----

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| Nevada                                                      | 86-0970023                 |
|-------------------------------------------------------------|----------------------------|
| State or other jurisdiction ofincorporation or organization | (I.R.S. Employer I.D. No.) |
|                                                        |                       |
| 1225 West Washington Street, Suite 213, Tempe, AZ           | 85281                      |
| (Address of principal executive offices)                    | (Zip Code)                 |

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----

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| ·   | A written and signed Letter of Authorization indicating that customer agrees to the change. |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | An automated or live agent independent third party that the customer is transferred to for the verification. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | An electronic Signature on an electronic Letter of Authorization, usually done on websites. |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | Dual Channel Recording to Eliminate the Loss of Interactions/Customer Statements |
|--------------------|----------------------------------------------------------------------------------|

| ·   | Very Low Implementation and Ongoing Cost |
|--------------------|------------------------------------------|

| ·   | Simple to Set Up, Implement and Launch |
|--------------------|----------------------------------------|

| ·   | Close to Real-Time Call Record and File Retrieval and Posting |
|--------------------|---------------------------------------------------------------|

| ·   | Dedicated Management and IT Resources, 24/7 Availability |
|--------------------|----------------------------------------------------------|

| ·   | Superior Value and Cost Competitive IVR Services |
|--------------------|--------------------------------------------------|

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|  ·   | Better Customer Experience |
|--------------------------|----------------------------|

| ·   | Superior Universal Language Coverage (i.e. Spanish, Chinese, Japanese, Korean, etc.) |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | Documented Higher Success Rates (success rates average over 96%) |
|--------------------|------------------------------------------------------------------|

| ·   | Higher Success Rates Mean: |
|--------------------|----------------------------|

| o   | Less Back Room Clean-up Expense |
|---------------|---------------------------------|

| o   | Fewer Lost Sales due to Non-Verified TPV’s |
|---------------|--------------------------------------------------|

| ·  | Close to Real-Time Call Record and File Retrieval and Posting |
|--------------|---------------------------------------------------------------|

| ·  | Cost Competitive Live Operator Answering Service |
|--------------|--------------------------------------------------|

----

| ·   | All Inclusive Pay-As-You-Go Pricing Model by the Minute or by the Transaction/Call |
|--------------------|------------------------------------------------------------------------------------|

| ·   | No Maintenance, Upgrade, Programming, Site/Seat Licensing or Change Fees |
|--------------------|--------------------------------------------------------------------------|

| ·   | Call Record & File Access 24/7 Via a Secured Website for Easy Retrieval |
|--------------------|-----------------------------------------------------------------------------|

| ·   | Customized Reporting Options |
|--------------------|------------------------------|

| ·   | High Quality Recording with Redundant Systems and Disaster Recovery |
|--------------------|---------------------------------------------------------------------|

| ·   | Compatible and Flexible Process can be used with Virtually Any System |
|--------------------|-----------------------------------------------------------------------|

| ·   | Optional Quality Control Monitoring and Evaluation Services |
|--------------------|-------------------------------------------------------------|

----

| ·   | Retail Sales Alerts |
|--------------------|---------------------|

| ·   | Thank You Messages |
|--------------------|--------------------|

| ·   | Direct Customers to your Website |
|--------------------|----------------------------------|

| ·   | Relationship calls – Happy Birthday, Anniversary, etc. |
|--------------------|--------------------------------------------------------------|

| ·   | Political Campaigns – Get out to Vote |
|--------------------|---------------------------------------------|

| ·   | Customer Loyalty Campaigns to Repeat Customers |
|--------------------|------------------------------------------------|

| ·   | Meeting/Conference Notifications |
|--------------------|----------------------------------|

| ·   | Fundraising |
|--------------------|-------------|

| ·   | Sports Team Advertising |
|--------------------|-------------------------|

| ·   | School and Emergency Notifications |
|--------------------|------------------------------------|

| ·   | Call Tracking |
|--------------------|---------------|

| ·   | Lead Generation |
|--------------------|-----------------|

| ·   | Save Sales on Cancellations |
|--------------------|-----------------------------|

| ·   | Online Phone Surveys |
|--------------------|----------------------|

| ·   | Real Estate Listings |
|--------------------|----------------------|

----

|  Outbound                              |  Inbound                    |
|---------------------------------------------|----------------------------------|
|                                        |                             |
|  Cold Calls                       |  Customer Support/Help Desk |
|                                        |                             |
|  Outbound Telemarketing           |  Order Taking/Fulfillment   |
|                                        |                             |
|  Phone Surveys     |  Answering Service          |
|                                        |                             |
|  Lead Qualifying                  |  Sales Verifications        |
|                                        |                             |
|  Direct Mail Follow up            |  Seminar Sign-up            |
|                                        |                             |
|  Fundraising                           |                             |
|                                        |                             |
|  Political Campaigns                   |                             |
|                                        |                             |
|  Internet Sales Verifications          |                             |
|                                        |                             |
|  Collections                           |                             |

----

----

| ·   | A written and signed Letter of Authorization indicating that customer agrees to the change. |
|--------------------|---------------------------------------------------------------------------------------------|

| ·   | An automated or live agent independent third party that the customer is transferred to for the verification. |
|--------------------|--------------------------------------------------------------------------------------------------------------|

| ·   | An electronic Signature on an electronic Letter of Authorization, usually done on websites. |
|--------------------|---------------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

----

----

----

----

| Plan Category                                          | Number of Securities tobe issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) |
|--------------------------------------------------------|------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                   | (a)                                                                                                  | (b)                                                                                        | (c)                                                                                                                                                                |
| Equity compensation plans approved by security holders | 1,383,332                                                                                            | $1.29                                                                                      | 2,916,668                                                                                                                                                          |
| Total                                                  | 1,383,332                                                                                            | $1.33                                                                                      | 2,916,668                                                                                                                                                          |

