----

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| Delaware                                                                                     |   | 95-4439334                                     |
|----------------------------------------------------------------------------------------------|--------|------------------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                                                         |   |                                           |
|                                                                                         |   |                                           |
| 4505 Emperor Blvd., Ste. 320Durham, North Carolina             |   | 27703                                          |
| (Address of principal executive offices)                                 |   | (Zip Code)                                |

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

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|    |                                                                                           |   | Page No. |   |
|---------|------------------------------------------------------------------------------------------------|--------|---------------|--------|
|    | PART I – FINANCIAL INFORMATION                                                           |   |          |   |
|    |                                                                                           |   |          |   |
| Item 1. | Financial Statements                                                                           |   | 3             |   |
|    |                                                                                           |   |          |   |
|    | Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011                           |   |          | 3      |   |
|    |                                                                                           |   |          |   |   |
|    | Statements of Operations (unaudited) for the three and six months ended June 30, 2012 and 2011 |   |          | 4      |   |
|    |                                                                                           |   |          |   |   |
|    | Statements of Cash Flows (unaudited) for the six months ended June 30, 2012 and 2011           |   |          | 5      |   |
|    |                                                                                           |   |          |   |   |
|    | Notes to Financial Statements (unaudited)                                                 |   |          | 6      |   |
|    |                                                                                           |   |          |   |   |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations    |   |          | 15     |   |
|    |                                                                                           |   |          |   |   |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk                                     |   |          | 28     |   |
|    |                                                                                           |   |          |   |   |
| Item 4. | Controls and Procedures                                                                        |   |          | 28     |   |
|    |                                                                                           |   |          |   |   |
|    | PART II – OTHER INFORMATION                                                              |   |          |   |   |
|    |                                                                                           |   |          |   |   |
| Item 6. | Exhibits                                                                                       |   |          | 29     |   |
|    |                                                                                           |   |          |   |   |
|    | Signatures                                                                                     |   |          | 30     |   |

----

|                                                                                                                                           |   | June 30, |        |   | December 31, |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                                                                                                                                           |   | 2012          |        |   | 2011              |   |
|                                                                                                                                           |   | (unaudited)   |        |   |              |   |
| ASSETS                                                                                                                                         |   |          |        |   |              |   |
| Current assets:                                                                                                                                |   |          |        |   |              |   |
| Cash and cash equivalents                                                                                                                      |   | $             | 96,513      |   |              | $      | 165,139 |   |
| Restricted cash                                                                                                                                |   |          | 250,000     |   |              |   | 70,445 |   |
| Accounts receivable, net                                                                                                                       |   |          | 38,027      |   |              |   | 6,630 |   |
| Prepaid expenses                                                                                                                               |   |          | 131,657     |   |              |   | 53,073 |   |
| Total current assets                                                                                                                           |   |          | 516,197     |   |              |   | 295,287 |   |
| Property and equipment, net                                                                                                                    |   |          | 171,044     |   |              |   | 164,657 |   |
| Capitalized software, net                                                                                                                      |   |          | 663,462     |   |              |   | 172,510 |   |
| Intangible assets, net                                                                                                                         |   |          | 126,589     |   |              |   | 117,685 |   |
| Other assets                                                                                                                                   |   |          | 21,170      |   |              |   | 16,836 |   |
| TOTAL ASSETS                                                                                                                                   |   | $             | 1,498,462   |   |              | $      | 766,975 |   |
| LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                                          |   |          |        |   |              |   |   |   |
| Current liabilities                                                                                                                            |   |          |        |   |              |   |   |   |
| Accounts payable                                                                                                                               |   | $             | 678,238     |   |              | $      | 580,850 |   |
| Notes payable (See Note 3)                                                                                                                     |   |          | 5,017,060   |   |              |   | 5,037,815 |   |
| Deferred revenue                                                                                                                               |   |          | 82,147      |   |              |   | 31,658 |   |
| Settlement related financial instrument liability (See Note 2)                                                                                 |   |          | 2,212,500   |   |              |   | 1,770,000 |   |
| Accrued liabilities (See Note 2)                                                                                                               |   |          | 448,600     |   |              |   | 520,967 |   |
| Total current liabilities                                                                                                                      |   |          | 8,438,545   |   |              |   | 7,941,290 |   |
| Long-term liabilities:                                                                                                                         |   |          |        |   |              |   |   |   |
| Long-term portion of notes payable (See Note 3)                                                                                                |   |          | 17,941,375  |   |              |   | 15,625,075 |   |
| Deferred revenue                                                                                                                               |   |          | 2,974       |   |              |   | 1,505 |   |
| Total long-term liabilities                                                                                                                    |   |          | 17,944,349  |   |              |   | 15,626,580 |   |
| Total liabilities                                                                                                                              |   |          | 26,382,894  |   |              |   | 23,567,870 |   |
| Commitments and contingencies (See Note 4)                                                                                                     |   |          |        |   |              |   |   |   |
| Stockholders' deficit                                                                                                                          |   |          |        |   |              |   |   |   |
| Preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2012 and December 31, 2011        |   |          | -           |   |              |   | - |   |
| Common stock, $0.001 par value, 45,000,000 shares authorized, 18,352,542 shares issued and outstanding at June 30, 2012 and December 31, 2011. |   |          | 18,353      |   |              |   | 18,353 |   |
| Additional paid-in capital                                                                                                                     |   |          | 67,135,755  |   |              |   | 67,118,452 |   |
| Accumulated deficit                                                                                                                            |   |          | (92,038,540 | )      |              |   | (89,937,700 | ) |
| Total stockholders’ deficit                                                                                                              |   |          | (24,884,432 | )      |              |   | (22,800,895 | ) |
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                         |   | $             | 1,498,462   |   |              | $      | 766,975 |   |

