| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|--------------------------------------------------------------------------------------|

|  ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|------------------------------------------------------------------------------------------|

| Delaware                       |   | 22-3367588          |
|--------------------------------|--------|---------------------|
| (State or jurisdiction of      |   | (I.R.S. Employer    |
| incorporation or organization) |   | Identification No.) |

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

----

| Note Concerning Forward Looking Information |   | 3                                                                                                                          |
|---------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------|
|                                        |   |                                                                                                                       |   |   |
| PART I                                      |   |                                                                                                                       |   |   |
|                                        |   |                                                                                                                       |   |   |
| ITEM 1.                                     |   | BUSINESS                                                                                                                   |   | 4 |
| ITEM 1A.                                    |   | RISK FACTORS                                                                                                               |   | 9 |
| ITEM 1B.                                    |   | UNRESOLVED STAFF COMMENTS                                                                                                  |   | 9 |
| ITEM 2.                                     |   | PROPERTIES                                                                                                                 |   | 9 |
| ITEM 3.                                     |   | LEGAL PROCEEDINGS                                                                                                          |   | 10 |
| ITEM 4.                                     |   | REMOVED AND RESERVED                                                                                                       |   | 10 |
|                                        |   |                                                                                                                       |   |   |
| PART II                                     |   |                                                                                                                       |   |   |
|                                        |   |                                                                                                                       |   |   |
| ITEM 5.                                     |   | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND  SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES |   | 10 |
| ITEM 6.                                     |   | SELECTED FINANCIAL DATA                                                                                                    |   | 11 |
| ITEM 7.                                     |   | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                      |   | 11 |
| ITEM 7A.                                    |   | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                 |   | 14 |
| ITEM 8.                                     |   | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                                |   | 15 |
| ITEM 9.                                     |   | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                       |   | 15 |
| ITEM 9A(T)                        |   | CONTROLS AND PROCEDURES                                                                                                    |   | 15 |
| ITEM 9B.                                    |   | OTHER INFORMATION                                                                                                          |   | 16 |
|                                        |   |                                                                                                                       |   |   |
| PART III                                    |   |                                                                                                                       |   |   |
|                                        |   |                                                                                                                       |   |   |
| ITEM 10.                                    |   | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                                     |   | 16 |
| ITEM 11.                                    |   | EXECUTIVE COMPENSATION                                                                                                     |   | 18 |
| ITEM 12.                                    |   | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                             |   | 23 |
| ITEM 13.                                    |   | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                                                   |   | 24 |
| ITEM 14.                                    |   | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                     |   | 25 |
|                                        |   |                                                                                                                       |   |   |
| PART IV                                     |   |                                                                                                                       |   |   |
|                                        |   |                                                                                                                       |   |   |
| ITEM 15.                                    |   | EXHIBITS                                                                                                                   |    | 26 |

----

|   | · | The development of new products and the expansion of the market for our current products; |
|--------|--------|-------------------------------------------------------------------------------------------|

|   | · | Implementing aspects of our business plans; |
|--------|--------|---------------------------------------------|

|   | · | Financing goals and plans; |
|--------|--------|----------------------------|

|   | · | Our existing cash and whether and how long these funds will be sufficient to fund our operations; and |
|--------|--------|-------------------------------------------------------------------------------------------------------|

|   | · | Our raising of additional capital through future equity financings. |
|--------|--------|---------------------------------------------------------------------|

----

| ITEM 1. | BUSINESS. |
|---------|-----------|

| 1(a) | Business Development |
|------|----------------------|

| 1(b) | Business of the Issuer |
|------|------------------------|

----

| 1(b)(i) | Principal Products and Markets |
|---------|--------------------------------|

|   | (a) | ENDUROX R4 Recovery Drink |
|--------|-----|---------------------------|

|   | (b) | ACCELERADE Sports Drink |
|--------|-----|-------------------------|

|   | (c) | ACCEL GEL Energy Gel |
|--------|-----|----------------------|

----

|   | (d) | ENDUROX EXCEL Dietary Supplement |
|--------|-----|----------------------------------|

| 1(b)(ii) | Distribution Methods |
|----------|----------------------|

| 1(b)(iii) | Status of Publicly Announced New Products |
|-----------|-------------------------------------------|

| 1(b)(iv) | Competition |
|----------|-------------|

| 1(b)(v) | Suppliers of Raw Materials |
|---------|----------------------------|

----

| 1(b)(vi) | Dependence on Major Customers |
|----------|-------------------------------|

| 1(b)(vii) | Patents and Trademarks |
|-----------|------------------------|

----

----

| 1(b)(x) | Expenditures for Research and Development |
|---------|-------------------------------------------|

| 1(b)(xi) | Compliance with Environmental Laws |
|----------|------------------------------------|

| 1(b)(xii) | Employees |
|-----------|-----------|

| ITEM 1A. | RISK FACTORS |
|----------|--------------|

| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
|----------|---------------------------|

| ITEM 2. | PROPERTIES |
|---------|------------|

----

| ITEM 3. | LEGAL PROCEEDINGS |
|---------|-------------------|

| ITEM 4. | REMOVED AND RESERVED |
|---------|----------------------|

| ITEM 5. | MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES. |
|---------|------------------------------------------------------------------------------------------------------------------|

| 5(a) | Market Information. |
|------|---------------------|

| Year ended December 31, 2010 |   | High   |   |   | Low    |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
|                         |   |   |   |   |   |   |
| First Quarter                |   | $      | 0.14   |   |   | $      | 0.08 |   |
| Second Quarter               |   | $      | 0.15   |   |   | $      | 0.07 |   |
| Third Quarter                |   | $      | 0.20   |   |   | $      | 0.06 |   |
| Fourth Quarter               |   | $      | 0.22   |   |   | $      | 0.13 |   |

| Year ended December 31, 2009 |   | High   |   |   | Low    |   |
|------------------------------|--------|--------|--------|--------|--------|--------|
|                         |   |   |   |   |   |   |
| First Quarter                |   | $      | 0.23   |   |   | $      | 0.11 |   |
| Second Quarter               |   | $      | 0.44   |   |   | $      | 0.13 |   |
| Third Quarter                |   | $      | 0.41   |   |   | $      | 0.22 |   |
| Fourth Quarter               |   | $      | 0.28   |   |   | $      | 0.11 |   |

| 5(b) | Holders |
|------|---------|

| 5(c) | Dividends |
|------|-----------|

----

| 5(d) | Recent Sales of Unregistered Securities |
|------|-----------------------------------------|

| 5(d)(i) | Recent Sales of Unregistered Securities |
|---------|-----------------------------------------|

| ITEM 6. | SELECTED FINANCIAL DATA |
|---------|-------------------------|

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

| 7(a)  | Introduction |
|------------|--------------|

| 7(b) | Results of Operations - Years Ended December 31, 2010 and 2009 |
|------|----------------------------------------------------------------|

----

----

| 7(c) | Liquidity and Capital Resources |
|------|---------------------------------|

| 7(d) | Impact of Inflation |
|------|---------------------|

----

| 7(e) | Seasonality |
|------|-------------|

| 7(f) | Impact of Recently Issued Financial Accounting Standards |
|------|----------------------------------------------------------|

| 7(g) | Off-Balance Sheet Arrangements |
|------|--------------------------------|

| 7(h) | Critical Accounting Policies |
|------|------------------------------|

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

----

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

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

| ITEM 9A(T) | CONTROLS AND PROCEDURES |
|------------|-------------------------|

| (a) | Evaluation of Disclosure Controls and Procedures |
|-----|--------------------------------------------------|

| (b) | Changes in Internal ControlsOver Financial Reporting |
|-----|------------------------------------------------------|

|   | (i) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (iii) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
|----------|--------------------------------------------------------|

| 10(a) | Directors and Executive Officers |
|-------|----------------------------------|

| Name                  |   | Position                                          |
|-----------------------|--------|---------------------------------------------------|
|                  |   |                                              |
| Frederick Duffner 1   |   | CEO, President and Director                       |
| Stephen P. Kuchen     |   | Chief Financial Officer, Treasurer, and Secretary |
| Robert Portman, Ph.D. |   | Director                                          |
| Michael Cahr          |   | Director 2,3                                      |
| Marc Particelli       |   | Director 2,3                                      |

