| (Mark One)                                                                                                                                      |
|-------------------------------------------------------------------------------------------------------------------------------------------------|
| [X]                                                                                                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended:  June 30, 2011                                                                                        |
| Or                                                                                                                                              |
| [  ]                                                                                                                                       | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|                                                                                                                                            |
| Commission File No. 333-140378                                                                                                             |
| WEBSAFETY, INC.(Exact name of small business issuer as specified in its charter)                                                                |
|                                                                                                                                            |
| Nevada(State or other jurisdiction of incorporation or organization)                                                                            | 20-5150818(I.R.S. Employer Identification No.) |
|                                                                                                                                            |   |
| 2201 W. Royal Lane, Suite 200, Irving, Texas 75063(Address of Principal Executive Offices) (214) 716-6909(Issuer’s telephone number) |
|                                                                                                                                            |
|                                                                                                                                            |
|                                                                                                                                            |

| [   ] Large accelerated filer | [   ]  Accelerated filer |
|----------------------------------------------|---------------------------------------------------|
| [   ] Non-accelerated filer   | [X]  Small reporting company            |

| Class                          | Outstanding shares as of August 19, 2011 |
|--------------------------------|------------------------------------------|
| Common Stock, $0.001 par value | 82,491,262                               |

----

| INDEX                                                                                                                                      | Page   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                       |   |
| PART 1-FINANCIAL INFORMATION                                                                                                               |   |
|                                                                                                                                       |   |
| Item 1.  Financial Statements                                                                                                    | 3      |
|                                                                                                                                       |   |
| Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010                                                                       | F-1    |
|                                                                                                                                       |   |
| Statements of Operations (unaudited) for the three and six months ended June 30, 2011 and June 30, 2010.                                   | F-2    |
|                                                                                                                                       |   |
| Statements of Cash Flows (unaudited) for the six months ended June 30, 2011 and June 30, 2010.                                             | F-3    |
|                                                                                                                                       |   |
| Statements of Stockholder’s Equity (Deficit) for the year ended December 31, 2010 and the six months ended June 30, 2011 (unaudited) | F-4-5  |
|                                                                                                                                       |   |
| Notes to Financial Statements                                                                                                              | F-6    |
|                                                                                                                                       |   |
| Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations                             | 4      |
|                                                                                                                                       |   |
| Item 3.  Quantitative and Qualitative Disclosures about Market Risk                                                              | 6      |
|                                                                                                                                       |   |
| Item 4.  Control and Procedures                                                                                                  | 6      |
|                                                                                                                                       |   |
| PART II-OTHER INFORMATION                                                                                                                  |   |
|                                                                                                                                       |   |
| Item 1.  Legal Proceedings                                                                                                       | 7      |
|                                                                                                                                       |   |
| Item 1A.  Risk Factors                                                                                                           | 7      |
|                                                                                                                                       |   |
| Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                                                             | 10     |
|                                                                                                                                       |   |
| Item 6.  Exhibits                                                                                                                | 10     |
|                                                                                                                                       |   |
| SIGNATURES                                                                                                                                 | 11     |

----

PART

Item

|                                        | PAGE   |
|---------------------------------------------|--------|
|                                        |   |
| BALANCE SHEETS                              | F-1    |
|                                        |   |
| STATEMENTS OF OPERATIONS                    | F-2    |
|                                        |   |
| STATEMENTS OF CASH FLOWS                    | F-3    |
|                                        |   |
| STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT) | F-4    |
|                                        |   |
| FOOTNOTES TO FINANCIAL STATEMENTS           | F-6    |