----

|                                                                      |   | For the Year EndedDecember 31, 2009 |            |   | For the Year EndedDecember 31, 2008 |   |
|---------------------------------------------------------------------------|--------|-------------------------------------|-----------------|--------|-------------------------------------|--------|
| Revenues                                                                  |   | $                                   | 4,245,144       |   |                                | $      | 5,485,798 |   |
| Cost of Revenues                                                          |   |                                | 1,768,922       |   |                                |   | 2,652,230 |   |
| Research and Development                                                  |   |                                | 545,485         |   |                                |   | 148,742 |   |
| General and Administrative Expenses                                       |   |                                |  2,337,788 |   |                                |   |  3,910,538 |   |
| Net Loss                                                                  |   |                                | (408,842        | )      |                                |   | (1,213,998 | ) |
| Basic and Diluted Income (Loss) per Share                                 |   |                                | (0.06           | )      |                                |   | (0.18 | ) |
| Basic and Diluted Weighted Average Number of Shares Outstanding |   |                                | 6,794,600       |   |                                |   | 6,794,600 |   |
|  BALANCE SHEET DATA:                                                 |   |                                |            |   |                                |   |   |   |
|                                                                      |   | December 31, 2009                   |            |   | December 31, 2008                   |   |
| Total Current Assets                                                      |   | $                                   | 847,528         |   |                                | $      | 1,777,662 |   |
| Total Assets                                                              |   |                                | 1,972,900       |   |                                |   | 1,980,578 |   |
| Total Current Liabilities                                                 |   |                                | 919,061         |   |                                |   | 518,639 |   |
| Working Capital                                                           |   |                                | (63,007         | )      |                                |   | 1,259,023 |   |
| Stockholders’ Equity                                                |   |                                | 1,062,366       |   |                                |   | 1,461,939 |   |
|                                                                      |   |                                |            |   |                                |   |   |   |
|                                                                      |   |                                |            |   |                                |   |   |   |

----

| ·   | Expected term is determined using an average of the contractual term and vesting period of the award; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of similar industry indices, which are publicly traded, over the expected term of the award; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Forfeitures are based on the history of cancellations of awards granted by the Company and   management's analysis of potential forfeitures. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

| Name                       | Age | Positions  |
|----------------------------|-----|-----------------|
| Jeff W. Holmes             | 56  | CEO, Director   |
| Greg Holmes                | 46  | President       |
| Kirk Blosch                | 55  | Director        |
| Charles House              | 69  | Director        |
| Christian J. Hoffmann, III | 62  | Director        |
| Kevin Asher                | 33  | CFO             |
| Tom Harker                 | 36  | CTO             |

----

----

----

----

| Name and Principal Position | Year       | Salary   | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified  Deferred Compensation | All Other Compensation | Total    |
|-----------------------------|------------|----------|-------|--------------|---------------|---------------------------------------------|-----------------------------------------------|------------------------|----------|
| (a)                         | (b)        | (c)      | (d)   | (e)          | (f) (1)       | (g)                                         | (h)                                           | (i) (2)                | (j)      |
| Jeff W. Holmes, CEO         | 12/31/2009 | $204,417 | $0    | $0           | $0            | $0                                          | $0                                            | $4,283                 | $208,700 |
|                        | 12/31/2008 | $220,000 | $500  | $0           | $19,600       | $0                                          | $0                                            | $4,336                 | $244,436 |
| Greg W. Holmes, President   | 12/31/2009 | $139,375 | $0    | $0           | $0            | $0                                          | $0                                            | $3,790                 | $143,165 |
|                        | 12/31/2008 | $150,000 | $500  | $0           | $14,000       | $0                                          | $0                                            | $3,470                 | $167,970 |
| Thomas Harker, CTO          | 12/31/2009 | $130,084 | $0    | $0           | $0            | $0                                          | $0                                            | $3,794                 | $133,878 |
|                        | 12/31/2008 | $140,000 | $500  | $0           | $14,000       | $0                                          | $0                                            | $3,525                 | $158,025 |
| Kevin J. Asher, CFO         | 12/31/2009 | $130,000 | $0    | $0           | $0            | $0                                          | $0                                            | $4,109                 | $134,109 |
|                        | 12/31/2008 | $130,000 | $0    | $0           | $21,000       | $0                                          | $0                                            | $3,008                 | $154,008 |

----

|                      | Stock Awards                                                        | Stock Awards                                                          |
|---------------------------|---------------------------------------------------------------------|-----------------------------------------------------------------------|
| Name                      | Number of securities underlying unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
| Jeff W. Holmes, CEO       | 25,000                                                              |                                                                  | - | $1.52 | 12/15/2010 | - | - | - | - |
|                      | 20,833                                                              | -                                                                     | - | $1.52 | 12/11/2011 | - | - | - | - |
|                      | 70,000                                                              | -                                                                     | - | $1.00 | 12/17/2013 | - | - | - | - |
| Greg W. Holmes, President | 25,000                                                              |                                                                  | - | $1.52 | 12/15/2010 | - | - | - | - |
|                      | 20,833                                                              | -                                                                     | - | $1.52 | 12/11/2011 | - | - | - | - |
|                      | 50,000                                                              | -                                                                     | - | $1.00 | 12/17/2013 | - | - | - | - |
| Thomas Harker, CTO        | 50,000                                                              |                                                                  | - | $1.52 | 12/15/2010 | - | - | - | - |
|                      | 20,833                                                              | -                                                                     | - | $1.52 | 12/11/2011 | - | - | - | - |
|                      | 50,000                                                              | -                                                                     | - | $1.00 | 12/17/2013 | - | - | - | - |
| Kevin J. Asher, CFO       | 50,000                                                              |                                                                  | - | $1.00 | 11/18/2003 | - | - | - | - |
|                      | 25,000                                                              | -                                                                     | - | $1.00 | 12/17/2013 | - | - | - | - |
|                      |                                                                |                                                                  |   |   |   |   |   |   |   |