----

| 10(b) | Scientific Advisory Boards |
|-------|----------------------------|

| 10(c) | Family Relationships |
|-------|----------------------|

----

| 10(d) | Involvement in Certain Legal Proceedings |
|-------|------------------------------------------|

| 10(e) | Procedures for Nomination of Directors by Security Holders |
|-------|------------------------------------------------------------|

| 10(f) | Audit Committee |
|-------|-----------------|

| 10(g) | Audit Committee Financial Expert |
|-------|----------------------------------|

| 10(h) | Section 16(a) Beneficial Ownership Reporting Compliance |
|-------|---------------------------------------------------------|

| 10(i) | Code of Ethics |
|-------|----------------|

| ITEM 11. | EXECUTIVE COMPENSATION |
|----------|------------------------|

----

| Name and PrincipalPosition       |   | Year   |   | Salary($) |    |   | Bonus($) |   |    | StockAwards($) |   |   | OptionAwards($) |   |   | Non-EquityIncentivePlanCompensation($) |    |   | NonqualifiedDeferredCompensationEarnings($) |   |    | All OtherCompensation($) |   |   | Total ($) |   |
|--------------------------------------------|--------|--------|--------|-----------|---------|--------|----------|--------|---------|----------------|--------|--------|-----------------|--------|--------|----------------------------------------|---------|--------|---------------------------------------------|--------|---------|-------------------------------|--------|--------|----------------|--------|
| (a)                                        |   | (b)    |   | (c)       |    |   | (d)      |   |    | (e)            |   |   | (f) (1)         |   |   | (g)                                    |    |   | (h)                                         |   |    | (i)                           |   |   | (j)            |   |
|                                       |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |
| Frederick Duffner,                         |   | 2010   |   | $         | 229,083 | (2)    |     |   | — |           |   |   | —         |   |   | $                                      | 20,727  |   |                                        |   | — |                          |   |   | —        |   |   | $ | 0 | (3) |   | $ | 249,810 |   |
| Chief Executive                            |   | 2009   |   | $         | 208,000 |   |     |   | — |           |   |   | —         |   |   | $                                      | 10,552  |   |                                        |   | — |                          |   |   | —        |   |   | $ | 0 | (3) |   | $ | 218,552 |   |
| Officer and President                      |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
|                                       |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| Jason Ash,                                 |   | 2010   |   | $         | 12,292  |   |     |   | — |           |   |   | —         |   |   |                                   | — |   |                                        |   | — |                          |   |   | —        |   |   | $ | 327,969 | (4) |   | $ | 340,261 |   |
| Former President,                          |   | 2009   |   | $         | 295,000 | (5)    |     |   | — |           |   |   | —         |   |   | $                                      | 84,725  |   |                                        |   | — |                          |   |   | —        |   |   | $ | 40,000 | (5) |   | $ | 419,725 |   |
| Chief ExecutiveOfficer, andDirector        |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
|                                       |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| Robert Portman,                            |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| Former ChiefExecutive Officerand President |   | 2009   |   |      | — |   |     |   | — |           |   |   | —         |   |   |                                   | — |   |                                        |   | — |                          |   |   | —        |   |   | $ | 172,081 | (6) |   | $ | 172,081 |   |
|                                       |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| Stephen P. Kuchen,                         |   | 2010   |   | $         | 158,100 | (7)    |     |   | — |           |   |   | —         |   |   | $                                      | 2,455   |   |                                        |   | — |                          |   |   | —        |   |   | $ | 0 | (3) |   | $ | 160,555 |   |
| Chief Financial                            |   | 2009   |   | $         | 158,100 |   |     |   | — |           |   |   | —         |   |   | $                                      | 17,152  |   |                                        |   | — |                          |   |   | —        |   |   | $ | 0 | (3) |   | $ | 175,252 |   |
| Officer, Treasurer,                        |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| and Secretary                              |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
|                                       |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| Matt Spolar, Vice                     |   | 2010   |   | $         | 16,483  | (8)    |     |   | — |           |   |   | —         |   |   |                                   | — |   |                                        |   | — |                          |   |   | —        |   |   | $ | 66,667 | (8) |   | $ | 83,150 |   |
| President, Product                         |   | 2009   |   | $         | 197,800 |   |     |   | — |           |   |   | —         |   |   | $                                      | 28,468  |   |                                        |   | — |                          |   |   | —        |   |   | $ | 0 | (3) |   | $ | 226,268 |   |
| Development and                            |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |
| Supply Chain                               |   |   |   |      |    |   |     |   |    |           |   |   |            |   |   |                                   |    |   |                                        |   |    |                          |   |   |           |   |   |   |   |   |   |   |   |   |

----

----

|  Executive Officer |   | Number of Shares of CommonStock Underlying Options |    |   | Exercise Price |   |  Grant Date |
|------------------------------|--------|----------------------------------------------------------------------------------|---------|--------|---------------------|--------|-----------------------|
| Frederick Duffner            |   |                                                                             | 250,000 |   |                | $      | 0.122                 |   | January 25, 2010 |
| Frederick Duffner            |   |                                                                             | 250,000 |   |                | $      | 0.145                 |   | August 30, 2010 |
| Stephen P. Kuchen            |   |                                                                             | 150,000 |   |                | $      | 0.184                 |   | December 7, 2010 |

|                |   | Option Awards                                           |    | Stock Awards |                                                                 |
|---------------------|--------|--------------------------------------------------------------|---------|-------------------|----------------------------------------------------------------------|
| Name                |   | NumberofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable |    |              | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable |   |   | EquityIncentivePlan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#) |   |   | OptionExercisePrice($) |   | OptionExpiration Date |   | Number ofShares orUnits ofStock ThatHave NotVested(#) |   |   | MarketValue ofShares orUnits ofStock ThatHave NotVested($) |   |   | EquityIncentive PlanAwards:Number ofUnearnedShares, Unitsor Other RightsThat Have NotVested(#) |   |   | EquityIncentive PlanAwards:Market orPayout Valueof UnearnedShares, Unitsor Other RightsThat Have NotVested($) |   |
| (a)                 |   | (b)                                                          |    |              | (c)                                                                  |   |   | (d) |   |   | (e) |   | (f) |   | (g) |   |   | (h) |   |   | (i) |   |   | (j) |   |
|                |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Frederick Duffner,  |   |                                                         | 100,000 | (1)               |                                                                 |   | 100,000 | (1) |   |   | — |   |   | $ | 0.28 |   | 07/14/2013 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| President, Chief    |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Executive Officer   |   |                                                         | 0       | (2)               |                                                                 |   | 250,000 | (2) |   |   | — |   |   | $ | 0.122 |   | 01/25/2015 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| and a Director      |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                |   |                                                         | 0       | (3)               |                                                                 |   | 250,000 | (3) |   |   | — |   |   | $ | 0.145 |   | 08/30/2015 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stephen P. Kuchen,  |   |                                                         | 100,000 | (4)               |                                                                 |   | — |   |   |   | — |   |   | $ | 0.60 |   | 02/10/2011 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Chief Financial     |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Officer, Treasurer, |   |                                                         | 50,000  | (5)               |                                                                 |   | — |   |   |   | — |   |   | $ | 1.13 |   | 12/31/2011 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| and Secretary       |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                |   |                                                         | 25,000  | (6)               |                                                                 |   | 25,000 | (6) |   |   | — |   |   | $ | 0.23 |   | 09/17/2013 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
|                |   |                                                         |    |              |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                |   |                                                         | 0       | (7)               |                                                                 |   | 150,000 | (7) |   |   | — |   |   | $ | 0.184 |   | 12/07/2015 |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |

----

| Name             |   | Fees EarnedorPaid inCash($) |    |   | StockAwards($) |   |   | OptionAwards($) |   |   | Non-EquityIncentive PlanCompensation($) |   |   | NonqualifiedDeferredCompensationEarnings($) |    |   | All OtherCompensation($) |   |    | Total($) |   |
|------------------|--------|---------------------------------------|---------|--------|----------------|--------|--------|-----------------|--------|--------|----------------------------------------------|--------|--------|---------------------------------------------|---------|--------|-------------------------------|--------|---------|----------|--------|
| (a)              |   | (b)                                   |    |   | (c)            |   |   | (d)             |   |   | (e)                                          |   |   | (f)                                         |    |   | (g)                           |   |    | (h)      |   |
|             |   |                                  |    |   |           |   |   |            |   |   |                                         |   |   |                                        |    |   |                          |   |    |     |   |
| David I. Portman |   |                                  | — |   |           | $      | 6,000  |            |   |   | —                                      |   |   |                                        | — |   |                          |   | — |     |   |   | — |   |   | $ | 6,000 |   |
|             |   |                                  |    |   |           |   |   |            |   |   |                                         |   |   |                                        |    |   |                          |   |    |     |   |   |   |   |   |   |   |   |
| Michael Cahr     |   | $                                     | 6,000   |   |           | $      | 18,000 |            |   |   | —                                      |   |   |                                        | — |   |                          |   | — |     |   |   | — |   |   | $ | 24,000 |   |
|             |   |                                  |    |   |           |   |   |            |   |   |                                         |   |   |                                        |    |   |                          |   |    |     |   |   |   |   |   |   |   |   |
| Adam Mizel       |   |                                  | — |   |           | $      | 12,000 |            |   |   | —                                      |   |   |                                        | — |   |                          |   | — |     |   |   | — |   |   | $ | 12,000 |   |
|             |   |                                  |    |   |           |   |   |            |   |   |                                         |   |   |                                        |    |   |                          |   |    |     |   |   |   |   |   |   |   |   |
| Marc Particelli  |   | $                                     | 6,000   |   |           | $      | 18,000 |            |   |   | —                                      |   |   |                                        | — |   |                          |   | — |     |   |   | — |   |   | $ | 24,000 |   |
|             |   |                                  |    |   |           |   |   |            |   |   |                                         |   |   |                                        |    |   |                          |   |    |     |   |   |   |   |   |   |   |   |
| Robert Portman   |   | $                                     | 6,000   |   |           | $      | 21,363 |            |   |   | —                                      |   |   |                                        | — |   |                          |   | — |     |   |   | — |   |   | $ | 27,363 |   |

