| DELAWARE                       |   | 75-2228828            |
|--------------------------------|--------|-----------------------|
| State or Other Jurisdiction of |   | IRS Employer          |
| Incorporation or Organization  |   | Identification Number |

| Title of Each Class |   | Name of Each Exchange on Which Registered |
|---------------------|--------|-------------------------------------------|
| NONE                |   | NONE                                      |

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|      |                 |                                                                                         | Page   |
|-----------|----------------------|----------------------------------------------------------------------------------------------|--------|
|      |                 |                                                                                         |   |
| PART I.   |                 |                                                                                         |
|      |                 |                                                                                         |   |
|      | Item  1.   | Business                                                                                     | 3      |
|      | Item 1A.   | Risk Factors                                                                                 | 7      |
|      | Item  2.   | Properties                                                                                   | 9      |
|      | Item  3.   | Legal Proceedings                                                                            | 9      |
|      | Item  4.   | Submission of Matters to a Vote of Security Holders                                          | 9      |
|      |                 |                                                                                         |   |
| PART II.  |                 |                                                                                         |
|      |                 |                                                                                         |   |
|      | Item  5.   | Market for Registrant's Common Equity and Related Shareholder Matters                        | 10     |
|      | Item 6.              | Selected Financial Data                                                                      | 10     |
|      | Item  7.   | Management’s' Discussion and Analysis of Financial Condition and Results of Operations | 12     |
|      | Item 7A.             | Quantitative and Qualitative Disclosures about Market Risks                                  | 14     |
|      | Item 8.              | Financial Statements                                                                         | 14     |
|      | Item 9.              | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure         | 14     |
|      | Item 9A.             | Control and Procedures                                                                       | 14     |
|      | Item 9B.             | Other Information                                                                            | 15     |
|      |                 |                                                                                         |   |
| PART III. |                 |                                                                                         |
|      |                 |                                                                                         |   |
|      | Item 10.             | Directors and Executive Officers of the Registrant                                           | 16     |
|      | Item 11.             | Executive Compensation                                                                       | 18     |
|      | Item 12.             | Security Ownership of Certain Beneficial Owners and Management                               | 22     |
|      | Item 13.             | Certain Relationships and Related Transactions                                               | 24     |
|      | Item 14.             | Principal Accountant Fees and Services                                                       | 24     |
|      |                 |                                                                                         |   |
| PART IV.  |                 |                                                                                         |
|      |                 |                                                                                         |   |
|      | Item 15.             | Exhibits                                                                                     | 26     |
|      |                 |                                                                                         |   |
|      |                 | Signatures                                                                                   | 27     |
|      |                 |                                                                                         |   |
|      |                 | Exhibit Index                                                                                | 28     |

----

| ITEM 1: | BUSINESS |
|--------------|----------|

| Section 1.1 | The Company |
|-------------|-------------|

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| ITEM 1.A:  | RISKS RELATED TO OUR BUSINESS |
|-----------------|-------------------------------|

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| ITEM 2: | DESCRIPTION OF PROPERTIES |
|---------|---------------------------|

| ITEM 3: | LEGAL PROCEEDINGS |
|---------|-------------------|

| ITEM 4: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
|---------|-----------------------------------------------------|

----

| ITEM 5: | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS |
|---------|-----------------------------------------------------------------------|

|           |   | OTC-BB  |   |
|----------------|--------|---------|--------|
|      |   | Low/Bid |   |   | High/Ask |   |
| 2008           |   |    |   |   |   |   |
| First Quarter  |   | $       | 0.01   |   |   | $ | 0.04 |   |
| Second Quarter |   |    | 0.02   |   |   |   | 0.03 |   |
| Third Quarter  |   |    | 0.01   |   |   |   | 0.03 |   |
| Fourth Quarter |   |    | 0.01   |   |   |   | 0.03 |   |
| 2009           |   |    |   |   |   |   |   |   |
| First Quarter  |   | $       | 0.01   |   |   | $ | 0.03 |   |
| Second Quarter |   |    | 0.01   |   |   |   | 0.02 |   |
| Third Quarter  |   |    | 0.01   |   |   |   | 0.01 |   |
| Fourth Quarter |   |    | 0.01   |   |   |   | 0.04 |   |
| 2010           |   |    |   |   |   |   |   |   |
| First Quarter  |   | $       | 0.01   |   |   | $ | 0.02 |   |
| Second Quarter |   |    | 0.01   |   |   |   | 0.02 |   |
| Third Quarter  |   |    | 0.01   |   |   |   | 0.01 |   |
| Fourth Quarter |   |    | 0.01   |   |   |   | 0.02 |   |

| ITEM 6: | SELECTED FINANCIAL DATA |
|---------|-------------------------|

----

|                                 |   | December 31, |       |
|--------------------------------------|--------|--------------|------------|
|                                 |   | 2010         |       |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Total assets                         |   | $            | 166,436    |   |   | $ | 141,415 |   |   | $ | 130,672 |   |   | $ | 3,221,336 |   |   | $ | 169,128 |   |
| Current liabilities                  |   |         | 6,181,044  |   |   |   | 2,311,386 |   |   |   | 5,179,293 |   |   |   | 6,316,912 |   |   |   | 2,674,613 |   |
| Long-term debt                       |   |         | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Working capital                      |   |         | (6,145,931 | ) |   |   | (2,226,345 | ) |   |   | (5,148,331 | ) |   |   | (5,826,532 | ) |   |   | (2,553,451 | ) |
|                                 |   |         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Shareholders’ equity (deficit) |   | $            | (6,014,608 | ) |   | $ | (2,169,971 | ) |   | $ | (5,048,621 | ) |   |   | (3,095,576 | ) |   |   | (2,505,485 | ) |

|                                              |   | For the Year Ended December 31, |        |
|---------------------------------------------------|--------|---------------------------------|-------------|
|                                              |   | 2010                            |        |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Total revenues                                    |   | $                               | 2,039       |   |   | $ | 50,450 |   |   | $ | 59,421 |   |   | $ | 29,745 |   |   | $ | 47,701 |   |
| Operating income (loss)                           |   |                            | (1,181,626  | ) |   |   | (1,609,956 | ) |   |   | (6,206,870 | ) |   |   | (2,447,832 | ) |   |   | (3,716,867 | ) |
| Net (loss)                                        |   |                            | (3,972,372  | ) |   |   | (2,440,465 | ) |   |   | (5,493,764 | ) |   |   | (3,881,652 | ) |   |   | (3,895,262 | ) |
| Net (loss) after dividends on preferred shares    |   |                            | (4,023,635  | ) |   |   | (2,491,728 | ) |   |   | (5,545,096 | ) |   |   | (3,935,133 | ) |   |   | (4,473,726 | ) |
| Net loss per common share                         |   | $                               | (0.008      | ) |   | $ | (0.006 | ) |   | $ | (0.015 | ) |   | $ | (0.016 | ) |   | $ | (0.026 | ) |
| Number of shares used in computing per share data |   |                            | 494,315,316 |   |   |   | 447,090,174 |   |   |   | 373,156,459 |   |   |   | 243,609,819 |   |   |   | 170,692,731 |   |

----

| ITEM 7: | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|---------|---------------------------------------------------------------------------------------|

----

----

| ITEM 7 A: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
|-----------|------------------------------------------------------------|

| ITEM 8: | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
|---------|---------------------------------------------|

| ITEM 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|---------|--------------------------------------------------------------------------------------|

| ITEM 9A: | MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING |
|----------|-------------------------------------------------------------------------------|

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| ITEM 9B: | OTHER INFORMATION |
|----------|-------------------|

----

| ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS |
|----------|--------------------------------------------------------------|

| Name              |   | Positions                          |   | Term  Served (Expires)    |
|-------------------|--------|------------------------------------|--------|-------------------------------------|
|              |   |                               |   |                                |
| Andre Scholz      |   | Director                           |   | May 13, 2009 to present             |
|              |   | President, Chief Executive Officer |   | August 1, 2010 to present           |
|              |   | Chief Technology Officer           |   | May 13, 2009 to present             |
|              |   |                               |   |                                |
| Joseph J. Tomasek |   | Director                           |   | Feb. 11, 1999  to present |
|              |   |                               |   |                                |
| Joerg Otzen       |   | Director                           |   | July 14, 2008 to present            |
|              |   |                               |   |                                |
| Craig S. Cody     |   | Chief Financial Officer            |   | May 1, 2010 to present              |
|              |   |                               |   |                                |
| Rudolf Hauke      |   | Director                           |   |                                |
|              |   | President, Chief Executive Officer |   | July 14, 2008 to August 1, 2010*    |
|              |   |                               |   |                                |
|              |   | Director                           |   | Dec. 2, 2005 to May 1, 2010*        |
| Joerg H. Klaube   |   | Sr. Vice President, Secretary,     |   | July 31, 1997 to May 1, 2010*       |
|              |   | Chief Financial Officer            |   |                                |