| Name                           | Year       | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($)                                                                                                            | Total ($) |
|--------------------------------|------------|---------------------------------|------------------|----------------------|--------------------------------------------|-------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|-----------|
| (a)                            | (b)        | (c)                             | (d)              | (e)                  | (f)                                        | (g)                                             | (h)                                                                                                                                   | (i)       |
| Kirk Blosch (2)                | 12/31/2009 | -                               | -                | $0                   | -                                          | -                                               | -                                                                                                                                     | $0        |
|                           | 12/31/2008 | -                               | -                | $25,000              | -                                          | -                                               | -                                                                                                                                     | $25,000   |
| Charles House (2)              | 12/31/2009 | -                               | -                | $0                   | -                                          | -                                               | -                                                                                                                                     | $0        |
|                           | 12/31/2008 | -                               | -                | $25,000              | -                                          | -                                               | -                                                                                                                                     | $25,000   |
| Christian J. Hoffmann, III (2) | 12/31/2009 | -                               | -                | $0                   | -                                          | -                                               | -                                                                                                                                     | $0        |
|                           | 12/31/2008 | -                               | -                | $25,000              | -                                          | -                                               |                       - | $25,000   |

----

----

| Employee       |   | Beginning Date |   | End Date   |   | Annual Salary |    | Renewal Term |
|----------------|--------|----------------|--------|------------|--------|---------------|---------|--------------|
| Jeff W. Holmes |   | 1/1/2005       |   | 12/31/2010 |   | $             | 220,000 |         | (3) one year extensions |
| Greg W. Holmes |   | 1/1/2005       |   | 12/31/2010 |   | $             | 150,000 |         | (3) one year extensions |
| Kevin J. Asher |   | 2/5/2008       |   | 2/4/2010   |   | $             | 130,000 |         | (2) one year extensions |
| Tom Harker     |   | 1/10/2007      |   | 1/9/2011   |   | $             | 140,000 |         | (3) one year extensions |
| Michael Brande |   | 1/10/2007      |   | 1/9/2011   |   | $             | 105,000 |         | (3) one year extensions |
| Michael Rae    |   | 1/10/2007      |   | 1/9/2011   |   | $             | 90,000  |         | (3) one year extensions |
| Jim Stockert   |   | 9/26/2005      |   | 10/25/2010 |   | $             | 80,000  |         | (3) one year extensions |
| Kelly Robinson |   | 6/28/2004      |   | 6/28/2010  |   | $             | 90,000  |         | (2) one year extensions |

----

----

|  Title of Class |  Name of Beneficial Owner                                                                                                                                                                                                                                                                                                     | Number of Shares Owned |  Percent of Class |
|----------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|------------------------|
|                 | Principal Shareholders                                                                                                                                                                                                                                                                                                             |                   |                   |
| Common               | Jeff W. Holmes225 West Washington StreetSuite 213Tempe, Arizona 85281                                                                                                                                                                                                                                                         | 1,611,167              | 23.31%                 |
| Common               | Kirk Blosch2081 S. Lakeline DriveSalt Lake City, Utah 84109                                                                                                                                                                                                                                                                   | 1,620,334              | 23.08%                 |
|                 | Director(s)                                                                                                                                                                                                                                                                                                                        |                   |                   |
| Common               | Jeff W. Holmes (1)                                -------------------------------See above---------------------------------------                                       |
| Common               | Kirk Blosch (2)                                      -------------------------------See above--------------------------------------- |
| Common               | Charles House (3)                                                                                                                                                                                                                                                                                                                  | 225,000                | 3.21%                  |
| Common               | Christian J. Hoffmann, III (4)                                                                                                                                                                                                                                                                                                     | 300,000                | 4.27%                  |
| Common               | All Officers and Director as a Group (four  persons)                                                                                                                                                                                                                                                                     | 3,459,501              | 45.61%                 |

----

|      Plan Category            |   Number of Securities to be issued upon exercise of outstanding options, warrants and rights |   Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a) |
|--------------------------------------------------------|---------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|                                                   | (a)                                                                                                     | (b)                                                                                     | (c)                                                                                                                                       |
| Equity compensation plans approved by security holders | 1,383,332                                                                                               | 1.29                                                                                    | 2,916,668                                                                                                                                 |
| Total                                                  | 1,383,332                                                                                               | 1.29                                                                                    | 2,916,668                                                                                                                                 |

----

----

|  ExhibitNo. | SECReferenceNo. |   Title of Document                                     |   Location            |
|------------------|-----------------|-------------------------------------------------------------------|---------------------------------|
| 3(i)             | 3.01            | Articles of Incorporation of Calibrus                             | Incorporated byReference*       |
| 3(ii)       | 3.02       | Amendment to Articles of Incorporation Calibrus-Name Change  | Incorporated byReference*       |
| 3(iii)      | 3.03       | Bylaws of Calibrus                                           | Incorporated byReference*       |
| 4           | 4.01       | Specimen Stock Certificate                                        | Incorporated byReference*       |
| 10          | 10.01           | Lease Agreement – Paragon                                   | Incorporated byReference*       |
| 10               | 10.02           | AT&T Services, Inc.-Agreement                                 | Confidentiality Requested  |
| 10          | 10.03      | Magnet Warrant                                               | Incorporated byReference*       |
| 10               | 10.04           | Employment Agreement-Jeff Holmes                                  | Incorporated byReference*       |
| 10               | 10.05           | Employment Agreement-Greg Holmes                                  | Incorporated byReference*       |
| 10               | 10.06           | Employment Agreement-Kevin Asher                                  | Incorporated byReference        |
| 10               | 10.07           | Incentive Stock Option Plan                                       | Incorporated byReference*       |
| 10          | 10.08      | Non-Qualified Stock Option Plan                              | Incorporated byReference*       |
| 10               | 10.09           | Form of Options                                                   | Incorporated byReference*       |
| 10          | 10.10           | MeoMyo, LLC Development Contract                                  | This Filing                     |
| 14               | 14.01           | Code of Ethics                                                    | This Filing                |
| 31               | 31.01           | CEO certification                                            | This Filing                     |
| 31               | 31.02           | CFO certification                                            | This Filing                     |
| 32               | 32.01           | CEO certification                                            | This Filing                     |
| 32               | 32.02           | CFO certification                                                 | This Filing                     |