----

| ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
|----------|------------------------------------------------------------------------------------------------|

|  Name and Address (1)                                             |   | Common Stock (2)Amount Beneficially Owned |      |   | Common Stock (2)Percentage of Class |   |
|---------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|-----------|--------|---------------------------------------------------------|--------|
|                                                                                  |   |                                                          |      |   |                                                    |   |
| Frederick Duffner (3)CEO, President and a Director                                    |   |                                                          | 846,190   |   |                                                    |   | 5.1 | % |
|                                                                                  |   |                                                          |      |   |                                                    |   |   |   |
| Stephen P. Kuchen (4)Vice President, Chief Financial Officer, Secretary and Treasurer |   |                                                          | 88,196    |   |                                                    |   | * |   |
|                                                                                  |   |                                                          |      |   |                                                    |   |   |   |
| Robert Portman (5)Director                                                            |   |                                                          | 2,431,854 |   |                                                    |   | 14.5 | % |
|                                                                                  |   |                                                          |      |   |                                                    |   |   |   |
| Michael Cahr (6)Director                                                              |   |                                                          | 694,253   |   |                                                    |   | 4.2 | % |
|                                                                                  |   |                                                          |      |   |                                                    |   |   |   |
| Marc Particelli (7)Director                                                           |   |                                                          | 525,807   |   |                                                    |   | 3.2 | % |
|                                                                                  |   |                                                          |      |   |                                                    |   |   |   |
| Executive Officers and Directors as a group (5 persons)                               |   |                                                          | 4,586,300 |   |                                                    |   | 26.8 | % |

| * | Less than one percent |
|---|-----------------------|

| (1) | Except as otherwise indicated, the address of each person named in the above table is c/o PacificHealth Laboratories, Inc., 100 Matawan Road, Suite 150, Matawan,   NJ 07747. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Common Stock includes shares issuable upon the exercise of a stock option which is presently exercisable or which becomes exercisable within sixty days is considered outstanding for the purpose of computing the percentage ownership (x) of persons holding such options, and (y) of officers and directors as a group with respect to all options held by officers and directors. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Includes 83,333 shares issuable upon the exercise of options granted under our 2010 Plan and 100,000 shares issuable upon the exercise of options not under any Incentive Stock plan (“NON-ISO”). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | Includes 50,000 shares issuable upon the exercise of options granted under our 1995 Plan and 12,500 shares issuable upon the exercise of options granted not covered under any Plan (“NON-ISO”). |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5) | Includes 275,000 shares issuable upon the exercise of options not under any Incentive Stock plan (“NON-ISO”). Does not include 449,693 shares of Common Stock owned by Jennifer Portman, Dr. Portman's wife, individually and as Trustee for his and her children, as to which Dr. Portman disclaims beneficial ownership. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes 40,000 shares issuable upon the exercise of options granted under our 1995 Plan and 20,000 shares issuable upon the exercise of options granted under our 2000 Plan. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7) | Includes 40,000 shares issuable upon the exercise of options granted under our 2000 Plan. |
|-----|-------------------------------------------------------------------------------------------|

----

| Plan Category                                         |   | Number of securities to beissued upon exercise ofoutstanding options,warrants and rights |      |   | Weighted-average exerciseprice of outstandingoptions, warrants and rights |   |   | Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in column (a)) |   |
|------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|-----------|--------|---------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                       |   | (a)                                                                                                                                        |      |   | (b)                                                                                                     |   |   | (c)                                                                                                                                                                                                |   |
| Equity compensation plans approved by security holders     |   |                                                                                                                                       | 1,443,500 |   |                                                                                                    | $      | 0.37   |                                                                                                                                                                                               |   |   | 455,000 |   |
| Equity compensation plans not approved by security holders |   |                                                                                                                                       | 925,000   |   |                                                                                                    | $      | 0.63   |                                                                                                                                                                                               |   |   | N/A |   |
| Total                                                      |   |                                                                                                                                       | 2,368,500 |   |                                                                                                    | $      | 0.47   |                                                                                                                                                                                               |   |   | 455,000 |   |

| ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
|----------|--------------------------------------------------------------------------|

|   | (a) | On June 24, 2009, our Board of Directors approved the sale of an aggregate of 535,714 shares of our common stock to Jason Ash, our then Chief Executive Officer and Frederick Duffner, current President and then Senior Vice President of Sales, for an aggregate purchase price of $150,000. The Board, including all independent directors, determined the purchase price of $0.28 per share represented fair market value. On the date the stock was purchased, the closing price was $0.28 per share. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | On July 27, 2010, the Company entered into a consulting agreement with Signal Nutrition LLC (“Signal”), a company controlled by a director of the Company.  Under terms of the Agreement, Signal will work with outside researchers, assist in developing new products, and formulate sales and marketing plans for the Company. The Agreement has an initial term of six months, with options by either party to renew for an additional six months, subject, however, to the right of either party to terminate on 15 days notice. The Company will pay Signal a fee of $11,000 per month, commencing September 1, 2010, during the term of the Agreement. Expense for 2010 is $55,000. Included in accounts payable and accrued expenses as of December 31, 2010 is $11,000 relating to this agreement. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (c) | On February 4, 2011, the Company extended this consulting agreement with Signal. Under terms of the Agreement, Signal will continue to work with outside researchers, assist in developing new products, and formulate sales and marketing plans for the Company. The Agreement has an indefinite term with an option by either party to terminate the agreement on thirty (30) days notice.  The Company will pay Signal a fee of $16,000 per month, commencing March 1, 2011, during the term of the Agreement. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES |
|----------|----------------------------------------|

| Fee Category        |   | Fiscal 2010 |    |   | Fiscal 2009 |   |
|---------------------|--------|-------------|---------|--------|-------------|--------|
| Audit Fees1    |   | $           | 87,600  |   |        | $      | 120,500 |   |
| Audit-Related Fees2 |   | $           | 5,500   |   |        | $      | 16,200 |   |
| Tax Fees3           |   | $           | 23,650  |   |        | $      | 1,450 |   |
| All Other Fees4     |   | $           | - 0 -   |   |        | $      | - 0 - |   |
| TOTAL               |   | $           | 116,750 |   |        | $      | 138,150 |   |

----

| ITEM 15. | EXHIBITS |
|----------|----------|

| By:    | /s/Frederick Duffner                 |   |
|--------|--------------------------------------|--------|
|   | Frederick Duffner, CEO and President |   |

| /s/Frederick Duffner |         | Director, Chief Executive Officer  |         |          |
|----------------------|--------------|------------------------------------|--------------|---------------|
| Frederick Duffner    |         | and President                      |         | March 4, 2011 |
|                 |         | (Principal Executive Officer)      |         |          |
|                 |         |                               |         |          |
| /s/Stephen P. Kuchen |         | Chief Financial Officer (Principal |         | March 4, 2011 |
| Stephen P. Kuchen    |         | Financial and Accounting Officer), |         |          |
|                 |         | Treasurer and Secretary            |         |          |
|                 |         |                               |         |          |
| /s/Robert Portman    |         | Director                           |         | March 4, 2011 |
| Robert Portman       |         |                               |         |          |
|                 |         |                               |         |          |
| /s/Michael Cahr      |         | Director                           |         | March 4, 2011 |
| Michael Cahr         |         |                               |         |          |
|                 |         |                               |         |          |
| s/ Marc Particelli   |         | Director                           |         | March 4, 2011 |
| Marc Particelli      |    |                               |    |          |