----

----

| ITEM 11: | EXECUTIVE COMPENSATION |
|----------|------------------------|

|                            |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   | (1)                     |   |
|--------------------------------------|--------|--------|--------|-----------|---------|--------|----------|--------|--------|----------------|--------|--------|-----------------|--------|--------|----------------------------------------|--------|--------|----------------------------------------------|--------|--------|-------------------------|--------|
| Name andPrincipal Position |   | Year   |   | Salary($) |    |   | Bonus($) |   |   | StockAwards($) |   |   | OptionAwards($) |   |   | Non-EquityIncentivePlanCompensation($) |   |   | Non-QualifiedDeferredCompensationEarnings($) |   |   | AllOtherCompensation($) |   |   | Total($) |   |
| (a)                                  |   | (b)    |   | (c)       |    |   | (d)      |   |   | (e)            |   |   | (f)             |   |   | (g)                                    |   |   | (h)                                          |   |   | (i)                     |   |   |   |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |
| Andre Scholz                         |   | 2010   |   |      | 230,000 |   |     |   | -      |           |   |   | 24,000          |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | 254,000 |   |
| Chief Executive                      |   | 2009   |   |      | 140,000 |   |     |   | -      |           |   |   | 25,000          |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 20,000 |   |   |   | 185,000 |   |
| Officer, President,                  |   | 2008   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | - |   |
| Director                             |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Joseph J. Tomasek,                   |   | 2010   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | 11,880 |   |                                         |   | -      |                    |   |   | - |   |   |   | 65,000 |   |   |   | 76,880 |   |
| Esq., Director and                   |   | 2009   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | 8,910  |   |                                         |   | -      |                    |   |   | - |   |   |   | 185,000 |   |   |   | 193,910 |   |
| General Legal Counsel                |   | 2008   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | 19,000 |   |                                         |   | -      |                    |   |   | - |   |   |   | 256,800 |   |   |   | 275,800 |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Joerg Otzen                          |   | 2010   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 5,000 |   |   |   | 5,000 |   |
| Director                             |   | 2009   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   | 2008   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Craig S Cody                         |   | 2010   |   |      | 59,750  |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 27,462 |   |   |   | 87,212 |   |
| Chief Financial Officer              |   | 2009   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 18,450 |   |   |   | 18,450 |   |
|                                 |   | 2008   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | - |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Rudolf Hauke                         |   | 2010   |   |      | -       |   |     |   | -      |           |   |   |            |   |   |                                   | 13,867 |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | 13,867 |   |
| Chief Executive                      |   | 2009   |   |      | 36,000  |   |     |   | -      |           |   |   | 23,790          |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 48,000 |   |   |   | 107,790 |   |
| Officer, President,                  |   | 2008   |   |      | 48,000  |   |     |   | -      |           |   |   | 19,200          |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 52,000 |   |   |   | 119,200 |   |
| Director                             |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   | - |   |   |   |   |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Joerg H. Klaube                      |   | 2010   |   |      | 30,763  |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | 30,763 |   |
| Chief Financial                      |   | 2009   |   |      | 60,885  |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | 60,885 |   |
| Officer, Director                    |   | 2008   |   |      | 62,500  |   |     |   | -      |           |   |   | -               |   |   |                                   | 4,750  |   |                                         |   | -      |                    |   |   | - |   |   |   | 2,410 |   |   |   | 69,660 |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Michael Howard                       |   | 2010   |   |      | -       |   |     |   | -      |           |   |   | -               |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | - |   |
| Employee of                          |   | 2009   |   |      | 75,866  |   |     |   |   |           |   |   |            |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | - |   |   |   | 75,866 |   |
| Subsidiary                           |   | 2008   |   |      | 150,000 |   |     |   | 20,000 |           |   |   | 177,165         |   |   |                                   | -      |   |                                         |   | -      |                    |   |   | - |   |   |   | 161,285 |   |   |   | 508,450 |   |
|                                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |
| All executive officers               |   | 2010   |   |      | 320,513 |   |     |   | -      |           |   |   | 24,000          |   |   |                                   | 25,747 |   |                                         |   | -      |                    |   |   | - |   |   |   | 97,462 |   |   |   | 467,722 |   |
| and named significant                |   | 2009   |   |      | 312,751 |   |     |   | -      |           |   |   | 25,000          |   |   |                                   | 32,700 |   |                                         |   | -      |                    |   |   | - |   |   |   | 253,000 |   |   |   | 623,451 |   |
| employees and                        |   | 2008   |   |      | 629,442 |   |     |   | 65,000 |           |   |   | 611,201         |   |   |                                   | 90,450 |   |                                         |   |   |                    |   |   |   |   |   |   | 655,143 |   |   |   | 2,051,236 |   |
| directors as a group                 |   |   |   |      |    |   |     |   |   |           |   |   |            |   |   |                                   |   |   |                                         |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |

----

----

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| Name andPrincipalPosition                        |   | Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable |               |   | Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable |   |   | EquityIncentivePlan AwardsNo. ofUnderlyingUnexercisedUnearnedOptions |   |   | OptionExercisePrice |   | OptionExpirationDate |   | No. ofShares orUnits ofStock thathave notvested |   |                      | MarketValue ofShares orUnits ofStock thathave notvested |   |   | EquityIncentiveAwards,Shares,UnitsOr otherRights thathave notvested |   |   | EquityIncentivePlanAwards:Market orPayoutvalue ofUnearnedShares,Unitsor otherrights thathave notvested |   |
|-------------------------------------------------------|--------|-----------------------------------------------------------------|--------------------|--------|-------------------------------------------------------------------|--------|--------|--------------------------------------------------------------------------------|--------|--------|---------------------|--------|----------------------|--------|--------------------------------------------------------------------------|--------|---------------------------|----------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|--------|
| Rudolf Hauke,CEO and President                        |   |                                                            | 2,400,000          |   |                                                              |   | -      |                                                                           |   |   | -                   |   |                 | $      | 0.10                                                                     |   | 8/14/2012 to 1/14/2014    |                                                                             |   | -      |                                                                               |   |   | -                                                                                                                               |   |   |   | - |   |   |   | - |   |
| Joerg H. Klaube, CFO                                  |   |                                                            | 250,000            |   |                                                              |   | -      |                                                                           |   |   | -                   |   |                 | $      | 0.025                                                                    |   | 6/26/13                   |                                                                             |   | -      |                                                                               |   |   | -                                                                                                                               |   |   |   | - |   |   |   | - |   |
| Joseph J. Tomasek, Director and General Legal Counsel |   |                                                            | 1,000,0002,100,000 |   |                                                              |   | --     |                                                                           |   |   | --                  |   |                 | $$     | 0.0250.05                                                                |   | 6/26/134/30/14 to12/31/14 |                                                                             |   | -      |                                                                               |   |   | -                                                                                                                               |   |   |   | - |   |   |   | - |   |
|                                                  |   |                                                            |               |   |                                                              |   |   |                                                                           |   |   |                |   |                 |   |                                                                     |   |                      |                                                                             |   |   |                                                                               |   |   |                                                                                                                            |   |   |   |   |   |   |   |   |   |
|                                                  |   |                                                            |               |   |                                                              |   | -      |                                                                           |   |   | -                   |   |                 |   |                                                                     |   |                      |                                                                             |   | -      |                                                                               |   |   | -                                                                                                                               |   |   |   | - |   |   |   | - |   |
|                                                  |   |                                                            |               |   |                                                              |   | -      |                                                                           |   |   | -                   |   |                 |   |                                                                     |   |                      |                                                                             |   | -      |                                                                               |   |   | -                                                                                                                               |   |   |   | - |   |   |   | - |   |

----

| ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
|----------|----------------------------------------------------------------|

| Title of Class* |               | Name and Address ofBeneficial Owner |   | Amount and Nature ofBeneficial Ownership(1) |       |   | Percentof Class |   |
|---------------------------|--------------------|---------------------------------------------------------|--------|-----------------------------------------------------------------|------------|--------|----------------------|--------|
| Common Stock              |     | Andre Scholz                                            |   |                                                            | 27,546,176 | (2)    |                 |   | 5.53 | % |
|                      |               | Pres./CEO/Director                                      |   |                                                            |       |   |                 |   |   |   |
|                      |               | Joseph Tomasek                                          |   |                                                            | 6,413,833  | (3)    |                 |   | 1.29 | % |
|                      |               | Director                                                |   |                                                            |       |   |                 |   |   |   |
|                      |               | Joerg Otzen                                             |   |                                                            | 500,000    | (4)    |                 |   | 0.10 | % |
|                      |               | Director                                                |   |                                                            |       |   |                 |   |   |   |
|                      |               | Craig Cody                                              |   |                                                            | 500,000    | (5)    |                 |   | 0.10 | % |
|                      |               | Chief Financial Officer                                 |   |                                                            |       |   |                 |   |   |   |

