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LETTER OF INTENT

YATERRA VENTURES CORP.

January 10, 2011

nanoCrypt AGBuchsweg 45 73547 Lorch
Germany

Dear Sirs:

|Re: | Business Combination between Yaterra Ventures Corp.
      (Yaterra) and nanoCrypt AG (nanoCrypt)
|--- | ----------------------------------------------------------------------------------------------------

This will confirm our intention with respect to a business
combination of Yaterra and nanoCrypt.

|1. | nanoCrypt has represented to Yaterra as
follows:
|-- | ------------------------------------------------
|   |                                                 
|   | a)                                              
|   |                                                 
|   | b)                                              
|   |                                                 
|   | c)                                              
|   |                                                 
|   | d)                                              
|   |                                                 
|   | e)                                              
|   |                                                 
|   | f)                                              
|   |                                                 
|   | g)                                              
|   |                                                 
|   | h)                                              

1

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| | i) | nanoCrypt owns the Patents, the nanoTicket trademark and
      the Technology (collectively the Intellectual Property) free of any
      liens, charges or encumbrances.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                           
| | j) | There is no material litigation by or against nanoCrypt
      or affecting the Intellectual Property.                                                                     

|2. | Yaterra has represented to nanoCrypt as
follows:
|-- | ------------------------------------------------
|   |                                                 
|   | a)                                              
|   |                                                 
|   | b)                                              

|3. | The parties agree to enter into a business combination
      such that on completion of the business combination, NanoCrypt or its
      shareholders will hold 60% of the resulting entity and Yaterras
      shareholders will hold 40% of the resulting entity. The exact form of the
      business combination will be determined by the parties based on advice
      from their respective legal and tax advisors.                                                                                                                                                            
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|4. | Concurrent with completion of the business combination,
      the current directors and officers of Yaterra will resign and be replaced
      by directors and officers nominated by nanoCrypt.                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|5. | Closing of the business combination will be subject
      to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|6. | Within 90 days of Closing of the business combination,
      Yaterra will provide funding to nanoCrypt in the amount of USD$300,000, of
      which USD $100,000 has been received by nanoCrypt.                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|7. | The parties shall use reasonable commercial efforts to
      prepare and execute formal documents for the business combination within
      60 days of the date of this letter of intent.                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|8. | During the 60 day period described in Paragraph 7 above
      (the Due Diligence Period), each of nanoCrypt and Yaterra shall make
      available to each others respective representatives all documents and
      information reasonably necessary for the
completion of their due diligence, including instructing their
      respective employees and accountants to provide such information upon
      request, subject to the requesting party entering into reasonable
      non-disclosure agreements protecting the confidential information of the
  disclosing party.

2

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|9.  | nanoCrypt agrees that during the Due Diligence Period,
      they will not agree, negotiate or discuss with any other party a sale of
      shares of nanoCrypt or business combination of nanoCrypt other than the
      business combination contemplated by this letter of intent.         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                               
|10. | Except for Paragraphs 7, 8 and 9, the provisions of this
      letter are not intended to be a binding agreement and the parties shall
      not be obligated to complete any business combination unless and until
      execution of the formal documentation contemplated by Paragraph
  7.

If the foregoing is in accordance with your understanding,
please sign where indicated below.

Yours truly,

YATERRA VENTURES CORP.

By:    /s/ Jarrett F.
Bousquet                           Jarrett
F. Bousquet, President

Agreed and accepted as of the 15th day of January,
2011.

nanoCrypt AG.

By: /s/ Martin
Pick
       Martin Pick, CEO

3

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SCHEDULE “A”

FINANCIAL STATEMENTS OF NANOCRYPT AG

---

NANOCRYPT AG

AUDIT REPORT OF INDEPENDENT ACCOUNTANTS 
  ANDFINANCIAL STATEMENTS

December 31, 2009 and 2008

---

nanoCrypt AGTable of Contents

|                                                                                                                                                                               | Page
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ----
|Audit Report of Independent Accountants                                                                                                                                        | 1   
|Balance Sheets  December 31, 2009 and 2008                                                                                                                                    | 2   
|Statements of Operations for the years ended December 31,
      2009 and 2008 Statements of Stockholders Equity (Deficit) for the
      years endedDecember 31, 2009 and 2008 | 3   
|Statements of Stockholders' Equity (Deficit)                                                                                                                                   | 4   
|Statements of Cash Flows for the years ended December 31,
      2009 and 2008                                                                                                  | 5   
|Notes to Financial Statements                                                                                                                                                  | 6   

---

SADLER, GIBB&ASSOCIATES, LLC

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors 
  nanoCrypt AG

We have audited the accompanying balance sheets of nanoCrypt
  AG as of December 31, 2009 and 2008, and the related statements of operations,
  stockholders equity (deficit) and cash flows for the years then ended.
  These financial statements are the responsibility of the Companys management.
  Our responsibility is to express an opinion on these financial statements based
  on our audits.