----

|         |   |    |   |                                                                                                                                                                                                            |   | Incorporated |
|--------------|--------|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|
| Exhibit No.  |   |    |   | Description                                                                                                                                                                                                     |   | by Reference |
| 3.1          |   | — |   | Certificate of Incorporation of PacificHealth Laboratories, Inc. and all amendments thereto                                                                                                                     |   | A            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 3.2          |   | — |   | Amended and Restated Bylaws of PacificHealth  Laboratories, Inc.                                                                                                                                      |   | C            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 3.3          |   | — |   | Certificate of Amendment of Certificate of Incorporation of PacificHealth Laboratories, Inc.                                                                                                                    |   | H            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 3.4          |   |    |   | Certificate of Designations For Series A Preferred Stock                                                                                                                                                        |   | I            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 4.1          |   | — |   | Specimen Common Stock Certificate                                                                                                                                                                               |   | C            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 4.2          |   | — |   | Stock Purchase Agreement dated June 1, 2001 between Pacific Health Laboratories, Inc. and Glaxo Wellcome International B.V.                                                                                     |   | E            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.1†  |   | — |   | Incentive Stock Option Plan of 1995                                                                                                                                                                             |   | A            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.2         |   | — |   | Strategic Alliance Agreement between the Company and the Institute of Nutrition and Food Hygiene                                                                                                                |   | A            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.3         |   | — |   | Exclusive Licensing Agreement between the Company and the INFH                                                                                                                                                  |   | A            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.4         |   | — |   | Shareholders Agreement                                                                                                                                                                                          |   | A            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.5†  |   | — |   | 2000 Incentive Stock Option Plan                                                                                                                                                                                |   | D            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.6†  |   |    |   | Employment Extension Agreement between PacificHealth Laboratories, Inc. and Robert Portman effective September 1, 2004, executed February 28, 2006                                                              |   | J            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.8         |   |    |   | Asset Purchase Agreement dated February 22, 2006 between PacificHealth Laboratories, Inc. and Mott’s LLP (redacted, subject to request for confidential treatment)                                        |   | L            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.9         |   |    |   | License Agreement dated February 22, 2006 between PacificHealth Laboratories, Inc. and Mott’s LLP (redacted, subject to request for confidential treatment)                                               |   | L            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.10        |   |    |   | Consulting, License and Noncompetition Agreement dated February 22, 2006 among PacificHealth Laboratories, Inc., Mott’s LLP, and Robert Portman (redacted, subject to request for confidential treatment) |   | L            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.11† |   |    |   | Option Certificate for grant to Robert Portman                                                                                                                                                                  |   | M            |
|         |   |    |   |                                                                                                                                                                                                            |   |         |
| 10.12† |   |    |   | Option Certificate for grant to Stephen Kuchen under the PacificHealth Laboratories, Inc. 1995 Incentive Stock Option Plan.                                                                                     |   | M            |

----

| 10.13        |         |    |         | Form of Stock Purchase Agreement entered into among the Company, Aquifer Opportunity Fund, L.P.  and Marc C. Particelli.                                      |         | N      |
|--------------|--------------|---------|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|--------|
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.14† |         |    |         | Form of Grant Instrument under PacificHealth  Laboratories, Inc. 2000 Incentive Stock Option Plan  for Adam M. Mizel.                               |         | N      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.15        |         |    |         | Form of Grant Instrument under PacificHealth  Laboratories, Inc. 2000 Incentive Stock Option Plan  for Marc C. Particelli                           |         | N      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.16† |         |    |         | Employment Agreement, effective January 3, 2008,  by and between PacificHealth Laboratories, Inc. and  Jason Ash                                    |         | O      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.17        |         |    |         | Business Loan Agreement, dated April 21, 2008, by  and between PacificHealth Laboratories, Inc. and Grand  Bank, N.A.                                    |         | P      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.18        |         |    |         | Promissory Note, in the original principal amount of $675,000, issued on April 21, 2008 by PacificHealth  Laboratories, Inc. in favor of Grand Bank, N.A.     |         | P      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.19        |         |    |         | Commercial Pledge Agreement, dated April 21, 2008,  by and between PacificHealth Laboratories, Inc. and  Grand Bank, N.A.                           |         | P      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.20        |         |    |         | Subordination Agreement, dated April 21, 2008, by and  among PacificHealth Laboratories, Inc., Robert Portman,  Stephen Kuchen and Grand Bank, N.A. |         | P      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.21        |         |    |         | Separation and Release Agreement, effective  August 1, 2008, by and between PacificHealth  Laboratories, Inc. and Robert Portman                    |         | Q      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.22† |         |    |         | Amendment No. 1 to Employment Agreement, by  And between PacificHealth Laboratories, Inc. and Jason Ash, effective August 1, 2008                             |         | Q      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.23† |         |    |         | Amendment No. 2 to Employment Agreement, by And between PacificHealth Laboratories, Inc. and Jason Ash, effective June 24, 2009                                         |         | R      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.24        |         |    |         | Separation and Release Agreement, effective January 27, 2010, by and between PacificHealth Laboratories, Inc. and Jason Ash                                             |         | S      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 10.25† |         |    |         | Summary of Compensation for Executive Officers of PacificHealth Laboratories, Inc.                                                                                      |         | *      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 23.1         |         | — |         | Consent of WeiserMazars LLP                                                                                                                                             |         | *      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 31.1         |         | — |         | Rule 13a-14(a) Certification of Chief Executive Officer                                                                                                                 |         | *      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 31.2         |         | — |         | Rule 13a-14(a) Certification of Chief Financial Officer                                                                                                                 |         | *      |
|         |         |    |         |                                                                                                                                                                    |         |   |
| 32           |    | — |    | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                         |    | *      |

----

----

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

| † | Management contract or management compensatory plan or arrangement. |
|---------|---------------------------------------------------------------------|

| A | Filed with Registration Statement on Form SB-2 (Registration No. 333-36379) (the “1997 SB-2”) on September 25, 1997. |
|---|----------------------------------------------------------------------------------------------------------------------------------|

| B | Filed with Amendment No. 1 to the 1997 SB-2 on October 23, 1997. |
|---|------------------------------------------------------------------|

| C | Filed with Amendment No. 3 to the 1997 SB-2 on December 17, 1997. |
|---|-------------------------------------------------------------------|

| D | Filed with Definitive Proxy Statement (Schedule 14A) for annual meeting held on August 16, 2000, filed on July 11, 2000. |
|---|--------------------------------------------------------------------------------------------------------------------------|

| E | Filed with Current Report on Form 8-K dated June 1, 2001, filed on June 14, 2001. |
|---|---------------------------------------------------------------------------------------------|

| F | Filed with Annual Report on Form 10-KSB for the year ended December 31, 2001. |
|---|-------------------------------------------------------------------------------|

| G | Filed with Amendment to Current Report on Form 8-K dated June 1, 2001, filed July 5, 2001. |
|---|------------------------------------------------------------------------------------------------------|

| H | Filed with Annual Report on Form 10-KSB for the year ended December 31, 2002. |
|---|-------------------------------------------------------------------------------|

| I | Filed as Exhibit 3.1 to Current Report on Form 8-K, dated January 24, 2005, filed on January 28, 2005. |
|---|--------------------------------------------------------------------------------------------------------|

| J | Filed as Exhibit 10.1 to Current Report on Form 8-K, dated and filed on September 9, 2004. |
|---|--------------------------------------------------------------------------------------------|

| K | Filed with Annual Report on Form 10-KSB for the year ended December 31, 2004. |
|---|-------------------------------------------------------------------------------|

| L | Filed with Annual Report on Form 10-KSB for the year ended December 31, 2005. |
|---|-------------------------------------------------------------------------------|

| M | Filed as Exhibit to Current Report on Form 8-K, dated December 13, 2006 and filed on December 19, 2006. |
|---|---------------------------------------------------------------------------------------------------------|

| N | Filed as Exhibit to Current Report on Form 8-K, dated February 22, 2007 and filed February 27, 2007. |
|---|------------------------------------------------------------------------------------------------------|

| O | Filed as Exhibit to Current Report on Form 8-K, dated November 28, 2007 and filed December 3, 2007. |
|---|-----------------------------------------------------------------------------------------------------|

| P | Filed as Exhibit to the Annual report on Form 8-K dated  April 29, 2008 and filed on May 2, 2008. |
|---|-------------------------------------------------------------------------------------------------------------|

| Q | Filed as Exhibit to the Annual report on Form 8-K dated  August 8, 2008 and filed on August 11, 2008. |
|---|-----------------------------------------------------------------------------------------------------------------|

| R | Filed as Exhibit to Current Report on Form 8-K dated June 24, 2009 and filed July 1, 2009. |
|---|--------------------------------------------------------------------------------------------|

| S | Filed as Exhibit to Current Report on Form 8-K, dated January 27, 2010 and filed January 29, 2010. |
|---|----------------------------------------------------------------------------------------------------|