----

| All Directors and Officers as a Group:        |   |   | 34,960,009 |   |   |   | 7.02   | %      |
|-----------------------------------------------|--------|--------|------------|--------|--------|--------|--------|--------|
| as a Group (4 persons)                        |   |   |       |   |   |   |   |   |
|                                          |   |   |       |   |   |   |   |   |
| Ulrich Schuerch                               |   |   |       |   |   |   |   |   |
| Tell Capital AG                               |   |   | 55,510,000 | (6)    |   |   | 11.14  | %      |
| Tellstrasse 21, CH-9000                       |   |   |       |   |   |   |   |   |
| St. Gallen, Switzerland                       |   |   |       |   |   |   |   |   |
|                                          |   |   |       |   |   |   |   |   |
| Discover Advisory Company                     |   |   | 49,774,482 | (7)    |   |   | 9.99   | %      |
| c/o Horymor Trust Corp. Ltd.                  |   |   |       |   |   |   |   |   |
| 50 Shirley Street / P.O.Box N-341,            |   |   |       |   |   |   |   |   |
| Nassau                                        |   |   |       |   |   |   |   |   |
|                                          |   |   |       |   |   |   |   |   |
| Cambridge Services Inc.                       |   |   | 49,774,482 | (8)    |   |   | 9.99   | %      |
| c/o TSZ Treuhandgesellschaft Sauter & Co. |   |   |       |   |   |   |   |   |
| Suedstr. 11, CH-8034 Zurich, Switzerland      |   |   |       |   |   |   |   |   |

----

|   | (1) | For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock which such person has the right to acquire within 60 days of March 31, 2011. For purposes of computing the percentage of outstanding shares of Common Stock held by each person or group of persons named above, any security which such person or persons has or have the right to acquire within such date is deemed to be outstanding but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnote to this table and pursuant to applicable community property laws, the Company believes based on information supplied by such persons, that the persons named in this table have sole voting and investment power with respect to all shares of Common Stock which they beneficially own. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
|----------|------------------------------------------------|

| ITEM 14: | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
|----------|----------------------------------------|

----

----

| ITEM 15: | EXHIBITS AND REPORTS ON FORM 8-K |
|----------|----------------------------------|

----

| KIWIBOX.COM, INC. |
|-------------------|
|              |   |   |   |
| By:          | /s/ Andre Scholz |   | Date:     April 14, 2011 |
|              | Andre Scholz |   |   |
|              | President and Chief Executive Officer |   |   |
|              | (Principal Executive Officer), |   |   |
|              | Director |   |   |
|              |   |   |   |
| By:               | /s/ Craig Cody |   | Date:      April 14, 2011 |
|              | Craig S. Cody |   |   |
|              | Secretary, Chief Financial Officer |   |   |
|              | (Principal Financial Officer) |   |   |

| Name                        |   | Date                      |
|-----------------------------|--------|---------------------------|
|                        |   |                      |
|                        |   |                      |
| Joerg Otzen, Director       |   |                      |
|                        |   |                      |
| /s/ Joseph J. Tomasek       |   | April  14, 2011 |
| Joseph J. Tomasek, Director |   |                      |
|                        |   |                      |
| /s/ Andre Scholz            |   | April  14, 2011 |
| Andre Scholz, Director      |   |                      |

----

| (A)      |   | Financial Statements and Notes to Financial Statements                                                                                                                                                                                  |
|----------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |   |                                                                                                                                                                                                                                    |
| (3) (i)  |   | Articles of Incorporation and Amendments thereto, incorporated herein by reference to Exhibits of previous filings with the Commission.                                                                                                 |
|     |   |                                                                                                                                                                                                                                    |
| (3) (ii) |   | Bylaws of the Company, incorporated herein by reference to Exhibits of previous filings with the Commission.                                                                                                                            |
|     |   |                                                                                                                                                                                                                                    |
| 10.25*   |   | Copy of Agreement and Plan of Reorganization, Dated February 19, 2007, between the Company, Kiwibox Media, Inc. and the Kiwibox Shareholders, and Form of Employment Agreement for the Three Kiwibox Shareholders,                      |
|     |   |                                                                                                                                                                                                                                    |
| 10.27*   |   | Amendment No. 3 to Agreement and Plan of Reorganization, dated July 31, 2007 and Effective August 2, 2007.                                                                                                                              |
|     |   |                                                                                                                                                                                                                                    |
| 10.28*   |   | Preliminary Employment Agreement with Paul Farris, Dated September 19, 2007                                                                                                                                                             |
|     |   |                                                                                                                                                                                                                                    |
| 10.29*   |   | Amendment No. 4 to Agreement and Plan of Reorganization, dated as of December 3, 2007.                                                                                                                                                  |
|     |   |                                                                                                                                                                                                                                    |
| 10.30*   |   | Amendment No. 5 to Agreement and Plan of Reorganization, dated as of December 31, 2007.                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                    |
| 10.31*   |   | Standstill Letter Agreement, dated as of January 30, 2008.                                                                                                                                                                              |
|     |   |                                                                                                                                                                                                                                    |
| 10.32*   |   | Standstill Letter Agreement, dated as of February 11, 2008.                                                                                                                                                                             |
|     |   |                                                                                                                                                                                                                                    |
| 10.33*   |   | Amendment No. 6 to Agreement and Plan of Reorganization, dated as of February 28, 2008.                                                                                                                                                 |
|     |   |                                                                                                                                                                                                                                    |
| 10.34*   |   | Engagement Agreement, Dated June 27, 2008, between Tell Capital AG and the Company.                                                                                                                                                     |
|     |   |                                                                                                                                                                                                                                    |
| 10.35*   |   | Resignation Agreement, Dated August 19, 2008, between Ivan Tumanov and the Company.                                                                                                                                                     |
|     |   |                                                                                                                                                                                                                                    |
| 10.36*   |   | Form of Demand Notes issued by the Company to Lender, Discover Advisory Company.                                                                                                                                                        |
|     |   |                                                                                                                                                                                                                                    |
| 10.36-1* |   | Form of corrected Demand Notes issued by the Company to Lender, Discover Advisory Company.                                                                                                                                              |
|     |   |                                                                                                                                                                                                                                    |
| 10.36-2  |   | Form of Registrant’s Master Corporate Promissory Note, dated June 4, 2009, delivered and accepted by Discover Advisory Company, attached as an exhibit to Registrant’s Form 8-K filed with the Commission on June 12, 2009. |
|     |   |                                                                                                                                                                                                                                    |
| 10.37    |   | Copy of Stock Pledge Agreement, dated June 4, 2009, by and between Registrant and Discover Advisory Company- attached as an exhibit to Registrant’s  Form 8-K filed with the Commission on June  12, 2009.    |
|     |   |                                                                                                                                                                                                                                    |
| 10.38    |   | Copy of Consulting Agreement, dated June 1, 2009, between the Registrant, Kiwibox Media, Inc. and Andre Scholz attached as an exhibit to Registrant’s  Form 8-K filed with the Commission on June  12, 2009.  |
|     |   |                                                                                                                                                                                                                                    |
| 10.39    |   | Form of Registrant’s Securities Purchase Agreement, with Warrant as an Exhibit: attached as an exhibit to Registrant’s Form 8-K filed with the Commission on December 31, 2009.                                             |

----

| 10.40   |         | Certificate of Ownership and Merger of Kiwibox Media, Inc. with and into Magnitude Information Systems, Inc., including Corporate Name Change, dated December 15, 2009 and as filed with the Secretary of State of Delaware on December 17, 2009. attached as an exhibit to Registrant’s  Form 8-K filed with the Commission on December 31, 2009 |
|---------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|    |         |                                                                                                                                                                                                                                                                                                                                                              |
| 31.01A. |         | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 14, 2011..                                                                                                                                                                                    |
|    |         |                                                                                                                                                                                                                                                                                                                                                              |
| 31.02A. |         | Certification of Acting Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated April 14, 2011.                                                                                                                                                                              |
|    |         |                                                                                                                                                                                                                                                                                                                                                              |
| 32.01A. |         | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 14, 2011.                                                                                                                                                                                          |
|    |         |                                                                                                                                                                                                                                                                                                                                                              |
| 32.02A. |    | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated April 14, 2011.                                                                                                                                                                                          |

| * | Documents filed as exhibits to Registrant’s current reports, quarterly reports, annual reports and registration statements and amendments thereto with the U.S. Securities and Exchange Commission. |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a) | The Company’s Quarterly Reports on Form 10-Q for the periods ended March 31, 2010, June 30, 2010, and September 30, 2010. |
|-----|---------------------------------------------------------------------------------------------------------------------------------|

| (b) | All other reports filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the Company’s fiscal year ended December 31, 2009 |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                    | Page   |
|---------------------------------------------------------|--------|
|                                                    |   |
| Report of Independent Registered Public Accounting Firm | 2      |
|                                                    |   |
| Financial Statements                                    |   |
|                                                    |   |
| Balance Sheets                                          | 3      |
|                                                    |   |
| Statements of Operations                                | 4      |
|                                                    |   |
| Statements of Stockholders Equity (Deficit)             | 5-6    |
|                                                    |   |
| Statements of Cash Flows                                | 7-8    |
|                                                    |   |
| Notes to the Financial Statements                       | 9-34   |