----

| Signature                                                                                                                                                                                                                         | Title         | Date           |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|----------------|--------|
|                                                                                                                                                                                                                              |          |           |   |
| /s/ Jeff W. Holmes                            Jeff W. Holmes                               | Director, CEO | April 15, 2010 |   |
|                                                                                                                                                                                                                              |          |           |   |
| /s/ Kirk Blosch                                  Kirk Blosch | Director      | April 15, 2010 |   |
|                                                                                                                                                                                                                              |          |           |   |
| /s/ Christian Hoffmann, III             Christian Hoffmann, III                                                                                                  | Director      | April 15, 2010 |   |
|                                                                                                                                                                                                                              |          |           |   |
| /s/ Charles House                            Charles House                                 | Director      | April 15, 2010 |   |
|                                                                                                                                                                                                                              |          |           |   |

----

----

|                                                                             |                                       |
|----------------------------------------------------------------------------------|--------------------------------------------|
| ASSETS                                                                           |                                       |
|                                                                             |                                       |   | 2009 |   |   | 2008 |   |
| Current Assets                                                                   |                                       |   |   |   |   |   |
|    Cash and cash equivalents                                      |                                       | $ | 174,428 |   |   | $ | 854,159 |   |
|    Accounts receivable - trade, net                               |                                       |   | 580,487 |   |   |   | 799,311 |   |
|    Prepaid expenses                                               |                                       |   | 92,613 |   |   |   | 124,192 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             | Total Current Assets                       |   |   | 847,528 |   |   |   | 1,777,662 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
| Property and equipment, net                                                      |                                       |   | 80,008 |   |   |   | 165,421 |   |
| Software development                                                             |                                       |   | 1,014,328 |   |   |   | - |   |
| Deposits                                                                         |                                       |   |   | 29,869 |   |   |   | 34,382 |   |
| Intangible asset, net                                                            |                                       |   | 1,167 |   |   |   | 3,113 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             | Total Assets                               |   | $ | 1,972,900 |   |   | $ | 1,980,578 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                             |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
| Current Liabilities                                                              |                                       |   |   |   |   |   |   |   |
|    Notes payable, net of discount - current portion               |                                       | $ | 371,474 |   |   | $ | - |   |
|    Accounts payable - trade                                       |                                       |   | 254,678 |   |   |   | 301,397 |   |
|    Accrued liabilities                                            |                                       |   | 284,383 |   |   |   | 217,242 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             | Total Current Liabilities                  |   |   | 910,535 |   |   |   | 518,639 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             | Total Liabilities                          |   |   | 910,535 |   |   |   | 518,639 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
| Commitments and Contingencies                                                    |                                       |   | - |   |   |   | - |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
| Stockholders' Equity                                                             |                                       |   |   |   |   |   |   |   |
|    Preferred stock, $.001 par value, 5,000,000 shares authorized, |                                       |   |   |   |   |   |   |   |
|      none issued or outstanding                         |                                       |   | - |   |   |   | - |   |
|    Common stock, $.001 par value, 45,000,000 shares authorized,   |                                       |   |   |   |   |   |   |   |
|       6,794,600 shares issued and outstanding |                                       |   | 6,795 |   |   |   | 6,795 |   |
|    Additional paid-in capital                                     |                                       |   | 4,640,812 |   |   |   | 4,631,544 |   |
|    Accumulated deficit                                            |                                       |   | (3,585,242 | ) |   |   | (3,176,400 | ) |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             | Total Stockholders' Equity                 |   |   | 1,062,365 |   |   |   | 1,461,939 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |
|                                                                             | Total Liabilities and Stockholders' Equity |   | $ | 1,972,900 |   |   | $ | 1,980,578 |   |
|                                                                             |                                       |   |   |   |   |   |   |   |   |

----

|                                        |   |   |      |   |   |   |
|---------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                        |   | 2009   |      |   | 2008   |   |
|                                        |   |   |      |   |   |   |
| Revenues                                    |   | $      | 4,245,144 |   |   | $      | 5,485,798 |   |
|                                        |   |   |      |   |   |   |   |   |
| Cost of revenues                            |   |   | 1,768,922 |   |   |   | 2,652,230 |   |
|                                        |   |   |      |   |   |   |   |   |
| Gross profit                                |   |   | 2,476,222 |   |   |   | 2,833,568 |   |
|                                        |   |   |      |   |   |   |   |   |
| General and administrative expenses         |   |   | 2,337,788 |   |   |   | 3,910,538 |   |
| Research and development                    |   |   | 545,485   |   |   |   | 148,742 |   |
| Loss on disposal/sale of asset              |   |   | -         |   |   |   | 3,844 |   |
|                                        |   |   |      |   |   |   |   |   |
| Loss from Operations                        |   |   | (407,051  | )      |   |   | (1,229,556 | ) |
|                                        |   |   |      |   |   |   |   |   |
| Other Income (Expense):                     |   |   |      |   |   |   |   |   |
|    Interest income           |   |   | 2,649     |   |   |   | 19,980 |   |
|    Interest expense          |   |   | (4,440    | )      |   |   | (4,422 | ) |
|                                        |   |   |      |   |   |   |   |   |
|                                        |   |   | (1,791    | )      |   |   | 15,558 |   |
|                                        |   |   |      |   |   |   |   |   |
| Loss before income taxes                    |   |   | (408,842  | )      |   |   | (1,213,998 | ) |
|                                        |   |   |      |   |   |   |   |   |
| Income tax benefit (expense) - deferred     |   |   | -         |   |   |   | - |   |
|                                        |   |   |      |   |   |   |   |   |
| Net Loss                                    |   | $      | (408,842  | )      |   | $      | (1,213,998 | ) |
|                                        |   |   |      |   |   |   |   |   |
| Loss per Common Share:                      |   |   |      |   |   |   |   |   |
|    Basic and Diluted         |   | $      | (0.06     | )      |   | $      | (0.18 | ) |
|                                        |   |   |      |   |   |   |   |   |
| Weighted Average Common Shares Outstanding: |   |   |      |   |   |   |   |   |
|    Basic and Diluted         |   |   | 6,794,600 |   |   |   | 6,794,600 |   |
|                                        |   |   |      |   |   |   |   |   |

