   |
| Net operating loss carry-forwards |   | $      | 25,373  |   |   | $      | 23,543 |   |
| Credit carry-forwards             |   |   | 165     |   |   |   | 202 |   |
| Deferred income                   |   |   | 456     |   |   |   | 582 |   |
| Intangibles                       |   |   | 1,175   |   |   |   | 684 |   |
| Other, net                        |   |   | 210     |   |   |   | 156 |   |
|                              |   |   |    |   |   |   |   |   |
| Total deferred tax assets         |   |   | 27,379  |   |   |   | 25,167 |   |
|                              |   |   |    |   |   |   |   |   |
| Valuation allowance               |   |   | (27,379 | )      |   |   | (25,167 | ) |
|                              |   |   |    |   |   |   |   |   |
| Net deferred tax assets           |   | $      | -       |   |   | $      | - |   |

|                                             |   | 2010   |    |   | 2009   |   |
|--------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Expected federal income tax benefit              |   | $      | (1,414  | )      |   | $      | (3,673 | ) |
| State income tax benefit                         |   |   | (250    | )      |   |   | (648 | ) |
| Other                                            |   |   | (548    | )      |   |   | 2,318 |   |
| Change in valuation allowance                    |   |   | 2,212   |   |   |   | 2,003 |   |
|      Income tax benefit |   | $      | – |   |   | $      | – |   |

----