We conducted our audits in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards require
  that we plan and perform the audits to obtain reasonable assurance about whether
  the financial statements are free of material misstatement. The Company is not
  required to have, nor were we engaged to perform, an audit of its internal control
  over financial reporting. Our audits included consideration of internal control
  over financial reporting as a basis for designing audit procedures that are
  appropriate in the circumstances, but not for the purpose of expressing an opinion
  on the effectiveness of the Companys internal control over financial reporting.
  Accordingly, we express no such opinion. An audit also includes examining, on
  a test basis, evidence supporting the amounts and disclosures in the financial
  statements, assessing the accounting principles used and significant estimates
  made by management, as well as evaluating the overall financial statement presentation.
  We believe that our audits provide a reasonable basis for our opinion.

In our opinion the financial statements referred to above present
  fairly, in all material respects, the financial position of nanoCrypt AG as
  of December 31, 2009 and 2008, and the results of their operations and their
  cash flows for the years then ended, in conformity with U.S. generally accepted
  accounting principles.

The accompanying financial statements have been prepared assuming
  that the Company will continue as a going concern. As discussed in Note 2 to
  the financial statements, the Company had net losses of $388,076 and $701,770
  for the years ended December 31, 2009 and 2008, respectively and accumulated
  deficits of $1,116,688 and $728,612 as of December 31, 2009 and 2008, respectively
  which raises substantial doubt about its ability to continue as a going concern.
  Managements plans concerning these matters are also described in Note
  2. The financial statements do not include any adjustments that might result
  from the outcome of this uncertainty.

| | SADLER, GIBB AND ASSOCIATES, LLC
| | --------------------------------
| |                                 
| | Salt Lake City, UT              
| | October 15, 2010                

1

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|nanoCrypt AG  
|--------------
|Balance Sheets
|              
|              
|ASSETS        

|                                                                                                                                                                             |   | December
      31, |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | -
|                                                                                                                                                                             |   | 2009               |  
|CURRENT ASSETS                                                                                                                                                               |   |                    |  
|Cash                                                                                                                                                                         | $ | -                  |  
|Accounts
      receivable, net                                                                                                                                               |   | 47,583             |  
|Prepaid expenses                                                                                                                                                             |   | 4,357              |  
|Other current
      assets                                                                                                                                                   |   | 23,425             |  
|Total Current
      Assets                                                                                                                                                   |   | 75,365             |  
|PROPERTY AND EQUIPMENT, Net                                                                                                                                                  |   | 31,352             |  
|TOTAL ASSETS                                                                                                                                                                 | $ | 106,717            |  
|                                                                                                                                                                             |   |                    |  
|LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                         |  
|CURRENT LIABILITIES                                                                                                                                                          |   |                    |  
|Accounts payable                                                                                                                                                             | $ | 38,085             |  
|Bank overdraft                                                                                                                                                               |   | 5,938              |  
|Accrued personnel costs                                                                                                                                                      |   | 73,699             |  
|Other accrued
      expenses                                                                                                                                                 |   | 9,380              |  
|VAT payable, net                                                                                                                                                             |   | 31,515             |  
|Total Current Liabilities                                                                                                                                                    |   | 158,617            |  
|TOTAL LIABILITIES                                                                                                                                                            |   | 158,617            |  
|STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                                               |   |                    |  
|Common
      stock, no par value; 1,000,000 shares              
      authorized, 178,561 and 174,561 shares 
                  
      issued and outstanding, respectively |   | 1,103,427          |  
|Accumulated
      other comprehensive income                                                                                                                                 |   | (38,639            | )
|Accumulated deficit                                                                                                                                                          |   | (1,116,688         | )
|Total Stockholders' Equity (Deficit)                                                                                                                                         |   | (51,900            | )
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                         | $ | 106,717            |  

The accompanying notes are an integral part of these financial
  statements.