----

|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |
|-----------------------------------------------|--------|--------------|-----------|--------|---------|--------|--------|-------------|--------|--------|---------------|--------|--------|--------|------------|
|                                          |   |         |      |   |    |   |   | Additional  |   |   |          |   |   | Total  |       |
|                                          |   | Common Stock |      |   | Paid-In |   |   | Accumulated |   |   | Stockholders' |   |
|                                          |   | Shares       |      |   | Amount  |   |   | Capital     |   |   | Deficit       |   |   | Equity |       |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |
| Balance at December 31, 2007                  |   |         | 6,794,600 |   |    | $      | 6,795  |        |   | $      | 4,461,321     |   |   | $      | (1,962,402 | ) |   | $ | 2,505,714 |   |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
| Stock based compensation                      |   |         | -         |   |    |   | -      |        |   |   | 170,223       |   |   |   | -          |   |   |   | 170,223 |   |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
| Net loss for the year ended                   |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
|    December 31, 2008           |   |         | -         |   |    |   | -      |        |   |   | -             |   |   |   | (1,213,998 | ) |   |   | (1,213,998 | ) |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
|                                          |   |         | 6,794,600 |   |    |   | 6,795  |        |   |   | 4,631,544     |   |   |   | (3,176,400 | ) |   |   | 1,461,939 |   |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
| Warrants issued with convertible              |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
|    debt at relative fair value |   |         | -         |   |    |   | -      |        |   |   | 9,268         |   |   |   | -          |   |   |   | 9,268 |   |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
| Net loss for the year ended                   |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
|    December 31, 2009           |   |         | -         |   |    |   | -      |        |   |   | -             |   |   |   | (408,842   | ) |   |   | (408,842 | ) |
|                                          |   |         |      |   |    |   |   |        |   |   |          |   |   |   |       |   |   |   |   |   |
| Balance at December 31, 2009                  |   |         | 6,794,600 |   |    | $      | 6,795  |        |   | $      | 4,640,812     |   |   | $      | (3,585,242 | ) |   | $ | 1,062,365 |   |

----

|                                                                                |                                             |   |     |       |   |   |      |
|-------------------------------------------------------------------------------------|--------------------------------------------------|--------|----------|------------|--------|--------|-----------|
|                                                                                |                                             |   | 2009     |       |   | 2008   |      |
|                                                                                |                                             |   |     |       |   |   |      |
| Increase (decrease) in cash and cash equivalents:                                   |                                             |   |     |       |   |   |
|                                                                                |                                             |   |     |       |   |   |      |
| Cash flows from operating activities:                                               |                                             |   |     |       |   |   |
|                                                                                | Net Loss                                         |   | $        | (408,842   | )      |   | $         | (1,213,998 | ) |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
|      Adjustments to reconcile net loss to net cash used by |                                             |   |     |       |   |   |      |   |
|      operating activities:                                 |                                             |   |     |       |   |   |      |   |
|                                                                                | Depreciation and amortization                    |   |     | 117,502    |   |   |      | 167,235 |   |
|                                                                                | Allowance for doubtful accounts                  |   |     | -          |   |   |      | (11,000 | ) |
|                                                                                | Stock based compensation expense                 |   |     | -          |   |   |      | 170,223 |   |
|                                                                                | Loss on disposal/sale of asset                   |   |     | -          |   |   |      | 3,844 |   |
|                                                                                | Amortization of debt discount                    |   |     | 742        |   |   |      | - |   |
|      Changes in assets and liabilities:                    |                                             |   |     |       |   |   |      |   |
|                                                                                | Accounts receivable - trade                      |   |     | 218,824    |   |   |      | 3,249 |   |
|                                                                                | Prepaid expenses                                 |   |     | 31,579     |   |   |      | 34,230 |   |
|                                                                                | Deposits                                         |   |     | 4,513      |   |   |      | - |   |
|                                                                                | Accounts payable - trade                         |   |     | (46,719    | )      |   |      | 233,235 |   |
|                                                                                | Accrued liabilities                              |   |     | 67,141     |   |   |      | (64,187 | ) |
|                                                                                | Net cash used by operating activities            |   |     | (15,260    | )      |   |      | (677,169 | ) |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Cash flows from investing activities:                                               |                                             |   |     |       |   |   |      |   |
|                                                                                | Purchase of fixed assets                         |   |     | (30,143    | )      |   |      | (78,895 | ) |
|                                                                                | Capitalized software development                 |   |     | (1,014,328 | )      |   |      | - |   |
|                                                                                | Proceeds from sale of fixed assets               |   |     | -          |   |   |      | 39,000 |   |
|                                                                                | Purchase of intangibles                          |   |     | -          |   |   |      | (3,500 | ) |
|                                                                                | Net cash used by investing activities            |   |     | (1,044,471 | )      |   |      | (43,395 | ) |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Cash flows from financing activities:                                               |                                             |   |     |       |   |   |      |   |
|                                                                                | Proceeds from issuance of debt                   |   |     | 380,000    |   |   |      | - |   |
|                                                                                | Repayment of debt                                |   |     | -          |   |   |      | (16,981 | ) |
|                                                                                | Net cash provided (used) by financing activities |   |     | 380,000    |   |   |      | (16,981 | ) |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Net decrease in cash and cash equivalents                                           |                                             |   | (679,731 | )          |   |   | (737,545  | ) |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Cash and cash equivalents at beginning of year                                      |                                             |   | 854,159  |       |   |   | 1,591,704 |   |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Cash and cash equivalents at end of year                                            |                                             | $      | 174,428  |       |   | $      | 854,159   |   |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Supplemental disclosure of cash flow information:                                   |                                             |   |     |       |   |   |      |   |
|                                                                                |                                             |   |     |       |   |   |      |   |   |
| Cash paid during the year for:                                                      |                                             |   |     |       |   |   |      |   |
|    Interest                                                          |                                             |   | $        | -          |   |   | $         | 4,422 |   |
|    Income Taxes                                                      |                                             | $      | 50       |       |   | $      | 50        |   |
|                                                                                |                                             |   |     |       |   |   |      |   |