----

----

|                                                                                         |   | Page   |
|----------------------------------------------------------------------------------------------|--------|--------|
|                                                                                         |   |   |
| Financial Statements                                                                         |   |   |
|                                                                                         |   |   |
| Report of independent registered public accounting firm                                      |   | F-1    |
|                                                                                         |   |   |
| Balance sheets as of December 31, 2010 and 2009                                              |   | F-2    |
|                                                                                         |   |   |
| Statements of operations for the years ended December 31, 2010 and 2009                      |   | F-3    |
|                                                                                         |   |   |
| Statements of changes in stockholders' equity for the years ended December 31, 2010 and 2009 |   | F-4    |
|                                                                                         |   |   |
| Statements of cash flows for the years ended December 31, 2010 and 2009                      |   | F-5    |
|                                                                                         |   |   |
| Notes to financial statements                                                                |   | F-6    |

----

----

|                                                                                                                                 |   | December 31, |        |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|
|                                                                                                                                 |   | 2010              |        |   | 2009 |   |
|                                                                                                                                 |   |              |        |   |   |   |
| ASSETS                                                                                                                               |   |              |        |   |   |   |
| Current assets:                                                                                                                      |   |              |        |   |   |   |
| Cash and cash equivalents                                                                                                            |   | $                 | 134,165     |   |   | $ | 281,159 |   |
| Other short-term investments                                                                                                         |   |              | 150,000     |   |   |   | 175,000 |   |
| Accounts receivable, net of allowances of $38,000 and $34,000, respectively                                                          |   |              | 416,722     |   |   |   | 763,288 |   |
| Inventories (including consigned inventory of approximately $37,000 and $81,000, respectively)                                       |   |              | 596,317     |   |   |   | 806,212 |   |
| Prepaid expenses                                                                                                                     |   |              | 64,780      |   |   |   | 92,702 |   |
| Tax loss receivable                                                                                                                  |   |              | -           |   |   |   | 303,931 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| Total current assets                                                                                                                 |   |              | 1,361,984   |   |   |   | 2,422,292 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| Property and equipment, net                                                                                                          |   |              | 52,531      |   |   |   | 110,904 |   |
| Deposits                                                                                                                             |   |              | 10,895      |   |   |   | 10,895 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| TOTAL ASSETS                                                                                                                         |   | $                 | 1,425,410   |   |   | $ | 2,544,091 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| LIABILITIES                                                                                                                          |   |              |        |   |   |   |   |   |
| Current liabilities:                                                                                                                 |   |              |        |   |   |   |   |   |
| Line of credit                                                                                                                       |   | $                 | 75,000      |   |   | $ | - |   |
| Notes payable                                                                                                                        |   |              | 20,670      |   |   |   | 12,182 |   |
| Accounts payable and accrued expenses (Includes related party of $11,000 and $0, respectively)                                       |   |              | 713,184     |   |   |   | 1,042,051 |   |
| Deferred revenue                                                                                                                     |   |              | 60,836      |   |   |   | 306,239 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| Total current liabilities                                                                                                            |   |              | 869,690     |   |   |   | 1,360,472 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| Commitments                                                                                                                          |   |              |        |   |   |   |   |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| STOCKHOLDERS' EQUITY                                                                                                                 |   |              |        |   |   |   |   |   |
| Preferred stock, $0.01 par value; 1,000,000 shares authorized, -0- shares issued and outstanding at December 31, 2010 and 2009       |   |              | -           |   |   |   | - |   |
| Common stock, $0.0025 par value, authorized 50,000,000 shares; issued and outstanding 16,485,257 and 15,624,017 shares, respectively |   |              | 41,213      |   |   |   | 39,060 |   |
| Additional paid-in capital                                                                                                           |   |              | 20,162,969  |   |   |   | 20,031,599 |   |
| Accumulated deficit                                                                                                                  |   |              | (19,648,462 | ) |   |   | (18,887,040 | ) |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
|                                                                                                                                 |   |              | 555,720     |   |   |   | 1,183,619 |   |
|                                                                                                                                 |   |              |        |   |   |   |   |   |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                     |   | $                 | 1,425,410   |   |   | $ | 2,544,091 |   |

----

|                                                                                           |   | Years Ended  |       |
|------------------------------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                                           |   | December 31, |       |
|                                                                                           |   | 2010              |       |   | 2009 |   |
|                                                                                           |   |              |       |   |   |   |
| Revenue:                                                                                       |   |              |       |   |   |   |
| Net product sales                                                                              |   | $                 | 7,200,960  |   |   | $ | 7,995,194 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Cost of goods sold:                                                                            |   |              |       |   |   |   |   |   |
| Product sales                                                                                  |   |              | 4,037,332  |   |   |   | 4,282,777 |   |
| Write-down of inventories                                                                      |   |              | -          |   |   |   | 491,172 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
|                                                                                           |   |              | 4,037,332  |   |   |   | 4,773,949 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Gross profit                                                                                   |   |              | 3,163,628  |   |   |   | 3,221,245 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Operating expenses:                                                                            |   |              |       |   |   |   |   |   |
| Sales and marketing                                                                            |   |              | 1,166,471  |   |   |   | 1,880,102 |   |
| General and administrative (Includes related party consulting of $55,000 and $0, respectively) |   |              | 2,753,512  |   |   |   | 3,200,680 |   |
| Research and development                                                                       |   |              | 4,000      |   |   |   | - |   |
| Restructuring expense                                                                          |   |              | -          |   |   |   | 81,050 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
|                                                                                           |   |              | 3,923,983  |   |   |   | 5,161,832 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Loss before other (expense) income and benefit for income taxes                                |   |              | (760,355   | ) |   |   | (1,940,587 | ) |
|                                                                                           |   |              |       |   |   |   |   |   |
| Other (expense)  income:                                                             |   |              |       |   |   |   |   |   |
| Interest income                                                                                |   |              | 1,055      |   |   |   | 3,684 |   |
| Interest expense                                                                               |   |              | (6,122     | ) |   |   | (5,320 | ) |
| Other income                                                                                   |   |              | 4,000      |   |   |   | 4,248 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
|                                                                                           |   |              | (1,067     | ) |   |   | 2,612 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Loss before benefit from income taxes                                                          |   |              | (761,422   | ) |   |   | (1,937,975 | ) |
|                                                                                           |   |              |       |   |   |   |   |   |
| Benefit from income taxes                                                                      |   |              | -          |   |   |   | 261,851 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Net loss applicable to common stockholders                                                     |   | $                 | (761,422   | ) |   | $ | (1,676,124 | ) |
|                                                                                           |   |              |       |   |   |   |   |   |
| Net loss per common share - basic                                                              |   | $                 | (0.05      | ) |   | $ | (0.11 | ) |
|                                                                                           |   |              |       |   |   |   |   |   |
| Net loss per common share - diluted                                                            |   | $                 | (0.05      | ) |   | $ | (0.11 | ) |
|                                                                                           |   |              |       |   |   |   |   |   |
| Weighted average shares outstanding - basic                                                    |   |              | 16,146,664 |   |   |   | 14,974,931 |   |
|                                                                                           |   |              |       |   |   |   |   |   |
| Weighted average shares outstanding – diluted                                            |   |              | 16,146,664 |   |   |   | 14,974,931 |   |