2

---

nanoCrypt AG 
  Statements of Operations

|                                                    |   | For the Years Ended |  
|--------------------------------------------------- | - | ------------------- | -
|                                                    |   | December
      31,  |  
|                                                    |   | 2009                |  
|REVENUES                                            | $ | 570,783             |  
|OPERATING EXPENSES                                  |   |                     |  
|General
      and administrative                    |   | 271,267             |  
|Depreciation and
      amortization                 |   | 15,379              |  
|Bad
      debt expense                              |   | 38,487              |  
|Development costs                                   |   | 113,442             |  
|Advertising                                         |   | 560                 |  
|Contract labor
      expenses                       |   | 147,081             |  
|Salaries
      and wages                            |   | 376,880             |  
|Total
      Operating Expenses                      |   | 963,096             |  
|OPERATING LOSS                                      |   | (392,313            | )
|OTHER INCOME (EXPENSE)                              |   |                     |  
|Interest
      income                               |   | -                   |  
|Interest expense                                    |   | (729                | )
|Other
      expenses                                |   | -                   |  
|Other income                                        |   | 4,966               |  
|Total Other Income (Expense)                        |   | 4,237               |  
|LOSS
      BEFORE INCOME TAXES                      |   | (388,076            | )
|PROVISION FOR INCOME TAXES                          |   | -                   |  
|NET
      LOSS                                      | $ | (388,076            | )
|OTHER COMPREHENSIVE INCOME
      (LOSS)             |   |                     |  
|Foreign currency
      translation adjustment       |   | 7,264               |  
|TOTAL COMPREHENSIVE LOSS                            | $ | (380,812            | )
|BASIC
      AND DILUTED LOSS PER SHARE              | $ | (2.18               | )
|WEIGHTED AVERAGE
      NUMBER OF SHARES OUTSTANDING |   | 177,651             |  

The accompanying notes are an integral part of these financial
  statements.

3

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nanoCrypt AGStatements of Stockholders Equity (Deficit)

|                                                       |  |                    |  |   |               |  |   | Accumulated |   |   |            |   |   |          |  
|------------------------------------------------------ |  | ------------------ |  | - | ------------- |  | - | ----------- | - | - | ---------- | - | - | -------- | -
|                                                       |  |                    |  |   |               |  |   | Other       |   |   |            |   |   |          |  
|                                                       |  | Common
      Stock |  |   | Comprehensive |  |   | Accumulated |   |   |            |  
|                                                       |  | Shares             |  |   | Amount        |  |   | Income      |   |   | Deficit    |   |   | Total    |  
|Balance, December 31, 2007                             |  | 101,000            |  | $ | 139,761       |  | $ | -           |   | $ | (26,842    | ) | $ | 112,919  |  
|Common stock issued for cash at $9.16 per
      share  |  | 71,500             |  |   | 723,762       |  |   | -           |   |   | -          |   |   | 723,762  |  
|Common stock issued for cash
      at $52.85 per share |  | 2,061              |  |   | 103,944       |  |   | -           |   |   | -          |   |   | 103,944  |  
|Currency translation adjustment                        |  | -                  |  |   | -             |  |   | (45,903     | ) |   | -          |   |   | (45,903  | )
|Net loss for the year ended
      December 31, 2008    |  | -                  |  |   | -             |  |   | -           |   |   | (701,770   | ) |   | (701,770 | )
|Balance, December 31, 2008                             |  | 174,561            |  |   | 967,467       |  |   | (45,903     | ) |   | (728,612   | ) |   | 192,952  |  
|Common stock issued for cash
      at $39.45 per share |  | 4,000              |  |   | 135,960       |  |   | -           |   |   | -          |   |   | 135,960  |  
|Currency translation adjustment                        |  | -                  |  |   | -             |  |   | 7,264       |   |   | -          |   |   | 7,264    |  
|Net loss for the year ended
      December 31, 2009    |  | -                  |  |   | -             |  |   | -           |   |   | (388,076   | ) |   | (388,076 | )
|Balance, December 31, 2009                             |  | 178,561            |  | $ | 1,103,427     |  | $ | (38,639     | ) | $ | (1,116,688 | ) | $ | (51,900  | )

The accompanying notes are an integral part of these financial
  statements.