----

----

----

| ·   | All Inclusive Pay-As-You-Go Pricing Model by the Minute or by the Transaction/Call |
|--------------------|------------------------------------------------------------------------------------|

| ·   | No Maintenance, Upgrade, Programming, Site/Seat Licensing or Change Fees |
|--------------------|--------------------------------------------------------------------------|

| ·   | Call Record & File Access 24/7 Via a Secured Website for Easy Retrieval |
|--------------------|-----------------------------------------------------------------------------|

| ·   | Customized Reporting Options |
|--------------------|------------------------------|

| ·   | High Quality Recording with Redundant Systems and Disaster Recovery |
|--------------------|---------------------------------------------------------------------|

| ·   | Compatible and Flexible Process can be used with Virtually Any System |
|--------------------|-----------------------------------------------------------------------|

| ·   | Optional Quality Control Monitoring and Evaluation Services |
|--------------------|-------------------------------------------------------------|

----

----

----

| ·   | Dual Channel Recording to Eliminate the Loss of Interactions/Customer Statements |
|--------------------|----------------------------------------------------------------------------------|

| ·   | Very Low Implementation and Ongoing Cost |
|--------------------|------------------------------------------|

| ·   | Simple to Set Up, Implement and Launch |
|--------------------|----------------------------------------|

| ·   | Close to Real-Time Call Record and File Retrieval and Posting |
|--------------------|---------------------------------------------------------------|

| ·   | Dedicated Management and IT Resources, 24/7 Availability |
|--------------------|----------------------------------------------------------|

| ·   | Superior Value and Cost Competitive IVR Services |
|--------------------|--------------------------------------------------|

----

----

----

----

----

----

----

----

----

----

----

----

|                                               |   | Year Ended December 31, |      |
|----------------------------------------------------|--------|-------------------------|-----------|
|                                               |   | 2009                    |      |   | 2008 |   |
|                                               |   |                    |      |   |   |   |
|                                               |   |                    |      |   |   |   |
| Loss available to common stockholders              |   | $                       | (408,842  | ) |   | $ | (1,213,998 | ) |
|                                               |   |                    |      |   |   |   |   |   |
| Weighted average number of common shares           |   |                    |      |   |   |   |   |   |
| used in basic earnings per share                   |   |                    | 6,794,600 |   |   |   | 6,794,600 |   |
|                                               |   |                    |      |   |   |   |   |   |
| Effect of dilutive securities:                     |   |                    |      |   |   |   |   |   |
|       Stock options  |   |                    | -         |   |   |   | - |   |
|       Stock warrants |   |                    | -         |   |   |   | - |   |
|                                               |   |                    |      |   |   |   |   |   |
| Weighted average number of common shares           |   |                    |      |   |   |   |   |   |
| and dilutive potential comon stock used in         |   |                    |      |   |   |   |   |   |
| diluted earnings per share                         |   |                    | 6,794,600 |   |   |   | 6,794,600 |   |

| ·   | Expected term is determined using an average of the contractual term and vesting period of the award; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of similar industry indices, which are publicly traded, over the expected term of the award; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

| ·   | Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and, |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Forfeitures are based on the history of cancellations of awards granted by the Company and management's analysis of potential forfeitures. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

|                           |   | 2008   |       |   | 2007   |   |
|--------------------------------|--------|--------|------------|--------|--------|--------|
|                           |   |   |       |   |   |   |
| Computer hardware              |   | $      | 2,115,043  |   |   | $      | 2,102,086 |   |
| Furniture and fixtures         |   |   | 229,728    |   |   |   | 229,728 |   |
| Leashold improvements          |   |   | 153,555    |   |   |   | 153,555 |   |
| Software costs                 |   |   | 1,195,761  |   |   |   | 1,178,575 |   |
|                           |   |   | 3,694,087  |   |   |   | 3,663,944 |   |
| Less: accumulated depreciation |   |   | (3,614,079 | )      |   |   | (3,498,523 | ) |
|                           |   |   |       |   |   |   |   |   |
|                           |   | $      | 80,008     |   |   | $      | 165,421 |   |

----

----

|                           |   | 2009   |      |   | 2008   |   |
|--------------------------------|--------|--------|-----------|--------|--------|--------|
|                           |   |   |      |   |   |   |
| JabberMonkey development       |   | $      | 1,014,328 |   |   | $      | - |   |
| Less: accumulated amortization |   |   | -         |   |   |   | - |   |
|                           |   |   |      |   |   |   |   |   |
|                           |   |   |      |   |   |   |   |   |
|                           |   | $      | 1,014,328 |   |   | $      | - |   |