----

|                                       |   |            |   |   |         |   |   |    |   |   |        |   |   | Additional |   |   |    |   |       |   |   |
|--------------------------------------------|--------|-----------------|--------|--------|--------------|--------|--------|---------|--------|--------|-------------|--------|--------|------------|--------|--------|---------|--------|------------|--------|--------|
|                                       |   | Preferred Stock |   |   | Common Stock |   |   | Paid In |   |   | Accumulated |   |   |       |   |
|                                       |   | Shares          |   |   | Amount       |   |   | Shares  |   |   | Amount      |   |   | Capital    |   |   | Deficit |   |       | Total  |   |
| Balance, January 1, 2009                   |   |            | -      |   |         | $      | -      |    |   |   | 14,194,613  |   |   | $          | 35,486 |   |    | $      | 19,585,297 |   |   | $ | (17,210,916 | ) |   | $ | 2,409,867 |   |
|                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   |       |   |   |   |   |   |   |   |   |   |
| Share-based compensation                   |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   | 171,975    |   |   |   |   |   |   |   | 171,975 |   |
| Common stock issued                        |   |            |   |   |         |   |   |    |   |   | 535,714     |   |   |       | 1,340  |   |    |   | 148,660    |   |   |   |   |   |   |   | 150,000 |   |
| Common stock granted to directors          |   |            |   |   |         |   |   |    |   |   | 801,593     |   |   |       | 2,004  |   |    |   | 99,996     |   |   |   |   |   |   |   | 102,000 |   |
| Common stock granted to certain sales reps |   |            |   |   |         |   |   |    |   |   | 92,097      |   |   |       | 230    |   |    |   | 25,671     |   |   |   |   |   |   |   | 25,901 |   |
| Net loss                                   |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   |       |   |   |   | (1,676,124 | ) |   |   | (1,676,124 | ) |
|                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   |       |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                 |   |            | -      |   |         |   | -      |    |   |   | 15,624,017  |   |   |       | 39,060 |   |    |   | 20,031,599 |   |   |   | (18,887,040 | ) |   |   | 1,183,619 |   |
|                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   |       |   |   |   |   |   |   |   |   |   |
| Share-based compensation                   |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   | 49,570     |   |   |   |   |   |   |   | 49,570 |   |
| Common stock granted to directors          |   |            |   |   |         |   |   |    |   |   | 799,881     |   |   |       | 2,000  |   |    |   | 73,363     |   |   |   |   |   |   |   | 75,363 |   |
| Common stock granted to certain sales reps |   |            |   |   |         |   |   |    |   |   | 61,359      |   |   |       | 153    |   |    |   | 8,437      |   |   |   |   |   |   |   | 8,590 |   |
| Net loss                                   |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   |       |   |   |   | (761,422 | ) |   |   | (761,422 | ) |
|                                       |   |            |   |   |         |   |   |    |   |   |        |   |   |       |   |   |    |   |       |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2010                 |   |            | -      |   |         | $      | -      |    |   |   | 16,485,257  |   |   | $          | 41,213 |   |    | $      | 20,162,969 |   |   | $ | (19,648,462 | ) |   | $ | 555,720 |   |

----

|                                                                                           |   | Years Ended December 31, |     |
|------------------------------------------------------------------------------------------------|--------|-----------------------------------------|----------|
|                                                                                           |   | 2010                                    |     |   | 2009 |   |
|                                                                                           |   |                                    |     |   |   |   |
| Cash flows from operating activities:                                                          |   |                                    |     |   |   |   |
| Net loss                                                                                       |   | $                                       | (761,422 | ) |   | $ | (1,676,124 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities:                    |   |                                    |     |   |   |   |   |   |
| Depreciation                                                                                   |   |                                    | 99,591   |   |   |   | 198,089 |   |
| Bad debt expense                                                                               |   |                                    | 12,144   |   |   |   | 12,000 |   |
| Equity instrument-based expense                                                                |   |                                    | 124,934  |   |   |   | 299,875 |   |
| Reserve/write-off of inventories                                                               |   |                                    | -        |   |   |   | 491,172 |   |
| Restructuring expense                                                                          |   |                                    | -        |   |   |   | 81,050 |   |
| Changes in:                                                                                    |   |                                    |     |   |   |   |   |   |
| Accounts receivable                                                                            |   |                                    | 334,422  |   |   |   | (319,437 | ) |
| Inventories                                                                                    |   |                                    | 209,895  |   |   |   | 10,932 |   |
| Prepaid expenses                                                                               |   |                                    | 27,922   |   |   |   | 66,499 |   |
| Tax loss receivable                                                                            |   |                                    | 303,931  |   |   |   | (303,931 | ) |
| Deposits                                                                                       |   |                                    | -        |   |   |   | 12,000 |   |
| Accounts payable and accrued expenses (Includes related party of $11,000 and $0, respectively) |   |                                    | (320,277 | ) |   |   | 523,474 |   |
| Deferred revenue                                                                               |   |                                    | (245,403 | ) |   |   | (41,706 | ) |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Net cash used in operating activities                                                          |   |                                    | (214,263 | ) |   |   | (646,107 | ) |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Cash flows from investing activities:                                                          |   |                                    |     |   |   |   |   |   |
| Proceeds from sales of other short-term investments                                            |   |                                    | 25,000   |   |   |   | 125,000 |   |
| Purchase of property and equipment                                                             |   |                                    | (41,219  | ) |   |   | (190,099 | ) |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Net cash used in investing activities                                                          |   |                                    | (16,219  | ) |   |   | (65,099 | ) |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Cash flows from financing activities:                                                          |   |                                    |     |   |   |   |   |   |
| Net borrowings on line of credit                                                               |   |                                    | 75,000   |   |   |   | - |   |
| Proceeds from common stock issuance                                                            |   |                                    | -        |   |   |   | 150,000 |   |
| Proceeds of note payable                                                                       |   |                                    | 70,293   |   |   |   | 59,751 |   |
| Repayment of note payable                                                                      |   |                                    | (61,805  | ) |   |   | (106,379 | ) |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Net cash provided by financing activities                                                      |   |                                    | 83,488   |   |   |   | 103,372 |   |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Net decrease in cash and cash equivalents                                                      |   |                                    | (146,994 | ) |   |   | (607,834 | ) |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Cash and cash equivalents at beginning of year                                                 |   |                                    | 281,159  |   |   |   | 888,993 |   |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Cash and cash equivalents at end of year                                                       |   | $                                       | 134,165  |   |   | $ | 281,159 |   |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                             |   |                                    |     |   |   |   |   |   |
| Cash paid for interest                                                                         |   | $                                       | 6,122    |   |   | $ | 5,320 |   |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Cash paid for income taxes                                                                     |   | $                                       | 17,157   |   |   | $ | 2,080 |   |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Non-cash operating activity:                                                                   |   |                                    |     |   |   |   |   |   |
| Issuance of common stock as payment for consulting services                                    |   | $                                       | 8,590    |   |   | $ | - |   |
|                                                                                           |   |                                    |     |   |   |   |   |   |
| Settlement of accounts payable in exchange for equipment                                       |   | $                                       | -        |   |   | $ | 36,776 |   |

----

| [1] | The Company: |
|-----|--------------|

| [2] | Cash and cash equivalents: |
|-----|----------------------------|

| [3] | Accounts receivable: |
|-----|----------------------|

| [4] | Inventories: |
|-----|--------------|

| [5] | Property and equipment: |
|-----|-------------------------|

| [6] | Loss per share: |
|-----|-----------------|

----

| [7] | Revenue recognition: |
|-----|----------------------|

| [8] | Research and development: |
|-----|---------------------------|

| [9] | Advertising costs: |
|-----|--------------------|

| [10] | Stock-based compensation: |
|------|---------------------------|

|                     |   | Year Ended   |       |
|--------------------------|--------|-------------------|------------|
|                     |   | December 31, |       |
|                     |   | 2010              |       |   | 2009 |   |
| Risk-free interest rate  |   |              | 1.35%-2.34 | % |   |   | 2.13 | % |
| Expected life (in years) |   |              | 5.0        |   |   |   | 5.0 |   |
| Expected volatility      |   |              | 100% - 105 | % |   |   | 104 | % |
| Dividend yield           |   |              | 0          | % |   |   | 0 | % |

| [11] | Segment information: |
|------|----------------------|

----

| [12] | Income taxes: |
|------|---------------|

| Balance, January 1, 2009                         |   | $      | -       |   |
|--------------------------------------------------|--------|--------|---------|--------|
| Additions based on tax positions related to 2009 |   |   | 40,000  |   |
| Payments in settlement of prior years            |   |   | -       |   |
| Balance, December 31, 2009                       |   |   | 40,000  |   |
| Additions based on tax position related to 2010  |   |   | -       |   |
| Payments in settlement of prior years            |   |   | (17,147 | )      |
| Balance, December 31, 2010                       |   | $      | 22,853  |   |

| [13] | Impairment of long-lived assets: |
|------|----------------------------------|

| [14] | Recent accounting pronouncements: |
|------|-----------------------------------|

| [15] | Use of estimates: |
|------|-------------------|

----

|   |  Shipping and handling costs are included in cost of sales. |
|--------|------------------------------------------------------------------|

|                                          |   | 2010   |    |   | 2009   |   |
|-----------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                          |   |   |    |   |   |   |
| Raw materials (at contract manufacturer)      |   | $      | -       |   |   | $      | - |   |
| Work-in-process (at contract manufacturer)    |   |   | -       |   |   |   | - |   |
| Packaging supplies (at third party warehouse) |   |   | 58,277  |   |   |   | 80,611 |   |
| Finished goods (at third party warehouse)     |   |   | 508,174 |   |   |   | 645,095 |   |
| Finished goods (on consignment)               |   |   | 29,866  |   |   |   | 80,506 |   |
|                                          |   |   |    |   |   |   |   |   |
|                                          |   | $      | 596,317 |   |   | $      | 806,212 |   |