----

|                                                                     |                               |        | As of         |       |
|--------------------------------------------------------------------------|------------------------------------|-------------|---------------|------------|
|                                                                     |                               |        | June 30, 2011 |       |   | December 31, 2010 |   |
|  ASSETS                                                             |                               | (Unaudited) |          |       |   |   |
|                                                                     |                               |        |          |       |   |   |   |
|  Current assets:                                                    |                               |        |          |       |   |   |   |
|  Cash                                                               |                               |        | $             | -          |   |   | $ | 26,168 |   |
|  Accounts receivable                                                |                               |        |          | 150        |   |   |   | 150 |   |
|                                                                     |  Total current assets         |        |          | 150        |   |   |   | 26,318 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  Property and Equipment:                                            |                               |        |          |       |   |   |   |   |
|  Computer equipment, computer software and furniture, net           |                               |        | 10,940        |       |   |   | 12,429 |   |
|  Software license and website development, net                      |                               |        | 73,254        |       |   |   | 101,139 |   |
|                                                                     |  Total property and equipment |        |          | 84,194     |   |   |   | 113,568 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  Other Assets:                                                      |                               |        |          |       |   |   |   |   |   |
|  Deposits                                                           |                               |        |          | 19,756     |   |   |   | 19,756 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|                                                                     |                               |        | $             | 104,100    |   |   | $ | 159,642 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  LIABILITIES AND STOCKHOLDERS' EQUITY  (DEFICIT)          |                               |        |          |       |   |   |   |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  Current liabilities:                                               |                               |        |          |       |   |   |   |   |   |
|  Cash overdraft                                                     |                               |        | $             | 37,441     |   |   | $ | - |   |
|  Accounts payable                                                   |                               |        |          | 308,526    |   |   |   | 297,730 |   |
|  Accrued expense                                                    |                               |        |          | 9,907      |   |   |   | 24,010 |   |
|  Deferred revenue                                                   |                               |        |          | -          |   |   |   | 3,587 |   |
|  Due to shareholders                                                |                               |        |          | 631,773    |   |   |   | 508,249 |   |
|  Loan payable                                                       |                               |        |          | 61,054     |   |   |   | 110,833 |   |
|  Liability to issue shares                                          |                               |        | -             |       |   |   | 53,000 |   |
|  Total current liabilities                                          |                               |        | 1,048,701     |       |   |   | 997,409 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  Stockholders' equity (deficit):                                    |                               |        |          |       |   |   |   |   |
|  Preferred stock; $.001 par value, 25,000,000 shares                |                               |        |          |       |   |   |   |   |
|  authorized, 2,863,335 shares issued and                            |                               |        |          |       |   |   |   |   |
|  outstanding respectively                                           |                               |        | 2,863         |       |   |   | 2,863 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  Subscriptions received in advance                                  |                               |        | 10,000        |       |   |   | - |   |
|  Common stock; $.001 par value, 300,000,000 shares                  |                               |        |          |       |   |   |   |   |
|  authorized, 79,018,359 and 70,313,828  shares issued and |                               |        |          |       |   |   |   |   |
|  outstanding, respectively                                          |                               |        | 79,019        |       |   |   | 70,314 |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|  Additional paid in capital                                         |                               |        | 8,387,160     |       |   |   | 7,104,986 |   |
|  Deficit accumulated                                                |                               |        |          | (9,423,643 | ) |   |   | (8,015,930 | ) |
|  Total stockholders' equity (deficit)                               |                               |        | (944,601      | )          |   |   | (837,767 | ) |
|                                                                     |                               |        |          |       |   |   |   |   |   |
|                                                                     |                               |        | $             | 104,100    |   |   | $ | 159,642 |   |