4

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nanoCrypt AG 
  Statements of Cash Flows

|                                                                                  |   | For the Years Ended |  
|--------------------------------------------------------------------------------- | - | ------------------- | -
|                                                                                  |   | December
      31,  |  
|                                                                                  |   | 2009                |  
|                                                                                  |   |                     |  
|CASH FLOWS FROM OPERATING ACTIVITIES                                              |   |                     |  
|                                                                                  |   |                     |  
|Net
      loss                                                                    | $ | (388,076            | )
|Adjustments
      to reconcile net loss to net cash used in operating activities: |   |                     |  
|Depreciation and amortization                                                     |   | 15,379              |  
|Bad debt expense                                                                  |   | 38,487              |  
|Changes
      in operating assets and liabilities                                 |   |                     |  
|Accounts receivable                                                               |   | (29,877             | )
|Prepaid expenses                                                                  |   | 664                 |  
|VAT receivable/payable                                                            |   | 2,377               |  
|Other receivables                                                                 |   | -                   |  
|Other current assets                                                              |   | (2,202              | )
|Accounts payable                                                                  |   | 18,079              |  
|Accrued personnel costs                                                           |   | 17,646              |  
|Accrued expenses                                                                  |   | 7,035               |  
|                                                                                  |   |                     |  
|Net
      Cash Used in Operating Activities                                       |   | (320,488            | )
|                                                                                  |   |                     |  
|CASH FLOWS FROM INVESTING
      ACTIVITIES                                        |   |                     |  
|                                                                                  |   |                     |  
|Purchases of fixed assets                                                         |   | (10,078             | )
|                                                                                  |   |                     |  
|Net
      Cash Used in Investing Activities                                       |   | (10,078             | )
|                                                                                  |   |                     |  
|CASH FLOWS FROM FINANCING
      ACTIVITIES                                        |   |                     |  
|                                                                                  |   |                     |  
|Proceeds from bank overdraft                                                      |   | 5,938               |  
|Common stock issued for cash                                                      |   | 135,960             |  
|                                                                                  |   |                     |  
|Net Cash Provided
      by Financing Activities                                   |   | 141,898             |  
|                                                                                  |   |                     |  
|EFFECT OF EXCHANGE RATES                                                          |   | 7,534               |  
|                                                                                  |   |                     |  
|NET INCREASE (DECREASE) IN CASH                                                   |   | (181,134            | )
|                                                                                  |   |                     |  
|CASH AT BEGINNING OF YEAR                                                         |   | 181,134             |  
|                                                                                  |   |                     |  
|CASH AT END OF YEAR                                                               | $ | -                   |  
|                                                                                  |   |                     |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                 |   |                     |  
|                                                                                  |   |                     |  
|CASH PAID FOR:                                                                    |   |                     |  
|                                                                                  |   |                     |  
|Interest                                                                          | $ | 729                 |  
|Income Taxes                                                                      | $ | -                   |  

The accompanying notes are an integral part of these financial
  statements.

5

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|nanoCrypt AG                     
|---------------------------------
|Notes to the Financial Statements
|December 31, 2009 and 2008       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES

Nature of Business

NanoCrypt AG (the Company)
  was incorporated in Germany on October 31, 2007, for purposes of engaging in
  the development of an integrated mobile ticketing and coupon platform. This
  platform is referred to as the nanoTicket system, allows end-users
  to purchase event tickets and merchandise via mobile devices, and allows event
  organizers a streamlined method of monitoring and tracking patrons.

Use of Estimates

The preparation of financial statements
  in conformity with accounting principles generally accepted in the United States
  of America requires management to make estimates and assumptions that affect
  the reported amounts of assets and liabilities and disclosure of contingent
  assets and liabilities at the date of 999the financial statements and the reported
  amounts of revenues and expenses during the respective reporting period. Actual
  results could differ from those estimates. Significant estimates made by management
  are, among others, the realization of receivables and long-lived assets, and
  valuation allowance on deferred tax assets.

Foreign Currency Translation

Assets and liabilities of the Company's
  operations are translated from its functional currency of the Euro into its
  reporting currency of the U.S. dollar at period-end exchange rates. Net exchange
  gains or losses resulting from such translation are excluded from net loss but
  are included in comprehensive income (loss) and accumulated in a separate component
  of stockholders' equity. Income and expenses are translated at the average exchange
  rate for the period. Equity transactions are translated at historical rates.