----

|                                                                          |    | Three Months Ended |      |    | Six Months Ended |    |
|-------------------------------------------------------------------------------|--------------|------------------------------|----------------|--------------|----------------------------|--------------|
|                                                                     |    | June 30, 2012                |      |    | June 30, 2011              |    |    | June 30, 2012 |    |    | June 30, 2011 |   |
| REVENUES:                                                                     |         |                         |           |         |                       |         |   |   |   |   |   |   |
| Subscription fees                                                             |         | $                            | 83,098         |         |                       | $            | 90,375 |   |   | $ | 166,806 |   |   | $ | 193,647 |   |
| Professional service fees                                                     |         |                         | 6,600          |         |                       |         | - |   |   |   | 24,700 |   |   |   | - |   |
| License fees                                                                  |         |                         | 24,892         |         |                       |         | - |   |   |   | 37,358 |   |   |   | - |   |
| Hosting fees                                                                  |         |                         | 324            |         |                       |         | - |   |   |   | 648 |   |   |   | - |   |
| Other revenue                                                                 |         |                         | 23,108         |         |                       |         | 20,697 |   |   |   | 47,743 |   |   |   | 56,162 |   |
| Total revenues                                                                |         |                         | 138,022        |         |                       |         | 111,072 |   |   |   | 277,255 |   |   |   | 249,809 |   |
|                                                                          |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| COST OF REVENUES                                                              |         |                         | 108,771        |         |                       |         | 201,889 |   |   |   | 197,167 |   |   |   | 394,205 |   |
|                                                                          |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| GROSS PROFIT (LOSS)                                                           |         |                         | 29,251         |         |                       |         | (90,817 | ) |   |   | 80,088 |   |   |   | (144,396 | ) |
|                                                                          |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                                           |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| General and administrative                                                    |         |                         | 300,486        |         |                       |         | 308,763 |   |   |   | 541,350 |   |   |   | 647,731 |   |
| Sales and marketing                                                           |         |                         | 193,852        |         |                       |         | 146,888 |   |   |   | 389,607 |   |   |   | 288,942 |   |
| Research and development                                                      |         |                         | 17,222         |         |                       |         | 104,932 |   |   |   | 33,260 |   |   |   | 263,821 |   |
|     Loss on disposal of assets, net                       |         |                         | -              |         |                       |         | 3,471 |   |   |   | - |   |   |   | 3,471 |   |
| Total operating expenses                                                      |         |                         | 511,560        |         |                       |         | 564,054 |   |   |   | 964,217 |   |   |   | 1,203,965 |   |
| LOSS FROM OPERATIONS                                                          |         |                         |  (482,309 | )            |                       |         |  (654,871 | ) |   |   |  (884,129 | ) |   |   |  (1,348,361 | )  |
|                                                                          |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                                       |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                                         |         |                         | (400,260       | )            |                       |         | (322,386 | ) |   |   | (774,311 | ) |   |   | (616,715 | ) |
| Gain on legal settlements, net                                                |         |                         |  -        |         |                       |         |  177,000 |   |   |   | 100 |   |   |   | 177,019 |   |
| Change in market value of settlement related financial instrument             |         |                         | (162,250       | )            |                       |         | - |   |   |   | (442,500 | ) |   |   | - |   |
| Total other income (expense)                                                  |         |                         | (562,510       | )       |                       |         | (145,386 | ) |   |   | (1,216,711 | ) |   |   | (439,696 | ) |
|  NET LOSS                                                                |         | $                            | (1,044,819     | )            |                       | $            | (800,257 | ) |   | $ | (2,100,840 | ) |   | $ | (1,788,057 | ) |
|                                                                          |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| NET LOSS PER COMMON SHARE:                                                    |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| Basic and fully diluted                                                       |         | $                            | (0.06          | )            |                       | $            | (0.04 | ) |   | $ | (0.11 | ) |   | $ | (0.10 | ) |
| WEIGHTED-AVERAGE NUMBER OF SHARES USED IN COMPUTING NET LOSS PER COMMON SHARE |         |                         |           |         |                       |         |   |   |   |   |   |   |   |   |   |   |
| Basic and fully diluted                                                       |         |                         | 18,352,542     |         |                       |         | 18,352,543 |   |   |   | 18,352,542 |   |   |   | 18,352,543 |   |