----

----

|                                                                                                                                                     |   | December 31, |        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|
|                                                                                                                                                     |   | 2010         |        |   | 2009 |   |
| Assets                                                                                                                                                   |   |         |        |   |   |   |
| Current Assets                                                                                                                                           |   |         |        |   |   |   |
| Cash                                                                                                                                                     |   | $            | 377         |   |   | $ | 2,518 |   |
| Accounts receivable, net of allowance for doubtful accounts of $0                                                                                        |   |         | 295         |   |   |   | 2,000 |   |
| Prepaid expenses and other current assets                                                                                                                |   |         | 34,441      |   |   |   | 80,523 |   |
| Total Current Assets                                                                                                                                     |   |         | 35,113      |   |   |   | 85,041 |   |
| Property and equipment, net of accumulated depreciation of $88,505 and $85,841                                                                           |   |         | 15,323      |   |   |   | 18,705 |   |
| Website development cost, net of accumulated amortization of $32,864 and $1,813                                                                          |   |         | 106,244     |   |   |   | 19,945 |   |
| Other Assets                                                                                                                                             |   |         | 9,756       |   |   |   | 17,724 |   |
| Total Assets                                                                                                                                             |   |         | 166,436     |   |   |   | 141,415 |   |
| Liabilities and Stockholders’ Equity (Impairment)                                                                                                  |   |         |        |   |   |   |   |   |
| Current Liabilities                                                                                                                                      |   |         |        |   |   |   |   |   |
| Accounts payable and accrued expenses                                                                                                                    |   |         | 535,877     |   |   |   | 535,618 |   |
| Dividends payable                                                                                                                                        |   |         | 530,602     |   |   |   | 479,339 |   |
| Obligations to be settled in stock                                                                                                                       |   |         | 183,648     |   |   |   | 132,900 |   |
| Loans and notes payable                                                                                                                                  |   |         | 140,000     |   |   |   | 140,000 |   |
| Promissory notes payable – related parties                                                                                                         |   |         | 240,000     |   |   |   | - |   |
| Convertible notes payable – related parties                                                                                                        |   |         | 1,894,980   |   |   |   | 990,000 |   |
| Current maturities of long-term debt                                                                                                                     |   |         | 33,529      |   |   |   | 33,529 |   |
| Liability for derivative conversion feature – related parties                                                                                      |   |         | 2,622,408   |   |   |   | - |   |
| Total Current Liabilities                                                                                                                                |   |         | 6,181,044   |   |   |   | 2,311,386 |   |
|                                                                                                                                                     |   |         |        |   |   |   |   |   |
| Commitments and Contingencies                                                                                                                            |   |         | -           |   |   |   | - |   |
|                                                                                                                                                     |   |         |        |   |   |   |   |   |
| Stockholders’ Equity (Impairment)                                                                                                                  |   |         |        |   |   |   |   |   |
| Preferred stock, $.001 par value, non-voting, 3,000,000 shares authorized; 85,890 shares issued and outstanding                                          |   |         | 86          |   |   |   | 86 |   |
| Common stock, $.0001 par value, 1,400,000,000 shares authorized; 498,243,060 and 478,168,060 shares issued and outstanding at December 31, 2010 and 2009 |   |         | 49,824      |   |   |   | 47,817 |   |
| Common stock subscribed                                                                                                                                  |   |         | -           |   |   |   | 500 |   |
| Additional paid in capital                                                                                                                               |   |         | 45,571,867  |   |   |   | 45,519,375 |   |
| Stock subscription receivable                                                                                                                            |   |         | -           |   |   |   | (125,000 | ) |
| Accumulated (deficit)                                                                                                                                    |   |         | (51,636,385 | ) |   |   | (47,612,749 | ) |
| Total Stockholders’ Equity (Impairment)                                                                                                            |   |         | (6,014,608  | ) |   |   | (2,169,971 | ) |
| Total Liabilities and Stockholders’ Equity (Impairment)                                                                                            |   | $            | 166,436     |   |   | $ | 141,415 |   |

----

|                                                          |   | Year Ended December 31, |        |
|---------------------------------------------------------------|--------|-------------------------|-------------|
|                                                          |   | 2010                    |        |   | 2009 |   |
| Net Sales                                                     |   |                    |        |   |   |   |
| Advertising                                                   |   | $                       | 2,039       |   |   | $ | 50,450 |   |
| Total Net Sales                                               |   |                    | 2,039       |   |   |   | 50,450 |   |
| Cost of Goods Sold                                            |   |                    |        |   |   |   |   |   |
| Website hosting expenses                                      |   |                    | 3,795       |   |   |   | 38,767 |   |
| Total Cost of Goods Sold                                      |   |                    | 3,795       |   |   |   | 38,767 |   |
|                                                          |   |                    |        |   |   |   |   |   |
| Gross Profit (Loss)                                           |   |                    | (1,756      | ) |   |   | 11,683 |   |
|                                                          |   |                    |        |   |   |   |   |   |
| Selling expenses                                              |   |                    | 189,320     |   |   |   | 73,517 |   |
| Stock-based compensation (see below)                          |   |                    | 15,000      |   |   |   | 121,929 |   |
| General and administrative expenses                           |   |                    | 975,550     |   |   |   | 1,426,192 |   |
|                                                          |   |                    |        |   |   |   |   |   |
| Loss From Operations                                          |   |                    | (1,181,626  | ) |   |   | (1,609,956 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Other Income (Expense)                                        |   |                    |        |   |   |   |   |   |
| Miscellaneous income                                          |   |                    | 8,834       |   |   |   | 2,591 |   |
| Interest expense                                              |   |                    | (167,167    | ) |   |   | (106,541 | ) |
| Gain on extinguishment of debt                                |   |                    | -           |   |   |   | 114,597 |   |
| Gain on disposal of assets, net                               |   |                    | 2,285       |   |   |   | 2,683 |   |
| Impairment loans receivable and software assets               |   |                    | (11,880     | ) |   |   | (162,033 | ) |
| Interest expense-derivative conversion features               |   |                    | (2,083,716  | ) |   |   | (600,000 | ) |
| Amortization deferred  financing costs              |   |                    | -           |   |   |   | (4,000 | ) |
| Change in fair value – derivative liabilities           |   |                    | (538,692    | ) |   |   | (77,806 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Total Other Income (Expense)                                  |   |                    | (2,790,336  | ) |   |   | (830,509 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Loss Before Provision for Income Taxes                        |   |                    | (3,971,962  | ) |   |   | (2,440,465 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Provision for Income Taxes                                    |   |                    | 410         |   |   |   | - |   |
|                                                          |   |                    |        |   |   |   |   |   |
| Net Loss                                                      |   | $                       | (3,972,372  | ) |   | $ | (2,440,465 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Dividends on Preferred Shares                                 |   |                    | (51,263     | ) |   |   | (51,263 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Net Loss Applicable to Common Shareholders, basic and diluted |   | $                       | (4,023,635  | ) |   | $ | (2,491,728 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Net Loss Per Common Share, basic and diluted                  |   |                    | (0.008      | ) |   |   | (0.006 | ) |
|                                                          |   |                    |        |   |   |   |   |   |
| Weighted Average of Common Shares Outstanding                 |   |                    | 494,315,316 |   |   |   | 447,090,174 |   |