Cash and Cash Equivalents

The Company maintains its cash
  in uninsured bank accounts in Germany. Cash and cash equivalents include time
  deposits for which the Company has no requirements for compensating balances.
  The Company has not experienced any losses in its uninsured bank accounts. The
  Company had $-0- and $181,134 of cash and cash equivalents outstanding as of
  December 31, 2009 and 2008. The Company had a bank overdraft of $5,938 as of
  December 31, 2009.

Property and Equipment

Property and equipment are recorded
  at cost and are depreciated or amortized using the straight-line method over
  the expected useful lives, which range from three to five years. Leasehold improvements
  are amortized using the straight-line method over the lesser of the estimated
  useful lives of the assets or the related lease terms. Depreciation expense
  for the years ended December 31, 2009 and 2008 was $15,379 and $21,211, respectively.
  Expenditures for normal maintenance and routine repairs are charged to expense,
  and significant improvements are capitalized. The cost and related accumulated
  depreciation of assets are removed from the accounts upon retirement or other
  disposition; any resulting gain or loss is reflected in the statement of operations.

6

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|nanoCrypt AG                     
|---------------------------------
|Notes to the Financial Statements
|December 31, 2009 and 2008       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES (Continued)

Revenue Recognition

The Company recognizes two primary
  sources of revenue: I.T. consulting, and event ticketing. With respect to I.T.
  projects, the Company recognizes revenue when the services are completed, the
  customer is invoiced, and collection is reasonably assured. With respect to
  event ticketing projects, the Company collects cash from ticket sales in advance
  of the event and earns an advanced booking fee as a percentage of cash receipts.
  The Company does not record revenues until the event is completed and ticketing
  obligations are satisfied.

Income Taxes

The Company accounts for income
  taxes in accordance with ASC 740. Deferred tax assets and liabilities are recognized
  for future tax consequences attributable to differences between the financial
  statement carrying amounts of existing assets and liabilities and their respective
  tax bases. Deferred tax assets and liabilities are measured using enacted tax
  rates expected to apply to taxable income in the years in which those temporary
  differences are expected to be recovered or settled. A valuation allowance is
  provided for certain deferred tax assets when it is more likely than not that
  such tax assets will not be realized through future operations.

Basic and Diluted Earnings (Loss) Per Common Share

Basic earnings (loss) per common
  share is computed by dividing income (loss) available to common stockholders
  by the weighted average number of common shares outstanding during the period
  of computation. Diluted earnings (loss) per share gives effect to all potential
  dilutive common shares outstanding during the period of compensation. The computation
  of diluted earnings (loss) per share does not assume conversion, exercise or
  contingent exercise of securities that would have an antidilutive effect on
  earnings. As of December 31, 2009 and 2008, the Company had no potentially dilutive
  securities that would affect the loss per share if they were to be dilutive.

Comprehensive Income (Loss)

Total comprehensive income (loss)
  represents the net change in stockholders' equity during a period from sources
  other than transactions with stockholders and as such, includes net earnings
  (loss). For the Company, the components of other comprehensive income (loss)
  are the changes in the cumulative foreign currency translation adjustments and
  are recorded as components of stockholders' equity.

Accounts Receivable

The Company periodically reviews
  its trade receivables for potential collectability issues. The Company has implemented
  the policy to periodically create an allowance for bad debts for those trade
  receivables older than 120 days outstanding. For the years ended December 31,
  2009 and 2008, the Company recognized bad debt expense in the amounts of $38,487
  and $5,273, respectively. The Companys accounts receivable are net of
  an allowance for doubtful accounts of $10,742 and $10,571 as of December 31,
  2009 and 2008, respectively.

7

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|nanoCrypt AG                     
|---------------------------------
|Notes to the Financial Statements
|December 31, 2009 and 2008       

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
  POLICIES (Continued)

New Accounting Pronouncements

During the year ended December
  31, 2009, the Company adopted the following accounting pronouncements: In May
  2009, the FASB issued FAS 165, Subsequent Events. This pronouncement
  establishes standards for accounting for and disclosing subsequent events (events
  which occur after the balance sheet date but before financial statements are
  issued or are available to be issued). FAS 165 requires and entity to disclose
  the date subsequent events were evaluated and whether that evaluation took place
  on the date financial statements were issued or were available to be issued.
  It is effective for interim and annual periods ending after June 15, 2009. The
  adoption of FAS 165 did not have a material impact on the Companys financial
  condition or results of operation.