----

|                                                                        |   | Six Months              |                                                                                                                                  |    | Six Months              |   |
|-----------------------------------------------------------------------------|--------|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------|---------|-------------------------|--------|
|                                                                        |   | Ended                   |                                                                                                                                  |    | Ended                   |   |
|                                                                        |   | June 30, 2012 |                                                                                                                                  |    | June 30, 2011 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                       |   |                    |                                                                                                                                  |    |                    |   |
| Net loss                                                                    |   | $                       | (2,100,840                                                                                                                            | )       |                    | $      | (1,788,057 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Depreciation and amortization                                               |   |                    | 39,640                                                                                                                                |    |                    |   | 26,145 |   |
| Bad debt expense                                                            |   |                    | -                                                                                                                                     |    |                    |   | - |   |
| Stock-based compensation expense                                            |   |                    | 17,303                                                                                                                                |    |                    |   | 36,180 |   |
| Loss on disposal of assets                                                  |   |                    | -                                                                                                                                     |    |                    |   | 4,376 |   |
| Changes in assets and liabilities:                                          |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Accounts receivable                                                         |   |                    | (21,147                                                                                                                               | )  |                    |   | 6,973 |   |
| Contracts receivable                                                        |   |                    | (10,250                                                                                                                               | )  |                    |   | - |   |
| Prepaid expenses                                                            |   |                    | (78,584                                                                                                                               | )  |                    |   | 78,425 |   |
| Other assets                                                                |   |                    | (4,334                                                                                                                                | )  |                    |   | (10,370 | )  |
| Deferred revenue                                                            |   |                    | 51,958                                                                                                                                |    |                    |   | (1,984 | ) |
| Accounts payable                                                            |   |                    | 172,388                                                                                                                               |    |                    |   | 147,072 |   |
| Accrued and other expenses                                                  |   |                    | 370,133                                                                                                                               |    |                    |   | (945,545 | ) |
| Net cash used in operating activities                                       |   |                    | (1,563,733                                                                                                                            | )       |                    |   | (2,446,785 | ) |
|                                                                        |   |                    |                                                                                                                                  |    |                    |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                       |   |                    |                                                                                                                                  |    |                    |   |   |   |
|                                                                        |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Purchases of furniture and equipment                                        |   |                    |                      (18,613 | )       |                    |   | (7,506 | ) |
| Purchase of software license                                                |   |                    | (75,000                                                                                                                               | )       |                    |   | - |   |
| Capitalized patent development costs                                        |   |                    | (14,072                                                                                                                               | )       |                    |   | - |   |
| Capitalized software                                                        |   |                    | (513,198                                                                                                                              | )       |                    |   | - |   |
| Net cash used in investing activities                                       |   |                    | (620,883                                                                                                                              | )       |                    |   | (7,506 | ) |
|                                                                        |   |                    |                                                                                                                                  |    |                    |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                       |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Restricted cash used to pay IDB interest expense and fees                   |   |                    | 101,692                                                                                                                               |    |                    |   | 78,555 |   |
| Repayments on notes payable                                                 |   |                    | (29,455                                                                                                                               | )       |                    |   | (32,844 | ) |
| Deposit of funds to IDB restricted account                                  |   |                    | (281,247                                                                                                                              | )       |                    |   | - |   |
| Debt borrowings                                                             |   |                    | 2,325,000                                                                                                                             |    |                    |   | 2,375,000 |   |
| Net cash provided by financing activities                              |   |                    | 2,115,990                                                                                                                             |    |                    |   | 2,420,711 |   |
|                                                                        |   |                    |                                                                                                                                  |    |                    |   |   |   |
| NET (DECREASE) IN CASH AND CASH EQUIVALENTS                            |   |                    | (68,626                                                                                                                               | )  |                    |   | (33,580 | ) |
| CASH AND CASH EQUIVALENTS,                                                  |   |                    |                                                                                                                                  |    |                    |   |   |   |
| BEGINNING OF PERIOD                                                         |   |                    | 165,139                                                                                                                               |    |                    |   | 860,211 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                    |   | $                       | 96,513                                                                                                                                |    |                    | $      | 826,631 |   |
|                                                                        |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Supplemental disclosures of cash flow information:                          |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Cash paid during the period for:                                            |   |                    |                                                                                                                                  |    |                    |   |   |   |
| Interest                                                                    |   | $                       | 748,778                                                                                                                               |    |                    | $      | 593,673 |   |

----

|   | ● | SaaS applications for business management, web marketing, and e-commerce;                                                                                                        |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | Software business tools that assist customers in developing written content;                                                                                                     |
|   | ● | Services that are designed to complement our product offerings and allow us to create custom business solutions that fit our end users’ and channel partners’ needs; |
|   | ● | Services that assist not-for-profit organizations in their fundraising efforts; and                                                                                              |
|   | ● | Mobile phone applications used to provide specialized communications and e-commerce opportunities for businesses and not-for-profit organizations.                               |

----

|                    |   | Three Months Ended June 30, |   |   | Six Months Ended June 30, |   |
|-------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                    |   | 2012                        |   |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
| Dividend yield          |   |                        | 0.0    | %      |                      |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |
| Expected volatility     |   |                        | 88.30  | %      |                      |   | 90.59 | % |   |   | 88.30 | % |   |   | 91.52 | % |
| Risk free interest rate |   |                        | 1.20   | %      |                      |   | 2.51 | % |   |   | 1.20 | % |   |   | 2.68 | % |
| Expected lives (years)  |   |                        | 3.75   |   |                      |   | 3.75 |   |   |   | 3.5 |   |   |   | 3.5 |   |

----

|                          |   | June 30,2012 |    |   | December 31,2011 |   |
|-------------------------------|--------|--------------|---------|--------|-----------------------|--------|
| Capitalized software          |   | $            | 685,708 |   |                  | $      | 172,510 |   |
| Less accumulated amortization |   |         | (22,246 | )      |                  |   | - |   |
| Capitalized software, net     |   | $            | 663,462 |   |                  | $      | 172,510 |   |

|                          |   | June 30,2012 |    |   | December 31,2011 |   |
|-------------------------------|--------|--------------|---------|--------|-----------------------|--------|
| Software license              |   | $            | 108,534 |   |                  | $      | 108,534 |   |
| Patent development costs      |   |         | 23,223  |   |                  |   | 9,151 |   |
| Less accumulated amortization |   |         | (5,168  | )      |                  |   | - |   |
| Intangible assets, net        |   | $            | 126,589 |   |                  | $      | 117,685 |   |

|                                                 |   | June 30, |    |   | December 31, |    |
|------------------------------------------------------|--------|---------------|---------|--------|-------------------|---------|
|                                                 |   | 2012          |    |   | 2011              |    |
| Nouri legal fee settlement                           |   | $        | 67,227  |   |              |  $ | 217,227 |   |
| Accrued payroll and related costs                    |   |          | 9,216   |   |              |    | - |   |
| Custom accounting development cost                   |   |          | 75,436  |   |              |    | 75,436 |   |
| Hosting service costs                                |   |          | -       |   |              |    | 27,444 |   |
| Professional services                                |   |          | 1,302   |   |              |    | 3,791 |   |
| Interest payable to IDB and Bondholders (See Note 3) |   |          | 255,103 |   |              |    | 179,569 |   |
| Other accrued items                                  |   |          | 40,316  |   |              |    | 17,500 |   |
|                                                 |   | $             | 448,600 |   |              | $       | 520,967 |   |