----

|                                                                                                                                                             |   | Convertible PreferredShares |    |   | Cumulative PreferredShares |   |   | Common Stock |   |   | StockSubscriptions |   |   | Additional Paid in |   |   | Accumulated |   |        | LoansReceivable - |   |   | TotalStockholders’Equity |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|---------|--------|---------------------------------|--------|--------|-------------------|--------|--------|--------------------|--------|--------|------------------------------|--------|--------|-------------|--------|-------------|------------------------|--------|--------|--------------------------------|--------|
|                                                                                                                                                                  |   | Shares                           |    |   | Amount                          |   |   | Shares            |   |   | Amount             |   |   | Shares                       |   |   | Amount      |   |        | Receivable             |   |   | Capital                        |   |   | Deficit |   |   | Stockholders |   |   | (Deficit) |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Balances, January 1, 2008                                                                                                                                             |   |                             | 129,500 |   |                            | $      | 129    |              |   |   | 1                  |   |   | $                            | -      |   |        |   | 436,242,570 |                   |   | $      | 43,624                         |   |   | $ | - |   |   | $ | 40,159,909 |   |   | $ | (45,121,021 | ) |   | $ | (131,262 | ) |   | $ | (5,048,621 | ) |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common stock pursuant  to stock subscriptions )*                                                                                                |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | 35,000,000  |                   |   |   | 3,500                          |   |   |   | (124,500 | ) |   |   | 996,000 |   |   |   | - |   |   |   | - |   |   |   | 875,000 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of  stock purchase warrants for services performed                                                                                                 |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | -           |                   |   |   | -                              |   |   |   |   |   |   |   | 170,000 |   |   |   | - |   |   |   | - |   |   |   | 170,000 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Finder’s fee paid on private placement                                                                                                                          |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   | (60,000 | ) |   |   |   |   |   |   |   |   |   |   | (60,000 | ) |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of common stock for loan origination fees                                                                                                                    |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | 500,000     |                   |   |   | 50                             |   |   |   |   |   |   |   | 9,950 |   |   |   | - |   |   |   | - |   |   |   | 10,000 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cancellation of common stock, net of re-issuance of 2,192,845 common shares and impairment of loans, pursuant to settlement agreement with former officers of Kiwibox |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   | (11,431,652 | )                      |   |   | (1,143                         | )      |   |   |   |   |   |   | 23,072 |   |   |   |   |   |   |   | 131,262 |   |   |   | 153,191 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Forgiveness of debt owed to director                                                                                                                                  |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | -           |                   |   |   | -                              |   |   |   |   |   |   |   | 213,569 |   |   |   | - |   |   |   | - |   |   |   | 213,569 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Conversion of preferred shares to common shares                                                                                                                       |   |                             | (43,610 | )      |                            |   | (43    | )                 |   |   | -                  |   |   |                         | -      |   |        |   | 17,857,142  |                   |   |   | 1,786                          |   |   |   |   |   |   |   | (1,743 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expiration  of derivative liabilities                                                                                                                       |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | -           |                   |   |   | -                              |   |   |   |   |   |   |   | 3,408,618 |   |   |   | - |   |   |   | - |   |   |   | 3,408,618 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Intrinsic value of beneficial conversion rights of convertible debt                                                                                                   |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   | 600,000 |   |   |   |   |   |   |   |   |   |   |   | 600,000 |   |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends on conv. preferred stock                                                                                                                                    |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | -           |                   |   |   | -                              |   |   |   |   |   |   |   | - |   |   |   | (51,263 | ) |   |   | - |   |   |   | (51,263 | ) |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss, year ended December 31, 2008                                                                                                                                |   |                             | -       |   |                            |   | -      |              |   |   | -                  |   |   |                         | -      |   |        |   | -           |                   |   |   | -                              |   |   |   |   |   |   |   | - |   |   |   | (2,440,465 | ) |   |   | - |   |   |   | (2,440,465 | ) |
|                                                                                                                                                                  |   |                             |    |   |                            |   |   |              |   |   |               |   |   |                         |   |   |        |   |        |                   |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, December 31, 2009                                                                                                                                           |   |                             | 85,890  |   |                            | $      | 86     |              |   |   | 1                  |   |   | $                            | -      |   |        |   | 478,168,060 |                   |   | $      | 47,817                         |   |   | $ | (124,500 | ) |   | $ | 45,519,375 |   |   | $ | (47,612,749 | ) |   | $ | - |   |   | $ | (2,169,971 | ) |

----

|                                                             |   | Convertible PreferredShares |   |   | Cumulative PreferredShares |   |   | Common Stock |   |   | StockSubscriptions |   |   | AdditionalPaid in |   |   | Accumulated |   |        | LoansReceivable |   |   | Total Stockholders’ |   |
|-----------------------------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|--------|-------------------|--------|--------|--------------------|--------|--------|------------------------|--------|--------|-------------|--------|-------------|-----------------|--------|--------|--------------------------------|--------|
|                                                                  |   | Shares                           |   |   | Amount                          |   |   | Shares            |   |   | Amount             |   |   | Shares                 |   |   | Amount      |   |        | Receivable      |   |   | Capital                        |   |   | Deficit |   |   | - Stockholders |   |   | Equity (Deficit) |   |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |
| Balances, January 1, 2010                                             |   |                             | 85,890 |   |                            | $      | 86     |              |   |   | 1                  |   |   | $                      | -      |   |        |   | 478,168,060 |            |   | $      | 47,817                         |   |   | $ | (124,500 | ) |   | $ | 45,519,375 |   |   | $ | (47,612,749 | ) |   | $ | - |   |   | $ | (2,169,971 | ) |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of stock – cash received for stock subscriptions       |   |                             | -      |   |                            |   | -      |              |   |   | -                  |   |   |                   | -      |   |        |   | 5,000,000   |            |   |   | 500                            |   |   |   | 124,500 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 125,000 |   |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance of  stock purchase warrants for services performed |   |                             | -      |   |                            |   | -      |              |   |   | -                  |   |   |                   | -      |   |        |   | -           |            |   |   | -                              |   |   |   |   |   |   |   | 15,000 |   |   |   | - |   |   |   | - |   |   |   | 15,000 |   |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cashless exercise of stock warrants                                   |   |                             | -      |   |                            |   | -      |              |   |   | -                  |   |   |                   |   |   |        |   | 13,125,000  |            |   |   | 1,313                          |   |   |   |   |   |   |   | (1,313 | ) |   |   |   |   |   |   |   |   |   |   | - |   |
| Issuance                                                              |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Partial settlements of obligation to be settled in stock              |   |                             | -      |   |                            |   | -      |              |   |   | -                  |   |   |                   | -      |   |        |   | 1,950,000   |            |   |   | 195                            |   |   |   |   |   |   |   | 38,805 |   |   |   | - |   |   |   | - |   |   |   | 39,000 |   |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   | -           |            |   |   | -                              |   |   |   |   |   |   |   | - |   |   |   |   |   |   |   | - |   |   |   | - |   |
| Dividends on conv. preferred stock                                    |   |                             | -      |   |                            |   | -      |              |   |   | -                  |   |   |                   | -      |   |        |   | -           |            |   |   | -                              |   |   |   |   |   |   |   | - |   |   |   | (51,263 | ) |   |   | - |   |   |   | (51,263 | ) |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss, year ended December 31, 2010                                |   |                             | -      |   |                            |   | -      |              |   |   | -                  |   |   |                   | -      |   |        |   | -           |            |   |   | -                              |   |   |   |   |   |   |   | - |   |   |   | (3,972,372 | ) |   |   | - |   |   |   | (3,975,765 | ) |
|                                                                  |   |                             |   |   |                            |   |   |              |   |   |               |   |   |                   |   |   |        |   |        |            |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, December 31, 2010                                           |   |                             | 85,890 |   |                            | $      | 86     |              |   |   | 1                  |   |   | $                      | -      |   |        |   | 498,243,060 |            |   | $      | 49,824                         |   |   | $ | - |   |   | $ | 45,571,867 |   |   | $ | (51,636,385 | ) |   | $ | - |   |   | $ | (6,014,608 | ) |

----

|                                                              |   | Year Ended December 31, |       |
|-------------------------------------------------------------------|--------|-------------------------|------------|
|                                                              |   | 2010                    |       |   | 2009 |   |
| Cash Flows From Operating Activities                              |   |                    |       |   |   |   |
| Net Loss                                                          |   | $                       | (3,972,372 | ) |   | $ | (2,440,465 | ) |
| Adjustments to Reconcile Net Loss to Net Cash Used by Operations  |   |                    |       |   |   |   |   |   |
| Depreciation and amortization                                     |   |                    | 42,302     |   |   |   | 56,218 |   |
| Securities issued for services                                    |   |                    | 15,000     |   |   |   | 121,929 |   |
| Intrinsic value of  beneficial conversion feature       |   |                    | 2,083,716  |   |   |   | 600,000 |   |
| Impairment of shareholder loan                                    |   |                    | -          |   |   |   | 131,262 |   |
| Impairment of software assets                                     |   |                    | 11,880     |   |   |   | 30,771 |   |
| (Gain) loss on disposition of assets                              |   |                    | (2,285     | ) |   |   | (2,683 | ) |
| Gain on extinguishment of debt                                    |   |                    | -          |   |   |   | (114,597 | ) |
| Change in value of derivative liabilities                         |   |                    | 538,692    |   |   |   | 77,806 |   |
|                                                              |   |                    |       |   |   |   |   |   |
| Decreases (Increases) in Assets                                   |   |                    |       |   |   |   |   |   |
| Accounts receivable                                               |   |                    | 1,705      |   |   |   | 7,800 |   |
| Prepaid expenses                                                  |   |                    | 46,082     |   |   |   | (64,361 | ) |
|                                                              |   |                    |       |   |   |   |   |   |
| Increases (Decreases) in Liabilities                              |   |                    |       |   |   |   |   |   |
|  Obligations to be settled in stock                          |   |                    | 89,748     |   |   |   | 77,700 |   |
| Accounts payable and accrued expenses                             |   |                    | 173,205    |   |   |   | (67,892 | ) |
| Net Cash Used by Operating Activities                             |   |                    | (972,327   | ) |   |   | (1,586,512 | ) |
|                                                              |   |                    |       |   |   |   |   |   |
| Cash Flows From Investing Activities                              |   |                    |       |   |   |   |   |   |
| Proceeds from sale of assets                                      |   |                    | 4,520      |   |   |   | - |   |
| Cash outlay – website development costs                     |   |                    | (129,230   | ) |   |   | (21,758 | ) |
| Cash outlay – other assets                                  |   |                    | -          |   |   |   | (14,500 | ) |
| Purchases of property and equipment                               |   |                    | (10,104    | ) |   |   | (4,712 | ) |
| Net Cash Used by Investing Activities                             |   |                    | (134,814   | ) |   |   | (40,970 | ) |
|                                                              |   |                    |       |   |   |   |   |   |
| Cash Flows From Financing Activities                              |   |                    |       |   |   |   |   |   |
| Proceeds from loans payable                                       |   |                    | 980,000    |   |   |   | 1,540,000 |   |
| Repayment of loans payable                                        |   |                    | -          |   |   |   | (730,000 | ) |
| Proceeds from issuance of common and preferred stock and warrants |   |                    | 125,000    |   |   |   | 815,000 |   |
| Net Cash Provided by Financing Activities                         |   |                    | 1,105,000  |   |   |   | 1,625,000 |   |
|                                                              |   |                    |       |   |   |   |   |   |
| Net Increase (Decrease) in Cash                                   |   |                    | (2,141     | ) |   |   | (2,482 | ) |
| Cash at beginning of period                                       |   |                    | 2,518      |   |   |   | 5,000 |   |
| Cash at end of period                                             |   | $                       | 377        |   |   | $ | 2,518 |   |
|                                                              |   |                    |       |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                  |   |                    |       |   |   |   |   |   |
| Interest Paid                                                     |   | $                       | 4,467      |   |   | $ | - |   |
| Taxes Paid                                                        |   | $                       | -          |   |   | $ | - |   |