----

|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |
|---------------------------------------------------------|--------|-----------------------------|------------|--------|---------------------------|--------|------------|--------|--------|--------|------------|--------|
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |
|                                                    |   | (Unaudited)                 |       |   | (Unaudited)               |   |
|                                                    |   | Three Months Ended June 30, |       |   | Six Months Ended June 30, |   |
|                                                    |   | 2011                        |       |   | 2010                      |   |       | 2011   |   |   | 2010       |   |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |
|  Revenue                                           |   | $                           | 20,895     |   |                      | $      | 76,712     |   |   | $      | 57,415     |   |   | $ | 122,490 |   |
|  Cost of goods sold                                |   |                        | (20,287    | )      |                      |   | (26,785    | )      |   |   | (46,302    | )      |   |   | (58,142 | ) |
|  Gross margin                                      |   |                        | 608        |   |                      |   | 49,927     |   |   |   | 11,113     |   |   |   | 64,348 |   |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  Operating expenses:                               |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|    General and administrative expenses   |   |                        | 410,413    |   |                      |   | 657,678    |   |   |   | 1,213,084  |   |   |   | 1,270,185 |   |
|    Research & Development            |   |                        | -          |   |                      |   | -          |   |   |   | -          |   |   |   | 2,500 |   |
|    Depreciation and amortization expense |   |                        | 14,687     |   |                      |   | 248,388    |   |   |   | 29,374     |   |   |   | 497,406 |   |
|  Total operating expenses                          |   |                        | 425,100    |   |                      |   | 906,066    |   |   |   | 1,242,458  |   |   |   | 1,770,091 |   |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  (Loss) from operations                            |   |                        | (424,492   | )      |                      |   | (856,139   | )      |   |   | (1,231,345 | )      |   |   | (1,705,743 | ) |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  Other income (expense):                           |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  Interest expense                                  |   |                        | (76,431    | )      |                      |   | -          |   |   |   | (176,368   | )      |   |   | - |   |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  (Loss) before provision for income taxes          |   |                        | (500,923   | )      |                      |   | (856,139   | )      |   |   | (1,407,713 | )      |   |   | (1,705,743 | ) |
|  Provision for income taxes                        |   |                        | -          |   |                      |   |       |   |   |   | -          |   |   |   |   |   |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  Net (loss)                                        |   | $                           | (500,923   | )      |                      | $      | (856,139   | )      |   | $      | (1,407,713 | )      |   | $ | (1,705,743 | ) |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  Basic and diluted loss per share                  |   | $                           | (0.007     | )      |                      | $      | (0.013     | )      |   | $      | (0.019     | )      |   | $ | (0.028 | ) |
|                                                    |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  Basic and diluted weighted average                |   |                        |       |   |                      |   |       |   |   |   |       |   |   |   |   |   |
|  common shares outstanding                         |   |                        | 75,084,352 |   |                      |   | 64,635,157 |   |   |   | 73,055,528 |   |   |   | 61,144,778 |   |