----

|                                                             |    | June 30,2012 |      |    | December 31,2011 |   |
|------------------------------------------------------------------|--------------|-------------------|-----------|--------------|-----------------------|--------|
| Shares into which financial instrument liability can be settled: |    |              |      |         |             |   |   |   |
| Unrestricted shares of common stock, when issued                 |    |              | 1,475,000 |    |             |   | 1,475,000 |    |

|                                                             |    | June 30,2012 |      |    | December 31,2011 |   |
|------------------------------------------------------------------|--------------|--------------|-----------|--------------|------------------|--------|
| Settlement related financial instrument liability at fair value: |    |         |      |         |        |   |   |   |
| Fair value of unrestricted shares of common stock                |    | $            | 2,212,500 |    |        | $      | 1,770,000 |    |

|                                                                                                                                                                                                         |   | Three Months Ended June 30, |    | Six Months Ended June 30, |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|---------|---------------------------|--------|
|                                                                                                                                                                                                         |   | 2012                        |    |                      | 2011   |   |   | 2012 |   |   | 2011 |   |
| Change in market value of settlement related financial instruments in the accompanying statement of operations is related to the Class Action settlement approved by the District Court on July 1, 2011 |   |                        |    |                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrestricted shares of common stock                                                                                                                                                                          |   | $                           | 162,250 |                      |   | $ | - |   |   | $ | 442,500 |   |   | $ | - |   |

| Note Description           |   | As of June 30, 2012 |       |   | As of December 31, 2011 |       | Maturity   |     | Rate          |                                         |
|---------------------------------|--------|------------------------------------|------------|--------|---------------------------------------------|------------|------------|----------|---------------|----------------------------------------------|
| IDB credit facility             |   | $                                  | 5,000,000  |   |                                        | $5,000,000 |       | May 2013 |          | Prime, not less than 4.0 | % |
| Insurance premium note          |   |                               | -          |   |                                        |       | 21,421     |     | July 2012     |                                         |   | 5.4 | % |
| Various capital leases          |   |                               | 158,435    |   |                                        |       | 166,469    |     | Various       |                                         |   | 8.0-18.0 | % |
| Convertible notes               |   |                               | 17,800,000 |   |                                        |       | 15,475,000 |     | November 2016 |                                         |   | 8.0 | % |
| Totals                          |   |                               | 22,958,435 |   |                                        |       | 20,662,890 |     |          |                                         |   |   |   |
| Less current portion of debt    |   |                               | 5,017,060  |   |                                        |       | 5,037,815  |     |          |                                         |   |   |   |
| Long–term portion of debt |   | $                                  | 17,941,375 |   |                                        | $          | 15,625,075 |     |          |                                         |   |   |   |

----

|                           | As of June 30, 2012 |   |                          |       |   |         |
|--------------------------------|-------------------------------|--------|-------------------------------|------------|--------|--------------|
| Note Buyer                | Date of Purchase    |   | Amount ofConvertibleNote |       |   | InterestRate |   | Due Date |
| Atlas Capital                  | Various                       |   | $                             | 13,775,000 |   |         |   | 8 | % | 11/14/2016 |
| Blueline Fund                  | November 14, 2007             |   |                          | 500,000    |   |         |   | 8 | % | 11/14/2016 |
| Crystal Management             | Various                       |   |                          | 750,000    |   |         |   | 8 | % | 11/14/2016 |
| HSBC Private Bank (Suisse), SA | November 21, 2008             |   |                          | 250,000    |   |         |   | 8 | % | 11/14/2016 |
| UBP, Union Bancaire Privee     | Various                       |   |                          | 2,475,000  |   |         |   | 8 | % | 11/14/2016 |
| William Furr                   | November 14, 2007             |   |                          | 250,000    |   |         |   | 8 | % | 11/14/2016 |
| Less – lease conversion  | September 4, 2009             |   |                          | (200,000   | )      |         |   |   |   |   |
| Total Convertible Notes        |                          |   | $                        | 17,800,000 |   |         |   |   |   |   |

----

----

|                            |   | Shares Outstanding |    |   | Weighted AverageExercise Price |   |
|---------------------------------|--------|--------------------|---------|--------|--------------------------------|--------|
| BALANCE, December 31, 2011 |   |               | 301,900 |   |                           | $      | 2.25 |   |
| Granted                         |   |               | 17,500  |   |                           |   | 1.31 |   |
| Exercised                       |   |               |  - |   |                           |   |  - |   |
| Canceled                        |   |               | (8,500  | )      |                           |   |               1.10 |   |
| BALANCE, June 30, 2012          |   |               | 310,900 |   |                           | $      | 1.97 |   |