----

----

----

|                           |   | 2009   |     |   | 2008   |   |
|--------------------------------|--------|--------|----------|--------|--------|--------|
|                           |   |   |     |   |   |   |
| Branding costs                 |   | $      | 321,343  |   |   | $      | 321,343 |   |
| Website development            |   |   | 17,540   |   |   |   | 17,540 |   |
| Less: accumulated amortization |   |   | (337,716 | )      |   |   | (335,770 | ) |
|                           |   |   |     |   |   |   |   |   |
|                           |   |   |     |   |   |   |   |   |
|                           |   | $      | 1,167    |   |   | $      | 3,113 |   |

----

----

----

----

----

|                                                                  |   | 2009   |     |   | 2008   |   |
|-----------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                                  |   |   |     |   |   |   |
|                                                                  |   |   |     |   |   |   |
| Various notes payable to convertible debenture holders, interest rate |   |   |     |   |   |   |
| of 12% accrued monthly, principal and accrued interest due            |   |   |     |   |   |   |
| November 16 2010, unsecured.                                          |   | $      | 250,000  |   |   | $      | - |   |
|                                                                  |   |   |     |   |   |   |   |   |
| Various notes payable to convertible debenture holders, interest rate |   |   |     |   |   |   |   |   |
| of 12% accrued monthly, principal and accrued interest due            |   |   |     |   |   |   |   |   |
| December 31, 2010, unsecured.                                         |   |   | 130,000  |   |   |   | - |   |
|                                                                  |   |   |     |   |   |   |   |   |
| Less: discount                                                        |   |   | (8,526   | )      |   |   |   |   |
|                                                                  |   |   |     |   |   |   |   |   |
| Less: current portion                                                 |   |   | (371,474 | )      |   |   | - |   |
|                                                                  |   |   |     |   |   |   |   |   |
|                                                                  |   | $      | -        |   |   | $      | - |   |

----

----

|                      |   |   |    |   |   |   |
|---------------------------|--------|--------|---------|--------|--------|--------|
|                      |   | 2009   |    |   | 2008   |   |
|                      |   |   |    |   |   |   |
| Payroll and related taxes |   | $      | 87,301  |   |   | $      | 115,080 |   |
| Deferred rent             |   |   | 15,054  |   |   |   | 33,118 |   |
| Accrued vacation          |   |   | 49,763  |   |   |   | 42,538 |   |
| Accrued interest          |   |   | 3,699   |   |   |   | - |   |
| Other accrued expenses    |   |   | 128,566 |   |   |   | 26,506 |   |
|                      |   |   |    |   |   |   |   |   |
|                      |   | $      | 284,383 |   |   | $      | 217,242 |   |

----

----

----

|                                 |   | 2009   |       |   | 2008   |   |
|--------------------------------------|--------|--------|------------|--------|--------|--------|
| Current portion:                     |   |   |       |   |   |   |
| Operating loss carryforwards         |   | $      | 1,210,970  |   |   | $      | 1,067,829 |   |
| Allowance for doubtful accounts      |   |   | 19,496     |   |   |   | 19,498 |   |
| Accrued vacation                     |   |   | (5,870     | )      |   |   | (12,915 | ) |
| Deferred rent expense                |   |   | 19,404     |   |   |   | 16,588 |   |
|                                 |   |   | 1,244,000  |   |   |   | 1,091,000 |   |
| Less: valuation allowance            |   |   | (1,244,000 | )      |   |   | (1,091,000 | ) |
|                                 |   |   |       |   |   |   |   |   |
| Deferred tax asset-current portion   |   | $      | -          |   |   | $      | - |   |
|                                 |   |   |       |   |   |   |   |   |
| Long-term portion:                   |   |   |       |   |   |   |   |   |
| Depreciation and amortization        |   | $      | 24,000     |   |   | $      | 28,000 |   |
| Less: valuation allowance            |   |   | (24,000    | )      |   |   | (28,000 | ) |
|                                 |   |   |       |   |   |   |   |   |
| Deferred tax asset-long term portion |   | $      | -          |   |   | $      | - |   |

|                                             |   | 2008   |     |   | 2008   |   |
|--------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                             |   |   |     |   |   |   |
| Federal Tax Benefit (Expense) at Statutory Rates |   | $      | 133,000  |   |   | $      | 361,000 |   |
| State Tax Benefit (Expense) at Statutory Rates   |   |   | 20,000   |   |   |   | 53,000 |   |
| Meals and Entertainment                          |   |   | (4,000   | )      |   |   | (3,000 | ) |
| Valuation Allowance Adjustment                   |   |   | (149,000 | )      |   |   | (411,000 | ) |
|                                             |   |   |     |   |   |   |   |   |
| Net Deferred Tax Benefit (Expense)               |   | $      | -        |   |   | $      | - |   |

----

----

----

|         |   |   |    |
|--------------|--------|--------|---------|
| Year Ending  |   |   |    |
| December 31, |   | Amount |    |
| 2010         |   | $      | 313,351 |   |
| 2011         |   |   | 3,768   |   |
|         |   |   |    |   |
|         |   | $      | 317,119 |   |

| Employee       |   | Beginning Date |   | End Date   |   | Annual Salary |    | Renewal Term |
|----------------|--------|----------------|--------|------------|--------|---------------|---------|--------------|
| Jeff W. Holmes |   | 1/1/2005       |   | 12/31/2010 |   | $             | 220,000 |         | (3) one year extensions |
| Greg W. Holmes |   | 1/1/2005       |   | 12/31/2010 |   | $             | 150,000 |         | (3) one year extensions |
| Kevin J. Asher |   | 2/5/2008       |   | 2/4/2010   |   | $             | 130,000 |         | (2) one year extensions |
| Tom Harker     |   | 1/10/2007      |   | 1/9/2011   |   | $             | 140,000 |         | (3) one year extensions |
| Michael Brande |   | 1/10/2007      |   | 1/9/2011   |   | $             | 105,000 |         | (3) one year extensions |
| Michael Rae    |   | 1/10/2007      |   | 1/9/2011   |   | $             | 90,000  |         | (3) one year extensions |
| Jim Stockert   |   | 9/26/2005      |   | 9/25/2010  |   | $             | 80,000  |         | (3) one year extensions |
| Kelly Robinson |   | 6/28/2004      |   | 6/28/2010  |   | $             | 90,000  |         | (2) one year extensions |