----

|                                                                       |   | (Unaudited)               |       |
|----------------------------------------------------------------------------|--------|---------------------------|------------|
|                                                                       |   | Six Months Ended June 30, |       |
|                                                                       |   | 2011                      |       |   | 2010 |   |
|   Operating activities:                                          |   |                      |       |   |   |   |
|    Net loss                                                 |   | $                         | (1,407,713 | ) |   | $ | (1,705,743 | ) |
|    Adjustments to reconcile net loss to                     |   |                      |       |   |   |   |   |   |
|       net cash used in operating activities: |   |                      |       |   |   |   |   |   |
|  Depreciation and amortization expense                                |   |                      | 29,374     |   |   |   | 497,406 |   |
|  Amortization of beneficial conversion                                |   |                      | 175,221    |   |   |   | - |   |
|  Stock compensation expense                                           |   |                      | 396,628    |   |   |   | 257,821 |   |
|  Stock issued for services - Non-cash                                 |   |                      | 146,251    |   |   |   | 311,905 |   |
|   Changes in operating assets and liabilities:                   |   |                      |       |   |   |   |   |   |
|  Decrease in accounts receivable                                      |   |                      | -          |   |   |   | 17,171 |   |
|  Increase  in accounts payable                              |   |                      | 10,796     |   |   |   | 206,530 |   |
|  Decrease  in deferred revenue                              |   |                      | (3,587     | ) |   |   | (40,442 | ) |
|  Increase (decrease) in accrued expense                               |   |                      | (14,103    | ) |   |   | 551 |   |
|  Net cash (used in) operating activities                              |   |                      | (667,133   | ) |   |   | (454,801 | ) |
|                                                                       |   |                      |       |   |   |   |   |   |
|   Investing activities:                                          |   |                      |       |   |   |   |   |   |
|  Purchase of long term assets                                         |   |                      | -          |   |   |   | (15,215 | ) |
|                                                                       |   |                      |       |   |   |   |   |   |
|  Financing activities:                                                |   |                      |       |   |   |   |   |   |
|  Increase in cash overdraft                                           |   |                      | 37,441     |   |   |   | - |   |
|  Decrease in Liability to Issue Shares                                |   |                      | (53,000    | ) |   |   | - |   |
|  Proceeds from borrowing                                              |   |                      | 133,000    |   |   |   | - |   |
|  Proceeds of advances from shareholders                               |   |                      | 123,524    |   |   |   | - |   |
|  Proceeds from sale of common stock                                   |   |                      | 420,000    |   |   |   | 520,091 |   |
|  Subscriptions received in advance                                    |   |                      | 10,000     |   |   |   |   |   |
|  Payment of borrowings                                                |   |                      | (30,000    | ) |   |   | - |   |
|  Net cash provided by financing activities                            |   |                      | 640,965    |   |   |   | 520,091 |   |
|                                                                       |   |                      |       |   |   |   |   |   |
|  Net changes in cash                                                  |   |                      | (26,168    | ) |   |   | 50,075 |   |
|                                                                       |   |                      |       |   |   |   |   |   |
|  Cash, beginning of year                                              |   |                      | 26,168     |   |   |   | 5,748 |   |
|                                                                       |   |                      |       |   |   |   |   |   |
|  Cash, end of period                                                  |   | $                         | -          |   |   | $ | 55,823 |   |
|                                                                       |   |                      |       |   |   |   |   |   |
|  Cash paid during the period for:                                     |   |                      |       |   |   |   |   |   |
|  Interest paid                                                        |   |                      | -          |   |   |   | - |   |
|  Tax paid                                                             |   |                      | -          |   |   |   | - |   |
|                                                                       |   |                      |       |   |   |   |   |   |
|  Non Cash Investing and Financing Activities:                         |   |                      |       |   |   |   |   |   |
|  Issuance of common stock for services                                |   | $                         | 146,251    |   |   | $ | 311,905 |   |
|  Conversion of notes to common stock                                  |   | $                         | 195,000    |   |   | $ | - |   |