----

| The Year Ended December 31, 2010                                                         |   |   |      |
|------------------------------------------------------------------------------------------|--------|--------|-----------|
|                                                                                     |   |   |      |
| Cashless exercise of warrants                                                            |   | $      | 1,313     |   |
|                                                                                     |   |   |      |   |
| Settlement of obligations with common stock and common stock options                     |   | $      | 39,000    |   |
|                                                                                     |   |   |      |   |
| Reclassification of accrued interest to debt principal                                   |   | $      | 164,980   |   |
|                                                                                     |   |   |      |   |
| Offset of security deposits against accrued rent                                         |   | $      | 7,968     |   |
|                                                                                     |   |   |      |   |
| The Year Ended December 31, 2009                                                         |   |   |      |   |
|                                                                                     |   |   |      |   |
| Stock subscription receivable                                                            |   | $      | 125,000   |   |
|                                                                                     |   |   |      |   |
| Issuance of stock for loan origination fee                                               |   | $      | 10,000    |   |
|                                                                                     |   |   |      |   |
| Debt forgiveness by director                                                             |   | $      | 213,570   |   |
|                                                                                     |   |   |      |   |
| Settlement of liability with common stock options                                        |   | $      | 70,000    |   |
|                                                                                     |   |   |      |   |
| Reclassification of derivative liability to paid-in capital – warrants and options |   | $      | 3,408,618 |   |

----

----

----

----

| Property and equipment consist of the following at: |   | December 31, 2010 |    |   | December 31, 2009 |   |
|-----------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
| Furniture                                           |   | $                 | 14,322  |   |              | $      | 6,646 |   |
| Leasehold Improvements                              |   |              | 24,130  |   |              |   | 24,131 |   |
| Equipment                                           |   |              | 65,376  |   |              |   | 73,770 |   |
|                                                |   |              | 103,828 |   |              |   | 104,546 |   |
| Less accumulated depreciation                       |   |              | 88,505  |   |              |   | 85,841 |   |
| Total                                               |   | $                 | 15,323  |   |              | $      | 18,705 |   |

----

|                          |   | December 31, 2010 |    |   | December 31, 2009 |   |
|-------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
| Website development costs     |   | $                           | 139,108 |   |                        | $      | 21,758 |   |
| Less accumulated amortization |   |                        | 32,864  |   |                        |   | 1,813 |   |
| Total                         |   | $                           | 106,244 |   |                        | $      | 19,945 |   |

|              |   | Amortization expense |   |
|-------------------|--------|---------------------------|--------|
| December 31, 2011 |   | $                         | 68,800 |   |
| December 31, 2012 |   |                      | 28,987 |   |
| December 31, 2013 |   |                      | 8,456  |   |
| December 31, 2014 |   |                      | -      |   |
| December 31, 2015 |   |                      | -      |   |

|                                           |   | December 31, 2010 |    |   | December 31, 2009 |   |
|------------------------------------------------|--------|-----------------------------|---------|--------|-----------------------------|--------|
|                                           |   |                        |    |   |                        |   |
| Accounts payable                               |   | $                           | 226,760 |   |                        | $      | 208,792 |   |
| Accrued interest                               |   |                        | 168,580 |   |                        |   | 170,860 |   |
| Accrued payroll, payroll taxes and commissions |   |                        | 7,902   |   |                        |   | 15,331 |   |
| Accrued professional fees                      |   |                        | 111,900 |   |                        |   | 116,900 |   |
| Miscellaneous accruals                         |   |                        | 20,735  |   |                        |   | 23,735 |   |
| Total                                          |   | $                           | 535,877 |   |                        | $      | 535,618 |   |

|                                                                                                                                                                                                  |   | December 31, |    |   | December 31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|-------------------|--------|
|                                                                                                                                                                                                  |   | 2010              |    |   | 2009              |   |
| Obligation for warrants granted for compensation                                                                                                                                                      |   | $                 | 60,000  |   |              | $      | 20,000 |   |
|                                                                                                                                                                                                  |   |              |    |   |              |   |   |   |
| 600,000 common shares issuable to a consultant who was a director of the company, for services rendered.                                                                                              |   |              | 36,000  |   |              |   | 36,000 |   |
|                                                                                                                                                                                                  |   |              |    |   |              |   |   |   |
| 500,000 (2010) and 1,250,000 (2009) common shares, and 2,900,000 (2010) and 2,200,000 (2009) stock options issuable to two officers of the Company pursuant to their respective employment Agreements |   |              | 66,858  |   |              |   | 67,990 |   |
|                                                                                                                                                                                                  |   |              |    |   |              |   |   |   |
| 2,100,000 (2010) and 900,000 (2009) stock options issuable to one director who also serves as the Company’s general counsel                                                                     |   |              | 20,790  |   |              |   | 8,910 |   |
|                                                                                                                                                                                                  |   | $                 | 183,648 |   |              | $      | 132,900 |   |

----

| On December 4, 1996, The company (Formerly Magnitude, Inc.) repurchased 500,000 shares of its common stock and retired same against issuance of a promissory note maturing twelve months thereafter accruing interest at 5% per annum and due December 4, 1998.  This note is overdue as of September 30, 2005 and no demand for payment has been made. |   | $      | 75,000 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                              |   |   |   |   |
| Total                                                                                                                                                                                                                                                                                                                                                             |   | $      | 75,000 |   |

|                                                                                                                                                                                         |   | December 30, |      |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|-------------------|--------|
|                                                                                                                                                                                         |   | 2010              |      |   | 2009              |   |
| Balance of non-converted notes outstanding. Attempts to locate the holder of this note, to settle this liability, have been unsuccessful.                                                    |   | $                 | 25,000    |   |              | $      | 25,000 |   |
|                                                                                                                                                                                         |   |              |      |   |              |   |   |   |
| In January 2008 a shareholder loaned the Company $40,000 pursuant to which the Company issued a demand note bearing interest at the rate of 5% per year.                                     |   |              | 40,000    |   |              |   | 40,000 |   |
|                                                                                                                                                                                         |   |              |      |   |              |   |   |   |
| From September 2008 through September 2010 two shareholders loaned the Company funds under the terms of the convertible notes issued, as modified in March 2009 and July 2010 (see Note 12). |   |              | 1,894,980 |   |              |   | 990,000 |   |
|                                                                                                                                                                                         |   |              |      |   |              |   |   |   |
| In September 2010, a shareholder loaned the Company $50,000 under a demand note at 10%. In the 4th quarter this shareholder loaned the Company $190,000 under a demand note at 10%.          |   |              | 240,000   |   |              |   | - |   |
|                                                                                                                                                                                         |   |              |      |   |              |   |   |   |
| Total                                                                                                                                                                                        |   | $                 | 2,199,980 |   |              | $      | 1,055,000 |   |

----

| Discounted present value of a non-interest bearing $70,000 settlement with a former investor of Magnitude, Inc. to be paid in 24 equal monthly payments commencing July 1, 1997.  The imputed interest rate used to discount the note is 8% per annum.  This obligation is in default. |   |   |     33,529 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------|--------|
| Total                                                                                                                                                                                                                                                                                                      |   |   | 33,529               |   |
| Less current maturities                                                                                                                                                                                                                                                                                    |   |   | 33,529               |   |
| Long-term debt, net of current maturities                                                                                                                                                                                                                                                                  |   | $      | -                    |   |

----

----

----

| Conversion Liability at January 1, 2010                         |   |   | -         |   |
|-----------------------------------------------------------------|--------|--------|-----------|--------|
| Value of beneficial conversion features of new debentures       |   |   | 2,083,716 |   |
| Change in value of beneficial conversion features during period |   |   | 538,692   |   |
| Reductions in fair value due to principal conversions           |   |   | -         |   |
| Conversion Liability at December 31, 2010                       |   | $      | 2,622,408 |   |