----

----

----

----

----

|                             |   |      |     |   |           |   |   | Weighted         |   |   |      |   |
|----------------------------------|--------|-----------|----------|--------|----------------|--------|--------|------------------|--------|--------|-----------|--------|
|                             |   |      |     |   |  Weighted |   |   |  Average    |   |   | Aggregate |   |
|                             |   | Number of |     |   |  Average  |   |   | Remaining        |   |   | Intrinsic |   |
|                             |   | Warrants  |     |   | Exercise Price |   |   | Contractual Term |   |   | Value     |   |
| Outstanding at December 31, 2008 |   |      | 691,104  |   |           | $      | 1.00   |             |   |   |      |   |   |   |
| Granted                          |   |      | 190,000  |   |           |   | -      |             |   |   |      |   |   |   |
| Exercised                        |   |      | -        |   |           |   | -      |             |   |   |      |   |   |   |
| Forfeited                        |   |      | (691,104 | )      |           |   | (1.00  | )                |   |   |      |   |   |   |
|                             |   |      |     |   |           |   |   |             |   |   |      |   |   |   |
| Outstanding at December 31, 2009 |   |      | 190,000  |   |           | $      | -      |             |   |   | 2.92      |   |   | $ | - |   |
|                             |   |      |     |   |           |   |   |             |   |   |      |   |   |   |   |   |
| Exercisable at December 31, 2009 |   |      | -        |   |           | $      | -      |             |   |   | -         |   |   | $ | - |   |

|                    |   | 2009    |            |   | Prior Years |   |
|-------------------------|--------|---------|-----------------|--------|-------------|--------|
| Expected Volatitlity    |   |    | 41.05% - 40.59% |   |        |   | 0% |   |
| Risk-free interest rate |   |    | .78% - 1.14%    |   |        |   | 2.25% |   |
| Expected dividends      |   |    | -               |   |        |   | - |   |
| Expected life           |   | 2 years |            |   | 7 years     |   |
| Fair value              |   | $       | 0.05            |   |        | $      | - |   |

----

----

----

|                                 |   |     |    |   | Weighted-Average |   |
|--------------------------------------|--------|----------|---------|--------|------------------|--------|
|                                 |   |     |    |   | Grant-Date       |   |
|                                 |   | Warrants |    |   | Fair Value       |   |
| Non-exercisable at January 1, 2009   |   |     | -       |   |             | $      | - |   |
|                                 |   |     |    |   |             |   |   |   |
| Granted                              |   |     | 190,000 |   |             |   | 0.05 |   |
|                                 |   |     |    |   |             |   |   |   |
| Exercisable                          |   |     | -       |   |             |   | - |   |
|                                 |   |     |    |   |             |   |   |   |
| Forfeited                            |   |     | -       |   |             |   | - |   |
|                                 |   |     |    |   |             |   |   |   |
| Non-exercisable at December 31, 2009 |   |     | 190,000 |   |             | $      | 0.05 |   |

----

----

----

|                                     |   |      |      |   |           |   | Weighted        |   |   |      |
|------------------------------------------|--------|-----------|-----------|--------|----------------|--------|-----------------|--------|--------|-----------|
|                                     |   |      |      |   |           |   | Average         |   |   |      |
|                                     |   |      |      |   | Weighted       |   | Remaining       |   |   | Aggregate |
|                                     |   | Number of |      |   | Average        |   | Contractual     |   |   | Intrinsic |
|                                     |   | Options   |      |   | Exercise Price |   | Term (in years) |   |   | Value     |
|                                     |   |      |      |   |           |   |            |   |   |      |
| Options outstanding at December 31, 2007 |   |      | 1,574,999 |   |           | $      | 1.48            |   |   |      |   |   |
|                                     |   |      |      |   |           |   |            |   |   |      |   |   |
|    Granted                |   |      | 615,000   |   |           |   | 1.00            |   |   |      |   |   |
|    Exercised              |   |      | -         |   |           |   | -               |   |   |      |   |   |
|    Forfeited              |   |      | (504,167  | )      |           |   | 1.41            |   |   |      |   |   |
|                                     |   |      |      |   |           |   |            |   |   |      |   |   |
| Options outstanding at December 31, 2008 |   |      | 1,685,832 |   |           |   | 1.33            |   |   |      |   |   |
|                                     |   |      |      |   |           |   |            |   |   |      |   |   |
|    Granted                |   |      | -         |   |           |   | -               |   |   |      |   |   |
|    Exercised              |   |      | -         |   |           |   | -               |   |   |      |   |   |
|    Forfeited              |   |      | (302,500  | )      |           |   | 1.51            |   |   |      |   |   |
|                                     |   |      |      |   |           |   |            |   |   |      |   |   |
| Options outstanding at December 31, 2009 |   |      | 1,383,332 |   |           | $      | 1.29            |   | 2.58   |      | $  |             - |
|                                     |   |      |      |   |           |   |            |   |   |      |   |   |
| Options exercisable at December 31, 2009 |   |      | 1,383,332 |   |           | $      | 1.29            |   | 2.58   |      | $  |           - |

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|                    |   | 2008    |         |
|-------------------------|--------|---------|--------------|
| Expected Volatility     |   |    | 27.4 - 28.8% |   |
| Risk-free interest rate |   |    | 1.26 - 2.08% |   |
| Expected dividends      |   |    | -            |   |
| Expected life           |   | 5 years |         |
| Value per option        |   | $       | 0.28         |   |

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