| Exercise Price |   |   | Number of Options Outstanding |          |    | Average Remaining Contractual Life (Years) |               |          | Weighted Average Exercise Price |          |          | Currently ExercisableNumber of Shares |   |               | Weighted Average Exercise Price |               |
|---------------------|--------|--------|----------------------------------------------|---------------|---------|----------------------------------------------------------------|--------------------|---------------|------------------------------------------------|---------------|---------------|-------------------------------------------------|--------|--------------------|------------------------------------------------|--------------------|
|                |   |   |                                         |          |    |                                                           |               |          |                                           |          |          |                                            |   |               |                                           |               |   |   |   |   |   |
| $                   | 0.90   |   |                                         |          | 8,400   |                                                           |               |          | 9.2                                            |          |          | $                                               | .90    |               |                                           |               | 2,100 |   |   | $ | .90 |   |
| $                   | 1.10   |   |                                         |          | 50,000  |                                                           |               |          | 8.3                                            |          |          | $                                               | 1.10   |               |                                           |               | 25,000 |   |   | $ | 1.10 |   |
| $                   | 1.14   |   |                                         |          | 132,500 |                                                           |               |          | 8.8                                            |          |          | $                                               | 1.14   |               |                                           |               | 87,500 |   |   | $ | 1.14 |   |
| $                   | 1.35   |   |                                         |          | 20,000  |                                                           |               |          | 9.2                                            |          |          | $                                               | 1.35   |               |                                           |               | 15,000 |   |   | $ | 1.35 |   |
| $                   | 1.39   |   |                                         |          | 5,000   |                                                           |               |          | 9.8                                            |          |          | $                                               | 1.39   |               |                                           |               | - |   |   | $ | 1.39 |   |
| $                   | 1.49   |   |                                         |          | 5,000   |                                                           |               |          | 9.9                                            |          |          | $                                               | 1.49   |               |                                           |               | - |   |   | $ | 1.49 |   |
| $                   | 2.50   |   |                                    |     | 5,000   |                                                      |          |     | 3.8                                            |     |     | $                                               | 2.50   |          |                                      |          | 5,000 |     |     | $ | 2.50 |     |
| $                   | 3.25   |   |                                         |          | 15,000  |                                                           |               |          | 6.3                                            |          |          | $                                               | 3.25   |               |                                           |               | 15,000 |   |   | $ | 3.25 |   |
| $                   | 3.50   |   |                                         |          | 25,000  |                                                           |               |          | 1.8                                            |          |          | $                                               | 3.50   |               |                                           |               | 25,000 |   |   | $ | 3.50 |   |
| $                   | 5.00   |   |                                    |          | 25,000  |                                                      |     |     | 2.8                                            |          |     | $                                               | 5.00   |     |                            |     | 25,000 |    |      | $ | 5.00 |     |
| $                   | 8.55   |   |                                    |     | 20,000  |                                                      |          |     | 3.1                                            |     |     | $                                               | 8.61   |          |                                      |          | 20,000 |     |     | $ | 8.61 |     |
| Totals              |   |   |                                         | 310,900       |    |                                                           |               | 7.2           |                                           |          | $             | 1.97                                            |   |               |                                           | 219,600            |   |   | $ | 2.71 |   |

----

|            |                                     |   | Three Months Ended June 30, 2012 |    |
|-----------------|------------------------------------------|--------|------------------------------------------------------|---------|
|            | Revenue Type                        |   | Revenues                                             |    | % of Total Revenues |   |
| Customer A | Subscription fees and other revenue |   | $                                                    | 93,454  |   | 68 | % |
| Customer B      | Subscription fees                   |   |                                                 | -       |   | - | % |
| Others          | Various                                  |   |                                                 | 44,568  |   | 32 | % |
| Total           |                                |   | $                                                    | 138,022 |   | 100 | % |

|            |                                |   | Three Months Ended June 30, 2011 |    |
|-----------------|-------------------------------------|--------|------------------------------------------------------|---------|
|            | Revenue Type                   |   | Revenues                                             |    | % of Total Revenues |   |
| Customer A | Subscription fees and other revenue |   | $                                                    | 88,383  |   | 80 | % |
| Customer B      | Subscription fees and other revenue |   |                                                 | 22,588  |   | 20 | % |
| Others          | Various                             |   |                                                 | 101     |   | - | % |
| Total           |                           |   | $                                                    | 111,072 |   | 100 | % |

----

|            |                                |   | Six Months Ended June 30, 2012 |    |
|-----------------|-------------------------------------|--------|----------------------------------------------------|---------|
|            | Revenue Type                   |   | Revenues                                           |    | % of Total Revenues |   |
| Customer A | Subscription fees and other revenue |   | $                                                  | 184,384 |   | 67 | % |
| Customer B      | Subscription fees and other revenue |   |                                               | 27,948  |   | 10 | % |
| Others          | Various                             |   |                                               | 64,923  |   | 23 | % |
| Total           |                           |   | $                                                  | 277,255 |   | 100 | % |

|            |                                |   | Six Months Ended June 30, 2011 |    |
|-----------------|-------------------------------------|--------|----------------------------------------------------|---------|
|            | Revenue Type                   |   | Revenues                                           |    | % of Total Revenues |   |
| Customer A | Subscription fees and other revenue |   | $                                                  | 196,772 |   | 79 | % |
| Customer B      | Subscription fees and other revenue |   |                                               | 50,657  |   | 20 | % |
| Others          | Various                             |   |                                               | 2,380   |   | 1 | % |
| Total           |                           |   | $                                                  | 249,809 |   | 100 | % |