----

|   | (1) | The holders of said shares of Series A Senior Preferred shall be entitled to receive cumulative dividends at the rate of seven percent (7%) per annum during the first annual period after issuance, increasing by increments of one half of one percent for every year thereafter until the rate reaches ten percent (10%) per annum at which time it will remain at 10% payable semi-annually when declared by the Board of Directors, before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company.  The Dividend Rate shall accrue on the Liquidation Price of each share of the Series A Senior Preferred.  The dividends on the Series A Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series A Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The Series A Senior Preferred shall with respect to dividend rights and liquidation rights rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series B, C and D Senior Convertible Preferred Stock. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the event of any liquidation, of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series A Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, the amount of Five ($5.00) dollars for each share of Series A Senior Preferred (the "Liquidation Price") held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series B and C Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.  In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | The Company shall have the right to redeem pro rata any or all of its Series A Senior Preferred issued and outstanding at any time, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been issued and outstanding for a minimum of three (3) years at the time of notice of redemption to the holders of such shares, by paying to the holders thereof the Liquidation Price for each share of Series A Senior Preferred held by such holder plus a "call premium" of 15% of the Liquidation Price, together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price"). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (5) | Each share of Series A Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into such number (the "Conversion Ratio") of shares of the Common Stock of the Company as arrived at by dividing the Liquidation Price by one hundred fifty (150) percent of the market price of the Common Stock of the Corporation ("Market Price") on the earlier of the dates such share of Series A Senior Preferred is subscribed for or issued (the "Effective Date"). |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | The holders of said shares of Series B Senior Preferred shall be entitled to receive cumulative dividends thereon at the rate of seven percent (7%) per annum, payable semi-annually when declared by the Board of Directors, before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company.  The Dividend Rate shall accrue on the Liquidation Price of each share of the Series B Senior Preferred.  The dividends on the Series B Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series B Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The Series B Senior Preferred shall, with respect to dividend rights and liquidation rights, rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series A, C and D Senior Convertible Preferred Stock. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or providing for payment of the debts and other liabilities of the Company, the holders of the Series B Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, the amount of nine ($9.00) dollars for each share of Series B Senior Preferred (the "Liquidation Price") held of record by such holder, payable in cash or in shares of stock, securities or other  consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A and C Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.  In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (4) | The Company shall have the right to redeem pro rata any or all of its Series B Senior Preferred issued and outstanding at any time, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been issued and outstanding for a minimum of three (3) years at the time of notice of redemption of the holders of such shares, by paying to the holders thereof the Liquidation Price for each share of Series B Senior Preferred held by such holder plus a "call premium" of 10% of the Liquidation Price, together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price"). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Each share of Series B Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into shares of Common Stock of the Company on the basis of ten (10) shares of Common Stock for 1 share of Series B Senior Preferred. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | The holders of said shares of Series C Senior Preferred shall be entitled to receive cumulative dividends thereon at the rate of seven percent (7%) per annum, payable monthly, before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company.  The Dividend Rate shall accrue on the Liquidation Price (as hereinafter defined) of each share of the Series C Senior Preferred.  The dividends on the Series C Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series C Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The Series C Senior Preferred shall with respect to dividend rights and liquidation rights rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series A, B and D Senior Convertible Preferred Stock. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series C Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, the amount of nine ($9.00) dollars for each share of Series C Senior Preferred (the "Liquidation Price") held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A and B Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.  In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (4) | The Company shall have the right to redeem pro rata any or all of its Series C Senior Preferred issued and outstanding at any time, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been issued and outstanding for a minimum of three (3) years at the time of notice of redemption to the holders of such shares, by paying to the holders thereof the Liquidation Price for each share of Series C Senior Preferred held by such holder plus a "call premium" of 10% of the Liquidation Price together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price"). |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Each share of Series C Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into shares of Common Stock of the Company on the basis of ten (10) shares of Common Stock for 1 share of Series C Senior Preferred. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | The holders of said shares of Series D Senior Preferred shall be entitled to receive cumulative dividends thereon at the rate of seven percent (7%) per annum, payable semi-annually when declared by the Board of Directors before any dividend shall be declared, set apart for, or paid upon the Common Stock of the Company.  The Dividend Rate shall accrue on the Stated Value (the "Stated Value"), which Stated Value shall be noted on the certificate issued to the holder, of each share of the Series D Senior Preferred.  The dividends on the Series D Senior Preferred, payable in cash, shall be cumulative, so that if the Company fails in any fiscal year to pay such dividends on all the issued and outstanding Series D Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for the Cumulative Preferred Stock or the Common Stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The Series D Senior Preferred shall with respect to dividend rights and liquidation rights rank prior to all classes and series of Common Stock and the Cumulative Preferred Stock, and on a par with the Series A, B and C Senior Convertible Preferred Stock. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the event of any liquidation of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series D Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, an amount equal to the Stated Value of each share of Series D Senior Preferred held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A, B and C Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.  In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C and D Senior Preferred, the holders of these series shall receive payments on a pro rata basis. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (4) | The Company shall have the right to redeem pro rata any or all of its Series D Senior Preferred issued and outstanding at anytime, with the Board of Directors of the Company in its sole discretion deciding how many shares to redeem, provided, however, that any such shares called for redemption have been outstanding for a minimum of three (3) years at the time of notice of redemption to the holders of such shares, by paying to the holders thereof the Stated Value for each share of Series D Senior Preferred held by such holder plus a "call premium" of 10% of the Stated Value, together with the amount of any accrued and unpaid dividends as may have accumulated thereon at the time of redemption (the "Redemption Price"). |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Each share of Series D Senior Preferred shall be convertible at any time prior to the Redemption Date, at the holder’s option, into shares of Common Stock of the corporation on the basis of ten (10) shares of Common Stock for 1 share of Series D Senior Preferred. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (1) | The holders of said shares of Series E Senior Preferred shall be entitled to receive cumulative dividends at the rate of six percent (6%) per annum, payable at the time said shares are converted into shares of common stock of the Company and when declared by the board of Directors, before any dividend shall be declared, set apart for, or paid upon the Common Stock and any other Preferred Stock of the Company.  The Dividend Rate shall accrue on the Stated Value, which Stated Value shall be noted on the certificate issued to the holder of each share of the Series E Senior Preferred.  The dividends on the Series E Senior Preferred, payable in cash, shall be cumulative, so that if the company fails in any fiscal year to pay such dividends on all the issued and outstanding Series E Senior Preferred, such deficiency in the dividends shall be fully paid, but without interest, before any dividends shall be paid on or set apart for any other class of Preferred Stock or the Common Stock. The holders of the currently outstanding shares of Series E Senior Convertible Stock have waived their right for dividends, consequently, no dividends have been accrued on this stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | The Series E Senior Preferred shall with respect to dividend rights rank prior to all classes and series of Common Stock, Cumulative Preferred Stock, and the Series A, B, C, and D Senior Convertible Preferred Stock and, with respect to liquidation rights rank prior to all classes and series of Common Stock, the Cumulative Preferred Stock, and be on a par with the Series A, B, C and D Senior Convertible Preferred Stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the event of any liquidation, dissolution, or winding up of the affairs of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series E Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, an amount equal to the Stated Value of each share of Series E Senior Preferred held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A, B, C and D Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.  In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C, D and E Senior Preferred, the holders of these series shall receive payments on a pro rata basis. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (4) | The holders of said shares of Series E Senior Preferred shall not be entitled to any voting rights. |
|--------|-----|-----------------------------------------------------------------------------------------------------|

|   | (5) | Shares of Series E Senior Preferred which have been issued and reacquired in any manner, including shares purchased or converted into Common Stock exchanged or redeemed, shall be canceled on the books of the Company and shall not be considered outstanding for any purpose. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | During such time as there exist unpaid cumulative dividends due on the Series E Senior Preferred, no reclassification of the shares of the Company or capital reorganization of the Company in any manner provided by law shall be valid unless (a) the holders of a majority of all the Series E Senior Preferred approve, and (b) provision is made for the payment of the aggregate unpaid cumulative dividends then in arrears. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Each share of Series E Senior Preferred shall automatically convert, on the date six months after the date of issuance (the “Conversion Date”) which Conversion Date shall be noted on the certificate issued to the holder of each share of the Series E Senior Preferred, into shares of Common Stock of the Company on the basis of one hundred (100) shares of Common Stock for 1 share of Series E Senior Preferred.  The holder of any shares of Series E Senior Preferred shall surrender, as soon as practicable on or after the Conversion Date, at the principal office of the Company or at such other office or agency maintained by the Company for that purpose, the certificate or certificates representing the shares of Series E Senior Preferred due for conversion.  As promptly as practicable, and in any event within ten business days after surrender of such certificates, the Company shall deliver or cause to be delivered certificates representing the number of validly issued, fully paid and non-assessable shares of Common Stock of the Company to which such holder of Series E Senior Preferred so converted shall be entitled.  Such conversion shall be deemed to have been made at the close of business on the Conversion Date, so that the rights of the holders of the Series E Senior Preferred shall thereafter cease except for the right to receive Common Stock of the Company in accordance herewith, and such converting holder of Series E Senior Preferred shall be treated for all purposes as having become the record holder of such Common Stock of the Company at such time. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | In the event that, prior to the conversion of the Series E Senior Preferred Stock by the holder thereof into Common Stock of the company, there shall occur any change in the outstanding shares of Common Stock of the Company by reason of the declaration of stock dividends, or through a re-capitalization resulting from stock splits or combinations, without the receipt by the Company of fair consideration therefore in the form of cash, services or property, the conversion ratio of the Series E Senior Preferred Stock into Common Stock of the Company shall be adjusted such that any holder of Series E Senior Preferred Stock converting such stock into Common Stock subsequent to such change in the outstanding shares of Common Stock of the Company be entitled to receive, upon such conversion, a number of shares of Common Stock of the Company representing the same percentage of common shares outstanding as presented by the shares that he would have received had he converted his Series E Senior Preferred Stock to Common Stock prior to such change in the outstanding shares of Common Stock of the Company. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (1) | The holders of said shares of Series G Senior Convertible Preferred shall not be entitled to receive dividends. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------|