----

STATEMENTS

|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   | Additional    |   |   |      |   |   | Total            |   |
|--------------------------------------------------------------------|--------|-----------------|------------|--------|--------------|--------|--------|--------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|--------|--------|-----------|--------|--------|------------------|--------|
|                                                               |   | Preferred Stock |       |   | Common Stock |   |   | Subscription |   |   | Paid-in    |   |   | Accumulated |   |   | Stockholders' |   |
|                                                               |   | Shares          |       |   | Amount       |   |   | Shares       |   |   | Amount     |   |   | Receivable  |   |   | Capital       |   |   | (Deficit) |   |   | Equity (Deficit) |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |
|  Balances December 31, 2009                                   |   |            | 4,230,002  |   |         | $      | 4,230  |         |   |   | 54,895,714 |   |   | $           | 54,896 |   |          | $      | -      |      |   | $      | 4,817,805        |   |   | $ | (2,572,257 | ) |   | $ | 2,304,674 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock for cash                            |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  January 6, 2010 one issuance at $0.45                        |   |            |       |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 44,900           |   |   |   |   |   |   |   | 45,000 |   |
|  January 27, 2010 one issuance at $0.043                      |   |            |       |   |         |   |   |         |   |   | 1,600,000  |   |   | $           | 1,600  |   |          |   |   |      |   |   | 68,400           |   |   |   |   |   |   |   | 70,000 |   |
|  March 9, 2010 one issuance at $0.05                          |   |            |       |   |         |   |   |         |   |   | 400,000    |   |   | $           | 400    |   |          |   |   |      |   |   | 19,600           |   |   |   |   |   |   |   | 20,000 |   |
|  March 9, 2010 one issuance at $0.045                         |   |            |       |   |         |   |   |         |   |   | 33,333     |   |   | $           | 33     |   |          |   |   |      |   |   | 14,967           |   |   |   |   |   |   |   | 15,000 |   |
|  March 9, 2010 one issuance at $0.045                         |   |            |       |   |         |   |   |         |   |   | 23,000     |   |   | $           | 23     |   |          |   |   |      |   |   | 10,327           |   |   |   |   |   |   |   | 10,350 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  Issuance of common stock for services                        |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  January 6, 2010 one issuance at $0.04                        |   |            |       |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 3,900            |   |   |   |   |   |   |   | 4,000 |   |
|  January 6, 2010 one issuance at $0.04                        |   |            |       |   |         |   |   |         |   |   | 200,000    |   |   | $           | 200    |   |          |   |   |      |   |   | 7,800            |   |   |   |   |   |   |   | 8,000 |   |
|  January 6, 2010 one issuance at $0.04                        |   |            |       |   |         |   |   |         |   |   | 28,000     |   |   | $           | 28     |   |          |   |   |      |   |   | 1,092            |   |   |   |   |   |   |   | 1,120 |   |
|  March 17, 2010 one issuance at $0.025                        |   |            |       |   |         |   |   |         |   |   | 7,000,000  |   |   | $           | 7,000  |   |          |   |   |      |   |   | 168,000          |   |   |   |   |   |   |   | 175,000 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  Stock Compensation Expense                                   |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 128,911          |   |   |   |   |   |   |   | 128,911 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Net loss for the period ended March 31, 2010                 |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   | (849,604 | ) |   |   | (849,604 | ) |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Balances  March 31, 2010                           |   |            | 4,230,002  |   |         | $      | 4,230  |         |   |   | 64,380,047 |   |   | $           | 64,380 |   |          | $      | -      |      |   | $      | 5,285,702        |   |   | $ | (3,421,861 | ) |   | $ | 1,932,451 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock for cash                            |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  April 5, 2010 one issuance at $0.45                          |   |            |       |   |         |   |   |         |   |   | 26,500     |   |   | $           | 27     |   |          |   |   |      |   |   | 11,898           |   |   |   |   |   |   |   | 11,925 |   |
|  April 5, 2010 one issuance at $0.45                          |   |            |       |   |         |   |   |         |   |   | 155,400    |   |   | $           | 155    |   |          |   |   |      |   |   | 69,775           |   |   |   |   |   |   |   | 69,930 |   |
|  April 5, 2010 one issuance at $0.45                          |   |            |       |   |         |   |   |         |   |   | 22,222     |   |   | $           | 22     |   |          |   |   |      |   |   | 9,978            |   |   |   |   |   |   |   | 10,000 |   |
|  June 2, 2010 one issuance at $0.45                           |   |            |       |   |         |   |   |         |   |   | 50,000     |   |   | $           | 50     |   |          |   |   |      |   |   | 22,450           |   |   |   |   |   |   |   | 22,500 |   |