----

----

|   | ● | Subscription fees – monthly fees charged to customers for access to our SaaS applications.  Subscription fees primarily consist of sales of subscriptions through private-label marketing partners to end users. We typically have a revenue-share arrangement with these private-label marketing partners in order to encourage them to market our products and services to their customers. We make subscription sales either on a subscription or on a “for fee” basis. Subscriptions are generally payable on a monthly basis and are typically paid via credit card of the individual end user.  In the past, we recognized all subscription revenue on a gross basis and in accordance with our policy to periodically review our accounting policies we recognized that certain contracts require the reporting of subscription revenue on a gross basis and others on a net basis according to U.S. GAAP.  On that basis, we continue to report subscription revenue from certain contracts on a gross basis and others on a net basis.  The net effect of this reclassification of expenses only impacts gross revenue and certain gross expenses; it does not change the net income or loss.  Subscription fees are recognized as earned through our revenue sharing arrangements. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Professional service fees – fees related to consulting services, some of which complement our other products and applications.  For example, a customer may request that we re-design its website to better accommodate our products or to improve its own website traffic or adapt our mobile platform to their specific requirements. We typically bill professional service fees on a time and material basis.  These fees are recognized upon the delivery of services and acceptance by the customer. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | License fees – fees charged for perpetual or term license agreements for the use of the Mobile platform, or any of our applications that may be offered as part of our platforms.  Revenue is generally recognized on a monthly basis during the term of contract. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Hosting fees – fees charged to customers with network accessibility for any of the Smart Online platform products or applications.  Revenue is generally recognized on a monthly basis as services are provided. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Other revenue – revenues generated from non-core activities such as maintenance fees; original equipment manufacturer contracts; and miscellaneous other revenues |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                              |   | Three Months EndedJune 30, 2012 |       | Three Months EndedJune 30, 2011 |      | 2012 vs 2011Change |   |
|-------------------------------------------------------------------|--------|-------------------------------------------|------------|-------------------------------------------|-----------|------------------------------|--------|
|                                                              |   |                                      |       |                                      | % of |                         |   |   |   |   | % of |   |   |   |   |
|                                                              |   | Dollars                                   |       |                                      | Revenue   |                         |   | Dollars |   |   | Revenue |   |   | Dollars |   |   | Percent |   |
| REVENUES:                                                         |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Subscription fees                                                 |   | $                                         | 83,098     |                                      |      |                         | 60.2   | % |   | $ | 90,375 |   |   |   | 81.4 | % |   | $ | (7,277 | ) |   |   | -8.1 | % |
| Professional service fees                                         |   |                                      | 6,600      |                                      |      |                         | 4.8    | % |   |   | - |   |   |   | - | % |   |   | 6,600 |   |   |   | 100 | % |
| License fees                                                      |   |                                      | 24,892     |                                      |      |                         | 18.0   | % |   |   | - |   |   |   | - | % |   |   | 24,892 |   |   |   | 100 | % |
| Hosting fees                                                      |   |                                      | 324        |                                      |      |                         | 0.2    | % |   |   | - |   |   |   | - | % |   |   | 324 |   |   |   | 100 | % |
| Other revenue                                                     |   |                                      | 23,108     |                                      |      |                         | 16.8   | % |   |   | 20,697 |   |   |   | 18.6 | % |   |   | 2,411 |   |   |   | 11.6 | % |
| Total revenues                                                    |   |                                      | 138,022    |                                      |      |                         | 100.0  | % |   |   | 111,072 |   |   |   | 100.0 | % |   |   | 26,950 |   |   |   | 24.3 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COST OF REVENUES                                                  |   |                                      | 108,771    |                                      |      |                         | 78.8   | % |   |   | 201,889 |   |   |   | 181.8 | % |   |   | (93,118 | ) |   |   | -46.1 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GROSS PROFIT (LOSS)                                               |   |                                      | 29,251     |                                      |      |                         | 21.2   | % |   |   | (90,817 | ) |   |   | -81.8 | % |   |   | 120,068 |   |   |   | 132.2 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                               |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative                                        |   |                                      | 300,486    |                                      |      |                         | 217.7  | % |   |   | 308,763 |   |   |   | 278.0 | % |   |   | (8,277 | ) |   |   | -2.7 | % |
| Sales and marketing                                               |   |                                      | 193,852    |                                      |      |                         | 140.4  | % |   |   | 146,888 |   |   |   | 132.2 | % |   |   | 46,964 |   |   |   | 32.0 | % |
| Research and development                                          |   |                                      | 17,222     |                                      |      |                         | 12.5   | % |   |   | 104,932 |   |   |   | 94.5 | % |   |   | (87,710 | ) |   |   | -83.6 | % |
| Loss on disposal of assets                                        |   |                                      | -          |                                      |      |                         | -      | % |   |   | 3,471 |   |   |   | 3.1 |   |   |   | (3,471 | ) |   |   | -100 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total operating expenses                                          |   |                                      | 511,560    |                                      |      |                         | 370.6  | % |   |   | 564,054 |   |   |   | 507.8 | % |   |   | (52,494 | ) |   |   | -9.3 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS FROM OPERATIONS                                              |   |                                      | (482,309   | )                                         |      |                         | -349.4 | % |   |   | (654,871 | ) |   |   | -589.6 | % |   |   | -172,562 |   |   |   | -26.4 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                           |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                             |   |                                      | (400,260   | )                                         |      |                         | -290.0 | % |   |   | (322,386 | ) |   |   | -290.2 | % |   |   | 77,874 |   |   |   | 24.2 | % |
| Gain on legal settlements, net                                    |   |                                      | -          |                                      |      |                         | -      | % |   |   | 177,000 |   |   |   | 159.4 | % |   |   | (177,000 | ) |   |   | -100.0 | % |
| Change in market value of settlement related financial instrument |   |                                      | (162,250   | )                                         |      |                         | -117.6 | % |   |   | - |   |   |   | - |   |   |   | (162,250 | ) |   |   | -100.0 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total other expense                                               |   |                                      | (562,510   | )                                         |      |                         | -407.5 | % |   |   | (145,386 | )  |   |   | -130.9 | % |   |   | 417,124 |   |   |   | 286.9 | % |
|                                                              |   |                                      |       |                                      |      |                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                                          |   | $                                         | (1,044,819 | )                                         |      |                         | -757.0 | % |   | $ | (800,257 | ) |   |   | -720.5 | % |   | $ | 244,562 |   |   |   | 30.6 | % |

----

----

|                                                              |   | Three Months Ended June 30, |     |    | Change |   |
|-------------------------------------------------------------------|--------|--------------------------------------------|----------|---------|--------|--------|
|                                                              |   | 2012                                       |     |    | 2011   |   |   | Dollars |   |   | Percent |   |
| Interest (expense) net                                            |   | $                                          | (400,260 | )       |   | $      | (322,386 | ) |   | $ | 77,874 |   |   |   | 24.2 | % |
| Gain on legal settlements, net                                    |   |                                       | -        |    |   |   | 177,000 |   |   |   | (177,000 | ) |   |   | -100 | % |
| Change in market value of settlement related financial instrument |   |                                       | (162,250 | )       |   |   | - |   |   |   | (162,250 | ) |   |   | -100 | % |
| Total other expense                                               |   | $                                          | (562,510 | )  |   | $      | (145,386 | )  |   | $ | 417,124 |   |   |   | 286.9 | % |