----

|                          |   | 2010   |    |   | 2009   |   |
|-------------------------------|--------|--------|---------|--------|--------|--------|
|                          |   |   |    |   |   |   |
| Furniture and equipment       |   | $      | 521,843 |   |   | $      | 815,724 |   |
| Molds and dies                |   |   | 116,366 |   |   |   | 218,546 |   |
|                          |   |   |    |   |   |   |   |   |
|                          |   |   | 638,209 |   |   |   | 1,034,270 |   |
| Less accumulated depreciation |   |   | 585,678 |   |   |   | 923,366 |   |
|                          |   |   |    |   |   |   |   |   |
|                          |   | $      | 52,531  |   |   | $      | 110,904 |   |

|                |   | 2010   |    |   | 2009   |   |
|---------------------|--------|--------|---------|--------|--------|--------|
|                |   |   |    |   |   |   |
| Trade payables      |   | $      | 512,448 |   |   | $      | 826,236 |   |
| Accrued expenses    |   |   | 190,516 |   |   |   | 180,086 |   |
| Commissions payable |   |   | 10,220  |   |   |   | 23,265 |   |
| Other               |   |   | -       |   |   |   | 12,464 |   |
|                |   | $      | 713,184 |   |   | $      | 1,042,051 |   |

|                                                                                                                                           |   | 2010   |   |   | 2009   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                           |   |   |   |   |   |   |
| Installment note payable to insurance finance company due in monthly installments of $6,135, including interest at 5.80% through February 2010 |   | $      | -      |   |   | $      | 12,182 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |
| Installment note payable to insurance finance company due in monthly installments of $3,980, including interest at 5.50% through February 2011 |   |   | 7,905  |   |   |   | - |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |
| Installment note payable to insurance finance company due in monthly installments of $3,228, including interest at 5.50% through April 2011    |   |   | 12,765 |   |   |   | - |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |
|                                                                                                                                           |   | $      | 20,670 |   |   | $      | 12,182 |   |

----

| [1] | Employment agreements: |
|-----|------------------------|

| [2] | Lease: |
|-----|--------|

----

| Years Ending |   |   |    |
|-------------------|--------|--------|---------|
| December 31, |   |   |    |
|              |   |   |    |
| 2011              |   | $      | 78,000  |   |
| 2012              |   |   | 78,000  |   |
| 2013              |   |   | 78,000  |   |
|              |   |   |    |   |
|              |   | $      | 234,000 |   |

|                                         |   |   |       |   |   |   |      |           |   |   | Weighted            |   |
|----------------------------------------------|--------|--------|------------|--------|--------|--------|-----------|----------------|--------|--------|---------------------|--------|
|                                         |   |   |       |   |   |   |      | Exercise       |   |   | Average             |   |
|                                         |   |   |       |   |   |   |      | Price Per |   |   | Exercise Price |   |
|                                         |   | Option |       |   | Vested |   |      | Common         |   |   | Per Share      |   |
|                                         |   | Shares |       |   | Shares |   |      | Share          |   |   | Outstanding         |   |
|                                         |   |   |       |   |   |   |      |           |   |   |                |   |
| Balance, January 1, 2009                     |   |   | 2,877,000  |   |   |   | 1,556,501 |           |   |   | $0.20 - $2.14       |   |   | $ | 0.67 |   |
|                                         |   |   |       |   |   |   |      |           |   |   |                |   |   |   |   |   |
| Granted/vested during the year               |   |   | 200,000    |   |   |   | 390,916   |           |   |   | $0.28               |   |   | $ | 0.28 |   |
| Exercised during the year                    |   |   | -          |   |   |   | -         |           |   |   | -                   |   |   |   | - |   |
| Expired during the year                      |   |   | (638,500   | )      |   |   | (638,500  | )              |   |   | $0.20 - $0.72       |   |   | $ | 0.65 |   |
|                                         |   |   |       |   |   |   |      |           |   |   |                |   |   |   |   |   |
| Balance, December 31, 2009                   |   |   | 2,438,500  |   |   |   | 1,308,917 |           |   |   | $0.20 - $2.14       |   |   | $ | 0.64 |   |
|                                         |   |   |       |   |   |   |      |           |   |   |                |   |   |   |   |   |
| Granted/vested during the year               |   |   | 1,045,000  |   |   |   | 362,917   |           |   |   | $0.12 - $0.184      |   |   | $ | 0.15 |   |
| Exercised during the year                    |   |   | -          |   |   |   | -         |           |   |   | -                   |   |   |   | - |   |
| Expired during the year                      |   |   | (1,115,000 | )      |   |   | (523,334  | )              |   |   | $0.23 - $1.93       |   |   | $ | 0.55 |   |
|                                         |   |   |       |   |   |   |      |           |   |   |                |   |   |   |   |   |
| Balance, December 31, 2010                   |   |   | 2,368,500  |   |   |   | 1,148,500 |           |   |   | $0.12 - $2.14       |   |   | $ | 0.47 |   |
|                                         |   |   |       |   |   |   |      |           |   |   |                |   |   |   |   |   |
| Aggregate Intrinsic Value, December 31, 2010 |   | $      | 9,500      |   |   | $      | -         |           |   |   |                |   |   |   |   |   |

----

|                 |   |        |      |   | Weighted                  |   |   |     |   |   |        |   |   |     |      |
|----------------------|--------|-------------|-----------|--------|---------------------------|--------|--------|----------|--------|--------|-------------|--------|--------|----------|-----------|
|                 |   |        |      |   | Average                   |   |   | Weighted |   |   |        |   |   | Weighted |      |
|                 |   |        |      |   | Remaining                 |   |   | Average  |   |   |        |   |   | Average  |      |
| Range of        |   | Number      |      |   | Contractual               |   |   | Exercise |   |   | Number      |   |   | Exercise |      |
| Exercise Prices |   | Outstanding |      |   | Life (in Years) |   |   | Price    |   |   | Exercisable |   |   | Price    |      |
|                 |   |        |      |   |                      |   |   |     |   |   |        |   |   |     |      |
| $0.12 - $2.00        |   |        | 2,342,500 |   |                      |   | 2.72   |     |   | $      | 0.45        |   |   |     | 1,122,500 |   |   | $ | 0.76 |   |
| $2.01 - $2.14        |   |        | 26,000    |   |                      |   | 1.19   |     |   | $      | 2.12        |   |   |     | 26,000    |   |   | $ | 2.12 |   |
|                 |   |        |      |   |                      |   |   |     |   |   |        |   |   |     |      |   |   |   |   |   |
|                 |   |        | 2,368,500 |   |                      |   | 2.70   |     |   | $      | 0.47        |   |   |     | 1,148,500 |   |   | $ | 0.79 |   |

|                                         |   |   |      |   | Weighted            |   |
|----------------------------------------------|--------|--------|-----------|--------|---------------------|--------|
|                                         |   |   |      |   | Average             |   |
|                                         |   |   |      |   | Exercise Price |   |
|                                         |   | Option |      |   | Per Share      |   |
|                                         |   | Shares |      |   | Outstanding         |   |
|                                         |   |   |      |   |                |   |
| Balance, January 1, 2009                     |   |   | 1,320,499 |   |                | $      | 0.52 |   |
|                                         |   |   |      |   |                |   |   |   |
| Granted during the year                      |   |   | 200,000   |   |                | $      | 0.28 |   |
| Vested during the year                       |   |   | (390,916  | )      |                | $      | 0.56 |   |
|                                         |   |   |      |   |                |   |   |   |
| Balance, December 31, 2009                   |   |   | 1,129,583 |   |                | $      | 0.46 |   |
|                                         |   |   |      |   |                |   |   |   |
| Granted during the year                      |   |   | 1,045,000 |   |                | $      | 0.15 |   |
| Expired/cancelled  during the year |   |   | (591,666  | )      |                | $      | 0.49 |   |
| Vested during the year                       |   |   | (362,917  | )      |                | $      | 0.50 |   |
|                                         |   |   |      |   |                |   |   |   |
| Balance, December 31, 2010                   |   |   | 1,220,000 |   |                | $      | 0.17 |   |