|   | (2) | The Series G Senior Preferred shall with respect to dividend rights rank junior to all classes and series of Common Stock, Cumulative Preferred Stock, and the Series A, B, C, D, E and F Senior Convertible Preferred Stock and, with respect to liquidation rights rank prior to all classes and series of Common Stock, the Cumulative Preferred Stock, and be on a par with the Series A, B, C, D, E and F Senior Convertible Preferred Stock. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | In the event of any liquidation, dissolution, or winding up of the affairs of the Company, whether voluntary or otherwise, after payment or provision for payment of the debts and other liabilities of the Company, the holders of the Series E Senior Preferred shall be entitled to receive, out of the remaining net assets of the Company, an amount equal to the Stated Value of $11.46526 for each share of Series G Senior Preferred held of record by such holder, payable in cash or in shares of stock, securities or other consideration, the value of which stock, securities or other consideration shall be fixed by the Board of Directors, plus the amount of all dividends in arrears on each such share up to the date fixed for distribution, provided, however, that such remaining net assets are sufficient to cover all the before mentioned payments and also like payments to holders of Series A, B, C, D, E and F Senior Preferred, before any distribution shall be made to the holders of Common Stock or Cumulative Preferred Stock of the Company.  In case such remaining net assets are insufficient to cover all such payments to holders of Series A, B, C, D, E and F Senior Preferred, the holders of these series shall receive payments on a pro rata basis. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | The holders of said shares of Series G Senior Preferred shall not be entitled to any voting rights. |
|--------|-----|-----------------------------------------------------------------------------------------------------|

|   | (5) | Shares of Series G Senior Preferred which have been issued and reacquired in any manner, including shares purchased or converted into Common Stock exchanged or redeemed, shall be canceled on the books of the Company and shall not be considered outstanding for any purpose. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | No cumulative dividends shall be payable on Series G Senior Preferred. |
|--------|-----|------------------------------------------------------------------------|

|   | (7) | Upon the second anniversary of the Agreement and Plan of Reorganization, dated February 19, 2007, all the issued and outstanding shares of Series G Senior Preferred automatically converted into shares of common stock based on the “Market Price”, which was determined by dividing the conversion value of $500,000 by the average sales price of a common share for the twenty successive trading days preceding the second anniversary date of the agreement, subject to a minimum of 10 million common shares. The outstanding 43,610 preferred shares converted into 17,857,142 common shares on February 19, 2009: based the average sales price for our common shares during the twenty trading days period immediately preceding February 19, 2009, of $.028. Stock certificates for the new common shares were issued upon surrender of the original preferred stock certificates. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (8) | In the event that, prior to the conversion of the Series G Senior Preferred Stock by the holder thereof into Common Stock of the company, there shall occur any change in the outstanding shares of Common Stock of the Company by reason of the declaration of stock dividends, or through a re-capitalization resulting from stock splits or combinations, without the receipt by the Company of fair consideration therefore in the form of cash, services or property, the conversion ratio of the Series G Senior Preferred Stock into Common Stock of the Company shall be adjusted such that any holder of Series G Senior Preferred Stock converting such stock into Common Stock subsequent to such change in the outstanding shares of Common Stock of the Company be entitled to receive, upon such conversion, a number of shares of Common Stock of the Company representing the same percentage of common shares outstanding as presented by the shares that he would have received had he converted his Series G Senior Preferred Stock to Common Stock prior to such change in the outstanding shares of Common Stock of the Company. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                               |   | Year Ended December 31, |   |
|------------------------------------|--------|----------------------------------------|--------|
|                               |   | 2010                                   |   |   | 2009 |   |
| State current provision (benefit)  |   | $                                      | 410    |   |   | $ | - |   |
| State deferred provision (benefit) |   |                                   | -      |   |   |   | - |   |
|                               |   | $                                      | 410    |   |   | $ | - |   |

|                                 |   | December 31, |        |
|--------------------------------------|--------|-------------------|-------------|
|                                 |   | 2010              |        |   | 2009 |   |
| Total deferred tax asset, noncurrent |   | $                 | 12,200,000  |   |   | $ | 11,200,000 |   |
| Less valuation allowance             |   |              | (12,200,000 | ) |   |   | (11,200,000 | ) |
| Net deferred tax asset, noncurrent   |   | $                 | -           |   |   | $ | - |   |

|                |   | Year Ended December 31, |   |
|---------------------|--------|----------------------------------------|--------|
|                |   | 2009                                   |   |   | 2008 |   |
| Tax benefit         |   |                                   | 40     | % |   |   | 40 | % |
| Valuation allowance |   |                                   | (40    | )% |   |   | (40 | )% |
| Effective tax rate  |   |                                   | -      |   |   |   | - |   |

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|                               |   | Qualified and Non-QualifiedShares Under Option Pursuantto the 1997 Plan December 31, |   |
|------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------|--------|
|                               |   | 2010                                                                                                                                   |   |   | 2009 |   |
| Outstanding, beginning of year     |   |                                                                                                                                   | -      |   |   |   | - |   |
| Granted during the year            |   |                                                                                                                                   | -      |   |   |   | - |   |
| Expired during the year            |   |                                                                                                                                   | -      |   |   |   | - |   |
| Surrendered during the year        |   |                                                                                                                                   | -      |   |   |   | - |   |
| Outstanding, end of year           |   |                                                                                                                                   | -      |   |   |   | - |   |
| Eligible, end of year for exercise |   |                                                                                                                                   | -      |   |   |   | - |   |

|                               |   | Qualified and Non-QualifiedShares Under Option Pursuantto the 2000 Plan December 31, |   |
|------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------|--------|
|                               |   | 2010                                                                                                                                   |   |   | 2009 |   |
| Outstanding, beginning of year     |   |                                                                                                                                   | -      |   |   |   | - |   |
| Granted during the year            |   |                                                                                                                                   | -      |   |   |   | - |   |
| Exercised during the year          |   |                                                                                                                                   | -      |   |   |   | - |   |
| Surrendered during the year        |   |                                                                                                                                   | -      |   |   |   | - |   |
| Expired during the year            |   |                                                                                                                                   | -      |   |   |   | - |   |
| Outstanding, end of year           |   |                                                                                                                                   | -      |   |   |   | - |   |
| Eligible, end of year for exercise |   |                                                                                                                                   | -      |   |   |   | - |   |

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|                                                                       |   | December 31, |       |
|----------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                       |   | 2010              |       |   | 2009 |   |
| Outstanding, beginning of year                                             |   |              | 10,453,542 |   |   |   | 18,353,542 |   |
| Granted during the year                                                    |   |              | 1,900,000  |   |   |   | 2,100,000 |   |
| Exercised during the year                                                  |   |              | -          |   |   |   | - |   |
| Surrendered or cancelled during the year                                   |   |              | -          |   |   |   | (8,000,000 | ) |
| Expired during the year                                                    |   |              | (3,903,542 | ) |   |   | (2,000,000 | ) |
| Outstanding, end of year (at prices ranging from $0.01 to $0.10)           |   |              | 8,450,000  |   |   |   | 10,453,542 |   |
|                                                                       |   |              |       |   |   |   |   |   |
| Eligible for exercise, end of year (at prices ranging from $0.01 to $0.10) |   |              | 8,450,000  |   |   |   | 10,453,542 |   |

|                                                             |   | December 31, |        |
|------------------------------------------------------------------|--------|-------------------|-------------|
|                                                             |   | 2010              |        |   | 2009 |   |
| Outstanding, beginning of year                                   |   |              | 178,189,648 |   |   |   | 168,222,981 |   |
| Granted during the year                                          |   |              | 6,750,000   |   |   |   | 27,750,000 |   |
| Exercised during the year                                        |   |              | (15,000,000 | ) |   |   | - |   |
| Surrendered /cancelled during the year                           |   |              | -           |   |   |   | - |   |
| Expired during the year                                          |   |              | (17,208,333 | ) |   |   | (17,783,333 | ) |
| Outstanding, end of year (at prices ranging from $.025 to $.085) |   |              | 152,731,315 |   |   |   | 178,189,648 |   |
|                                                             |   |              |        |   |   |   |   |   |
| Eligible, end of year (at prices ranging from $.025 to $.085)    |   |              | 152,731,315 |   |   |   | 178,189,648 |   |

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| 22.  FUTURE IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS |
|-----------------------------------------------------------------|

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