In June 2009, the FASB issued FAS
  166, Accounting for Transfers of Financial Assets an amendment of
  FAS 140. FAS 140 is intended to improve the relevance, representational faithfulness,
  and comparability of the information that a reporting entity provides in its
  financial statements about a transfer of financial assets: the effects of a
  transfer on its financial position, financial performance , and cash flows:
  and a transferors continuing involvement, if any, in transferred financial
  assets. This statement must be applied as of the beginning of each reporting
  entitys first annual reporting period that begins after November 15, 2009.
  The Company does not expect the adoption of FAS 166 to have an impact on the
  Companys results of operations, financial condition or cash flows.

In June 2009, the FASB issued FAS
  167, Amendments to FASB Interpretation No. 46(R) . FAS 167 is intended
  to (1) address the effects on certain provisions of FASB Interpretation No.
  46 (revised December 2003), Consolidation of Variable Interest Entities,
  as a result of the elimination of the qualifying special-purpose entity concept
  in FAS 166, and (2) constituent concerns about the application of certain key
  provisions of Interpretation 46(R), including those in which the accounting
  and disclosures under the Interpretation do not always provided timely and useful
  information about an enterprises involvement in a variable interest entity.
  This statement must be applied as of the beginning of each reporting entitys
  first annual reporting period that begins after November 15, 2009. The Company
  does not expect the adoption of FAS 167 to have an impact on the Companys
  results of operations, financial condition or cash flows.

In June 2009, the FASB issued FAS
  168, The FASB Accounting Standards Codification and the Hierarchy of Generally
  Accepted Accounting Principles. FAS 168 will become the source of authoritative
  U.S. generally accepted accounting principles (GAAP) recognized by the FASB
  to be applied by nongovernmental entities. Rules and interpretive releases of
  the Securities and Exchange Commission (SEC) under authority of federal securities
  laws are also sources of authoritative GAAP for SEC registrants. On the effective
  date of this Statement, the Codification will supersede all then-existing non-SEC
  accounting and reporting standards. All other non-grandfathered non-SEC accounting
  literature not included in the Codification will become non-authoritative. This
  statement is effective for financial statements issued for interim and annual
  periods ending after September 15, 2009.The Company does not expect the adoption
  of FAS 168 to have an impact on the Companys results of operations, financial
  condition or cash flows.

8

---

|nanoCrypt AG                     
|---------------------------------
|Notes to the Financial Statements
|December 31, 2009 and 2008       

NOTE 2 - GOING CONCERN

The Company incurred net losses
  applicable to common stockholders of $388,076 and $701,770 during the years
  ended December 31, 2009 and 2008, respectively, and accumulated deficits of
  $1,116,688 and $728,612 as of December 31, 2009 and 2008, respectively. These
  and other conditions raise substantial doubt about the Company's ability to
  continue as a going concern. The Company expects to continue to incur significant
  capital expenses in pursuing its business while obtaining additional financing
  through stock offerings or other feasible financing alternatives. In order for
  the Company to continue its operations at its existing levels, the Company will
  require significant additional funds over the next twelve months.

Therefore, managements plan
  contemplates that the Company will be dependent on funds raised through equity
  or debt offerings. Additional financing may not be available on terms favorable
  to the Company, or at all. If these funds are not available the Company may
  not be able to execute its business plan or take advantage of business opportunities.
  The ability of the Company to obtain such additional financing and to achieve
  its operating goals is uncertain. In the event that the Company does not obtain
  additional capital or is not able to increase cash flow through the increase
  of sales, there is a substantial doubt of its being able to continue as a going
  concern. The accompanying consolidated financial statements do not include any
  adjustments that might result from the outcome of this uncertainty.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December
  31, 2009 and 2008:

December
        31, .2009
        .
      
      
      2008
        .Computer equipment
      $
      46,336
      
      $
      35,936Software
      
      6,317
      
      
      6,217Furniture and fixtures
      
      2,778
      
      
      2,734Total property and equipment
      
      55,431
      
      
      44,887Less accumulated depreciation and amortization
      
      (24,079
      )
      
      (8,773
      )Total property and equipment,
        net
      $
      31,352
      
      $
      36,114


NOTE 4 - STOCKHOLDERS' EQUITY

Common Stock

The Company is authorized to issue
  1,000,000 shares of no par value common stock. The holders of the Company's
  common stock are entitled to one vote for each share held of record on all matters
  to be voted on by those stockholders.