----

|                                                              |   | Six Months Ended June 30, 2012 |       |   | Six Months Ended June 30, 2011 |   |   | 2012 vs 2011 Change |   |
|-------------------------------------------------------------------|--------|--------------------------------|------------|--------|--------------------------------|--------|--------|---------------------|--------|
|                                                              |   |                           |       |   | % of                      |   |   |                |   |   | % of |   |   |   |   |
|                                                              |   | Dollars                        |       |   | Revenue                        |   |   | Dollars             |   |   | Revenue |   |   | Dollars |   |   | Percent |   |
| REVENUES:                                                         |   |                           |       |   |                           |   |   |                |   |   | ` |   |   |   |   |   |   |   |
| Subscription fees                                                 |   | $                              | 166,806    |   |                           |   | 60.2   | %                   |   | $ | 193,647 |   |   |   | 77.5 | % |   | $ | (26,841 | ) |   |   | -13.9 | % |
| Professional service fees                                         |   |                           | 24,700     |   |                           |   | 8.9    | %                   |   |   | - |   |   |   | - | % |   |   | 24,700 |   |   |   | 100.0 | % |
| License fees                                                      |   |                           | 37,358     |   |                           |   | 13.5   | %                   |   |   | - |   |   |   | - | % |   |   | 37,358 |   |   |   | 100.0 | % |
| Hosting fees                                                      |   |                           | 648        |   |                           |   | 0.2    | %                   |   |   | - |   |   |   | - | % |   |   | 648 |   |   |   | 100.0 | % |
| Other revenue                                                     |   |                           | 47,743     |   |                           |   | 17.2   | %                   |   |   | 56,162 |   |   |   | 22.5 | % |   |   | (8,419 | )  |   |   | -15.0 | % |
| Total revenues                                                    |   |                           | 277,255    |   |                           |   | 100.0  | %                   |   |   | 249,809 |   |   |   | 100.0 | % |   |   | 27,446 |   |   |   | 11.0 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| COST OF REVENUES                                                  |   |                           | 197,167    |   |                           |   | 71.1   | %                   |   |   | 394,205 |   |   |   | 157.8 | % |   |   | (197,038 | ) |   |   | -50.0 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| GROSS PROFIT (LOSS)                                               |   |                           | 80,088     |   |                           |   | 28.9   | %                   |   |   | (144,396 | ) |   |   | -57.8 | % |   |   | 224,484 |   |   |   | 155.5 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING EXPENSES:                                               |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative                                        |   |                           | 541,350    |   |                           |   | 195.3  | %                   |   |   | 647,731 |   |   |   | 259.3 | % |   |   | (106,381 | ) |   |   | -16.4 | % |
| Sales and marketing                                               |   |                           | 389,607    |   |                           |   | 140.5  | %                   |   |   | 288,942 |   |   |   | 115.7 | % |   |   | 100,665 |   |   |   | 34.8 | % |
| Research and development                                          |   |                           | 33,260     |   |                           |   | 12.0   | %                   |   |   | 263,821 |   |   |   | 105.6 | % |   |   | (230,561 | ) |   |   | -87.4 | % |
| Loss on disposal of assets, net                                   |   |                           | -          |   |                           |   | -      | %                   |   |   | 3,471 |   |   |   | 1.4 | % |   |   | (3,471 |  ) |   |   | -100 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total operating expenses                                          |   |                           | 964,217    |   |                           |   | 347.8  | %                   |   |   | 1,203,965 |   |   |   | 482.0 | % |   |   | (239,748 | ) |   |   | -19.9 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| LOSS FROM OPERATIONS                                              |   |                           | (884,129   | )      |                           |   | -318.9 | %                   |   |   | (1,348,361 | ) |   |   | -539.8 | % |   |   | (464,232 | ) |   |   | -34.4 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE):                                           |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                             |   |                           | (774,311   | )      |                           |   | -279.3 | %                   |   |   | (616,715 | ) |   |   | -246.9 | % |   |   | 157,596 |   |   |   | 25.6 | % |
| Gain on legal settlements, net                                    |   |                           | 100        |   |                           |   | 0      | %                   |   |   | 177,019 |   |   |   | 70.9 | % |   |   | (176,919 | ) |   |   | -99.9 | % |
| Change in market value of settlement related financial instrument |   |                           | (442,500   | )      |                           |   | -159.6 | %                   |   |   | - |   |   |   | - | % |   |   | 442,500 |   |   |   | 100 | % |
| Total other expense                                               |   |                           | (1,216,711 | )      |                           |   | -438.8 | %                   |   |   | (439,696 | )  |   |   | -176.0 | % |   |   | 777,015 |   |   |   | 176.7 | % |
|                                                              |   |                           |       |   |                           |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET LOSS                                                          |   | $                              | (2,100,840 | )      |                           |   | -757.7 | %                   |   | $ | (1,788,057 | ) |   |   | -715.8 | % |   | $ | 312,783 |   |   |   | 17.5 | % |

----

----

----

|                                                              |   | Six Months Ended June 30, |       |   | Change |   |
|-------------------------------------------------------------------|--------|---------------------------|------------|--------|--------|--------|
|                                                              |   | 2012                      |       |   | 2011   |   |   | Dollars |   |   | Percent |   |
| Interest expense, net                                             |   | $                         | (774,311   | )      |   | $      | (616,715 | ) |   | $ | 157,596 |   |   |   | 25.6 | % |
| Gain on legal settlements, net                                    |   |                      | 100        |   |   |   | 177,019 |   |   |   | (176,919 | ) |   |   | -99.9 | % |
| Change in market value of settlement related financial instrument |   |                      | (442,500   | )      |   |   | - |   |   |   | 442,500 |   |   |   | 100.0 |   |
| Total other (expense)                                             |   | $                         | (1,216,711 | )      |   | $      | (439,696 | ) |   | $ | 777,015 |   |   |   | 176.7 | % |