----

|                           |   |   |    |   |   |   |    |           |   |   | Weighted            |   |
|--------------------------------|--------|--------|---------|--------|--------|--------|---------|----------------|--------|--------|---------------------|--------|
|                           |   |   |    |   |   |   |    | Exercise       |   |   | Average             |   |
|                           |   |   |    |   |   |   |    | Price Per |   |   | Exercise Price |   |
|                           |   | Option |    |   | Vested |   |    | Common         |   |   | Per Share      |   |
|                           |   | Shares |    |   | Shares |   |    | Share          |   |   | Outstanding         |   |
|                           |   |   |    |   |   |   |    |           |   |   |                |   |
| Balance, January 1, 2009       |   |   | 65,250  |   |   |   | 65,250  |           |   |   | $0.20 - $2.10  |   |   | $ | 0.37 |   |
|                           |   |   |    |   |   |   |    |           |   |   |                |   |   |   |   |   |
| Granted/vested during the year |   |   | -       |   |   |   | -       |           |   |   | -                   |   |   |   | - |   |
| Expired during the year        |   |   | (41,000 | )      |   |   | (41,000 | )              |   |   | $0.20 - $0.83  |   |   | $ | 0.35 |   |
|                           |   |   |    |   |   |   |    |           |   |   |                |   |   |   |   |   |
| Balance, December 31, 2009     |   |   | 24,250  |   |   |   | 24,250  |           |   |   | $0.26 - $2.10  |   |   | $ | 0.38 |   |
|                           |   |   |    |   |   |   |    |           |   |   |                |   |   |   |   |   |
| Granted/vested during the year |   |   | -       |   |   |   | -       |           |   |   | -                   |   |   |   | - |   |
| Expired during the year        |   |   | (24,250 | )      |   |   | (24,250 | )              |   |   | $0.26 - $2.10  |   |   | $ | 0.38 |   |
|                           |   |   |    |   |   |   |    |           |   |   |                |   |   |   |   |   |
| Balance, December 31, 2010     |   |   | -       |   |   |   | -       |           |   |   | -                   |   |   |   | - |   |

|                       |   |     |          |   | Exercise |   |   | Weighted            |   |
|----------------------------|--------|----------|---------------|--------|----------|--------|--------|---------------------|--------|
|                       |   |     |          |   | Price    |   |   | Average             |   |
|                       |   |     |          |   | Per      |   |   | Exercise Price |   |
|                       |   |     |          |   | Common   |   |   | Per                 |   |
|                       |   | Warrants |          |   | Share    |   |   | Common Share   |   |
|                       |   |     |          |   |     |   |   |                |   |
| Balance, January 1, 2009   |   |     | 27,500        |   |     | $      | 0.88   |                |   | $ | 0.88 |   |
| Granted during the year    |   |     | 402,500       |   |     | $      | 0.14   |                |   | $ | 0.14 |   |
| Expired during the year    |   |     | (27,500       | )      |     | $      | 0.88   |                |   | $ | 0.88 |   |
| Balance, December 31, 2009 |   |     | 402,500       |   |     | $      | 0.14   |                |   | $ | 0.14 |   |
| Granted during the year    |   |     |  10,000  |   |     | $      | 0.12   |                |   | $ | 0.12 |   |
| Cancelled during the year  |   |     | (90,000       | )      |     | $      | 0.14   |                |   | $ | 0.14 |   |
|                       |   |     |          |   |     |   |   |                |   |   |   |   |
| Balance, December 31, 2010 |   |     |  322,500 |   |     | $      | 0.14   |                |   | $ | 0.14 |   |

----

|                       |   |   |     |   | Weighted            |   |
|----------------------------|--------|--------|----------|--------|---------------------|--------|
|                       |   |   |     |   | Average             |   |
|                       |   |   |     |   | Exercise Price |   |
|                       |   | Option |     |   | Per Share      |   |
|                       |   | Shares |     |   | Outstanding         |   |
|                       |   |   |     |   |                |   |
| Balance, January 1, 2009   |   |   | -0-      |   |                |   | - |   |
|                       |   |   |     |   |                |   |   |   |
| Granted during the year    |   |   | 402,500  |   |                | $      | 0.14 |   |
| Vested during the year     |   |   | (109,167 | )      |                | $      | 0.14 |   |
|                       |   |   |     |   |                |   |   |   |
| Balance, December 31, 2009 |   |   | 293,333  |   |                | $      | 0.14 |   |
|                       |   |   |     |   |                |   |   |   |
| Granted during the year    |   |   | 10,000   |   |                | $      | 0.12 |   |
| Cancelled during the year  |   |   | (60,000  | )      |                | $      | 0.14 |   |
| Vested during the year     |   |   | (88,333  | )      |                | $      | 0.14 |   |
|                       |   |   |     |   |                |   |   |   |
| Balance, December 31, 2010 |   |   | 155,000  |   |                | $      | 0.14 |   |

|                              |   | 2010   |         |   | 2009    |   |
|-----------------------------------|--------|--------|--------------|--------|---------|--------|
|                              |   | Amount |         |   | Percent |   |   | Amount |   |   | Percent |   |
|                              |   |   |         |   |    |   |   |   |   |   |   |   |
| U.S. federal income tax benefit   |   |   |         |   |    |   |   |   |   |   |   |   |
| at federal statutory rate         |   | $      | (266,499     | )      |    |   | 35 | % |   | $ | (692,290 | ) |   |   | 35 | % |
| Effect of state taxes, net of     |   |   |         |   |    |   |   |   |   |   |   |   |   |   |   |   |
| federal benefit                   |   |   | (45,686      | )      |    |   | 6 | % |   |   | (118,680 | ) |   |   | 6 | % |
| Reduction in state net operating  |   |   |         |   |    |   |   |   |   |   |   |   |   |   |   |   |
| losses in connection with sale of |   |   |         |   |    |   |   |   |   |   |   |   |   |   |   |   |
| net operating losses              |   |   | -            |   |    |   | 0 | % |   |   | 125,500 |   |   |   | (6 | )% |
| Change in valuation allowance     |   |   | 291,000      |   |    |   | (38 | )% |   |   | 318,700 |   |   |   | (16 | )% |
| Stock compensation expense        |   |   |  51,223 |   |    |   |  (7 | )% |   |   |  66,100 |   |   |   |  (3 | )% |
| Other                             |   |   | (30,038      | )      |    |   | 4 | % |   |   | 38,819 |   |   |   | (2 | )% |
|                              |   |   |         |   |    |   |   |   |   |   |   |   |   |   |   |   |
|                              |   | $      | 0            |   |    |   | 0 | % |   | $ | (261,851 | ) |   |   | 14 | % |

----

|                             |   | 2010   |       |   | 2009   |   |
|----------------------------------|--------|--------|------------|--------|--------|--------|
|                             |   |   |       |   |   |   |
| Net operating loss carryforwards |   | $      | 6,223,000  |   |   | $      | 5,812,000 |   |
| Inventory reserve                |   |   | 15,000     |   |   |   | 159,000 |   |
| Other                            |   |   | 79,000     |   |   |   | 55,000 |   |
| Valuation allowance              |   |   | (6,317,000 | )      |   |   | (6,026,000 | ) |
|                             |   |   |       |   |   |   |   |   |
| Deferred tax asset               |   | $      | - 0 -      |   |   | $      | - 0 - |   |

| [1] | Concentrations of credit risk: |
|-----|--------------------------------|

| [2] | Fair value of financial instruments: |
|-----|--------------------------------------|

| [3] | Major customers: |
|-----|------------------|

----

| [4] | Major vendors: |
|-----|----------------|

|          |   | 2010   |      |   | Pct.   |   |   | 2009   |   |   | Pct.      |   |
|---------------|--------|--------|-----------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|
| United States |   | $      | 5,966,734 |   |   |   | 83     | %      |   | $      | 6,864,854 |   |   |   | 86 | % |
| Canada        |   |   | 250,789   |   |   |   | 4      | %      |   |   | 339,234   |   |   |   | 4 | % |
| Singapore     |   |   | 151,258   |   |   |   | 2      | %      |   |   | 236,750   |   |   |   | 3 | % |
| South America |   |   | 385,241   |   |   |   | 5      | %      |   |   | 216,413   |   |   |   | 3 | % |
| Other         |   |   | 446,938   |   |   |   | 6      | %      |   |   | 337,943   |   |   |   | 4 | % |
|          |   |   |      |   |   |   |   |   |   |   |      |   |   |   |   |   |
| Total         |   | $      | 7,200,960 |   |   |   | 100    | %      |   | $      | 7,995,194 |   |   |   | 100 | % |

----

|                              |   | 2010   |   |   | 2009   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| Balance – Beginning of Year |   | $      | 34,032 |   |   | $      | 24,091 |   |
| Accruals                          |   |   | 12,000 |   |   |   | 12,000 |   |
| A/R Written Off                   |   |   | (8,373 | )      |   |   | (2,059 | ) |
| Balance – End of Year       |   | $      | 37,659 |   |   | $      | 34,032 |   |

|                              |   | 2010   |     |   | 2009   |   |
|-----------------------------------|--------|--------|----------|--------|--------|--------|
| Balance – Beginning of Year |   | $      | 401,258  |   |   | $      | 42,339 |   |
| Reserved                          |   |   | -        |   |   |   | 364,254 |   |
| Disposed                          |   |   | (364,137 | )      |   |   | (5,335 | ) |
| Balance – End of Year       |   | $      | 37,121   |   |   | $      | 401,258 |   |

----