During the year ended December
  31, 2009 the Company issued 4,000 shares of common stock to an unrelated third
  party in exchange for cash at $39.45 per share, yielding total cash proceeds
  of $135,960.

9

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nanoCrypt AGNotes to the Financial Statements 
  December 31, 2009 and 2008

NOTE 4 - STOCKHOLDERS' EQUITY (Continued)

Common Stock

During the year ended December
  31, 2008, the Company issued 2,061 shares of common stock for cash at $52.85
  per share, yielding total cash proceeds of $103,944. Additionally, the Company
  issued 71,500 shares of common stock for cash at $9.16 per share, yielding total
  cash proceeds of $723,762.

NOTE 5 - INCOME TAX PROVISION

The Company is subject to income
  taxes under the laws of Germany. The provision for income taxes differs from
  the amounts which would be provided by applying the statutory German federal
  income tax rate of 30% to the net loss before provision for income taxes for
  the following reasons:

December 31,
      
      
      December 31,2009
      
      
      2008Income tax expense at statutory
        rate
      $
      (116,423
      )
      $
      ( 210,531
      )Valuation allowance
      
      116,423
      
      
      210,531Income tax expense per books
      $
      -
      
      $
      -


Net deferred tax assets consist of the
  following components as of:

June 30,
      
      
      June 30,2010
      
      
      2009NOL Carryover
      $
      335,007
      
      $
      218,584Valuation allowance
      
      (335,007
      )
      
      (218,584
      )Net deferred tax asset
      $
      -
      
      $
      -


As of December 31, 2009, the Company
  had net operating loss carryforwards of approximately $1,104,000. No tax benefit
  has been reported in the December 31, 2009 and 2008 financial statements since
  the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership
  provisions of the Tax Laws of Germany, net operating loss carryforwards for
  German Federal income tax reporting purposes are subject to annual limitations.
  Should a change in ownership occur, net operating loss carryforwards may be
  limited as to use in future years.

10

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nanoCrypt AGNotes to the Financial Statements 
  December 31, 2009 and 2008

NOTE 6 - BASIC AND DILUTED LOSS PER COMMON SHARE

The following is a reconciliation
  of the numerators and denominators of the basic and diluted loss per common
  share computations for the years ended December 31, 2009 and 2008:

2009
      
      
      2008 .Numerator for basic and diluted
        loss 
        per common share
      
      $ (388,076
      )
      
      $ (701,770
      )Denominator for basic and diluted
        loss per common 
        share  weighted average shares
      
      177,651
      
      
      146,004Basic and diluted loss per
        common share
      $
      (2.18
      )
      $
      (4.81
      )


NOTE 7  FOREIGN CURRENCY TRANSLATION

During the years ended December
  31, 2009 and 2008, the Company has transacted the majority of its business activities
  in Germany, and the transactions have been primarily consummated in the Euro
  currency. Due to the fact that the Companys functional currency is the
  Euro and its reporting currency is the U.S. dollar, the Company must recognize
  the effects of variations in foreign currency exchange rates as other comprehensive
  income and losses, pursuant to ASC 830. To calculate this other comprehensive
  income and loss, the Company utilizes the current method, whereby
  assets and liabilities of the German entity are translated from Euro into U.S.
  dollars at the exchange rate at the balance sheet date. All equity items, other
  than retained earnings, are specifically identified where possible and exchange
  rates on transaction dates are implemented. Profit and loss accounts are translated
  using an average rate for the period. During the years ended December 31, 2009
  and 2008, the Company recognized other comprehensive income (loss) of $7,264
  and $(45,903), respectively, resulting in total accumulated other comprehensive
  income of $(38,639) as of December 31, 2009. Such other comprehensive income
  (loss) had no effect on liquidity.

NOTE 8 - SUBSEQUENT EVENTS

In accordance with ASC 855-10 Company
  management reviewed all material events through the date of this report and
  there are no additional subsequent events to report.

11

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SCHEDULE “B”

EMPLOYMENT, CONSULTING OR MANAGEMENT CONTRACTS

Contracts that cannot be terminated within 60 days:

Executive Board:
- Andreas Fendl
- Martin Pick
- Prof. Dr. Michael Stephan

All other employment or consulting contracts can be terminated within 60 days.

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SCHEDULE “C”

PATENTS

Patent Number: DE 20 2006 016 358 U1 2008.03.27

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