----

|                                    |   | Six Months Ended June 30, |       |   | Change |   |
|-----------------------------------------|--------|---------------------------|------------|--------|--------|--------|
|                                    |   | 2012                      |       |   | 2011   |   |   | Dollars |   |   | Percent |   |
| Net cash (used) in operating activities |   | $                         | (1,563,733 | )      |   | $      | (2,446,785 | ) |   | $ | (883,052 | ) |   |   | -36.1 | % |

|                                    |   | Six Months Ended June 30, |     |   | Change |   |
|-----------------------------------------|--------|---------------------------|----------|--------|--------|--------|
|                                    |   | 2012                      |     |   | 2011   |   |   | Dollars |   |   | Percent |   |
| Net cash (used) in investing activities |   | $                         | (620,883 | )      |   | $      | (7,506 | )  |   | $ | 613,377 |   |   |   | 8171.8 | % |

----

|                                      |   | Six Months Ended June 30, |      |   | Change |   |
|-------------------------------------------|--------|---------------------------|-----------|--------|--------|--------|
|                                      |   | 2012                      |      |   | 2011   |   |   | Dollars |   |   | Percent |   |
| Net cash provided by financing activities |   | $                         | 2,115,990 |   |   | $      | 2,420,711 |   |   | $ | (304,721 | ) |   |   | -12.6 | % |

|                       | For the six months ended June 30, 2012 |   |                     |      |         |   |   |             |   |
|----------------------------|----------------------------------------|--------|--------------------------|-----------|--------------|--------|--------|------------------|--------|
| Note Buyer                 | Date ofPurchase                        |   | Amount ofConvertibleNote |      | InterestRate |   |   | OriginalDue Date |   | Restateddue Date |   |
| Atlas Capital              | January 5, 2012                        |   | $                        | 350,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| Atlas Capital              | February 10, 2012                      |   |                     | 350,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| UBP, Union Bancaire Privee | March 9, 2012                          |   |                     | 375,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| Atlas Capital              | April 2, 2012                          |   |                     | 350,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| UBP, Union Bancaire Privee | May 8, 2012                            |   |                     | 300,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| Atlas Capital              | May 25, 2012                           |   |                     | 200,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| UBP, Union Bancaire Privee | June 13, 2012                          |   |                     | 400,000   |         |   | 8      | %                |   | 11/14/2016 |   |   |   |   |
| Total                      |                                   |   | $                        | 2,325,000 |         |   |   |             |   |   |   |   |   |   |

----

----

----

| Exhibit No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.1        |   | Promissory Note dated May 31, 2012, made by Smart Online, Inc. for the benefit of Israel Discount Bank of New York, as lender (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on June 6, 2012)                                                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.2        |   | Guaranty dated May 31, 2012, made by Atlas Capital, SA for the benefit of Israel Discount Bank of New York (incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K, as filed with the SEC on June 6, 2012)                                                                                                                                                                                                     |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 99.1        |   | Fifth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Third Amendment to Convertible Secured Subordinated Promissory Notes and Fourth Amendment to Registration Rights Agreement, dated June 13, 2012, by and among Smart Online, Inc., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on June 19, 2012) |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.1        |   | Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) (Filed herewith)                                                                                                                                                                                                                                                                                                                                                   |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2        |   | Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) (Filed herewith)                                                                                                                                                                                                                                                                                                                                                   |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1        |   | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)                                                                                                                                                                                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.2        |   | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)                                                                                                                                                                                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 101.1       |   | The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) related notes to these financial statements, tagged as blocks of text (Furnished herewith)                                                                |

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|            |   | SMART ONLINE, INC.              |   |
|-----------------|--------|---------------------------------|--------|
|            |   |                            |   |
|            | By:    | /s/ Dror Zoreff                 |   |
| August 14, 2012 |   | Dror Zoreff                     |   |
|            |   | Interim Chief Executive Officer |   |
|            |   |                            |   |
|            |   |                            |   |
|            | By:    | /s/ Thaddeus J. Shalek          |   |
| August 14, 2012 |   | Thaddeus J. Shalek              |   |
|            |   | Chief Financial Officer         |   |

----

| Exhibit No. |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.1        |   | Promissory Note dated May 31, 2012, made by Smart Online, Inc. for the benefit of Israel Discount Bank of New York, as lender (incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on June 6, 2012)                                                                                                                                                                                  |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.2        |   | Guaranty dated May 31, 2012, made by Atlas Capital, SA for the benefit of Israel Discount Bank of New York (incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K, as filed with the SEC on June 6, 2012)                                                                                                                                                                                                     |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1        |   | Fifth Amendment to Convertible Secured Subordinated Note Purchase Agreement, Third Amendment to Convertible Secured Subordinated Promissory Notes and Fourth Amendment to Registration Rights Agreement, dated June 13, 2012, by and among Smart Online, Inc., Atlas Capital S.A. and Crystal Management Ltd. (incorporated herein by reference to Exhibit 99.1 to our Current Report on Form 8-K, as filed with the SEC on June 19, 2012) |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.1        |   | Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) (Filed herewith)                                                                                                                                                                                                                                                                                                                                                   |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2        |   | Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) (Filed herewith)                                                                                                                                                                                                                                                                                                                                                   |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1        |   | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)                                                                                                                                                                                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.2        |   | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 (Furnished herewith)                                                                                                                                                                                                                                                                                                                                       |
|        |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 101.1       |   | The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows and (iv) related notes to these financial statements, tagged as blocks of text (Furnished herewith)                                                                |

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