|  June 18, 2010 one issuance at $0.45                          |   |            |       |   |         |   |   |         |   |   | 534,192    |   |   | $           | 534    |   |          |   |   |      |   |   | 239,852          |   |   |   |   |   |   |   | 240,386 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  Issuance of common stock for services                        |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  June 2, 2010 one issuance at $0.45                           |   |            |       |   |         |   |   |         |   |   | 15,000     |   |   | $           | 15     |   |          |   |   |      |   |   | 6,735            |   |   |   |   |   |   |   | 6,750 |   |
|  June 2, 2010 one issuance at $0.45                           |   |            |       |   |         |   |   |         |   |   | 4,522      |   |   | $           | 5      |   |          |   |   |      |   |   | 2,030            |   |   |   |   |   |   |   | 2,035 |   |
|  June 2, 2010 one issuance at $0.45                           |   |            |       |   |         |   |   |         |   |   | 55,555     |   |   | $           | 56     |   |          |   |   |      |   |   | 24,944           |   |   |   |   |   |   |   | 25,000 |   |
|  June 18, 2010 one issuance at $0.45                          |   |            |       |   |         |   |   |         |   |   | 200,000    |   |   | $           | 200    |   |          |   |   |      |   |   | 89,800           |   |   |   |   |   |   |   | 90,000 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  Conversion of preferred shares to common shares at 1.25 to 1 |   |            | (1,000,000 | )      |         |   | (1,000 | )            |   |   | 1,250,000  |   |   | $           | 1,250  |   |          |   |   |      |   |   | (250             | )      |   |   |   |   |   |   | - |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock to adjust issue price               |   |            |       |   |         |   |   |         |   |   | 11,111     |   |   | $           | 11     |   |          |   |   |      |   |   | 4,989            |   |   |   |   |   |   |   | 5,000 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Stock Compensation Expense                                   |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 128,910          |   |   |   |   |   |   |   | 128,910 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Net loss for the period ended June 30, 2010                  |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   | (856,139 | ) |   |   | (856,139 | ) |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Balances  June 30, 2010                            |   |            | 3,230,002  |   |         | $      | 3,230  |         |   |   | 66,704,549 |   |   | $           | 66,705 |   |          | $      | -      |      |   | $      | 5,896,813        |   |   | $ | (4,278,000 | ) |   | $ | 1,688,748 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock for cash                            |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  August 6, 2010 one issuance at $0.45                         |   |            |       |   |         |   |   |         |   |   | 47,223     |   |   | $           | 47     |   |          |   |   |      |   |   | 21,203           |   |   |   |   |   |   |   | 21,250 |   |
|  September 7, 2010 one issuance at $0.25                      |   |            |       |   |         |   |   |         |   |   | 124,446    |   |   | $           | 124    |   |          |   |   |      |   |   | 30,987           |   |   |   |   |   |   |   | 31,112 |   |
|  September 15, 2010 one issuance at $0.25                     |   |            |       |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 24,900           |   |   |   |   |   |   |   | 25,000 |   |
|  September 22, 2010 one issuance at $0.45                     |   |            |       |   |         |   |   |         |   |   | 55,740     |   |   | $           | 56     |   |          |   |   |      |   |   | 25,027           |   |   |   |   |   |   |   | 25,083 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  Issuance of common stock for services                        |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  August 6, 2010 one issuance at $0.45                         |   |            |       |   |         |   |   |         |   |   | 25,000     |   |   | $           | 25     |   |          |   |   |      |   |   | 975              |   |   |   |   |   |   |   | 1,000 |   |
|  August 6, 2010 one issuance at $0.45                         |   |            |       |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 44,900           |   |   |   |   |   |   |   | 45,000 |   |
|  September 15, 2010 one issuance at $0.25                     |   |            |       |   |         |   |   |         |   |   | 135,000    |   |   | $           | 135    |   |          |   |   |      |   |   | 33,615           |   |   |   |   |   |   |   | 33,750 |   |
|  September 15, 2010 one issuance at $0.40                     |   |            |       |   |         |   |   |         |   |   | 125,000    |   |   | $           | 125    |   |          |   |   |      |   |   | 49,875           |   |   |   |   |   |   |   | 50,000 |   |
|  September 15, 2010 one issuance at $0.45                     |   |            |       |   |         |   |   |         |   |   | 42,500     |   |   | $           | 43     |   |          |   |   |      |   |   | 19,083           |   |   |   |   |   |   |   | 19,125 |   |
|  September 22, 2010 one issuance at $0.45                     |   |            |       |   |         |   |   |         |   |   | 10,068     |   |   | $           | 10     |   |          |   |   |      |   |   | 4,521            |   |   |   |   |   |   |   | 4,531 |   |
|  September 22, 2010 one issuance at $0.25                     |   |            |       |   |         |   |   |         |   |   | 550,000    |   |   | $           | 550    |   |          |   |   |      |   |   | 136,950          |   |   |   |   |   |   |   | 137,500 |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  Conversion of preferred shares to common shares at 1.25 to 1 |   |            | (366,667   | )      |         |   | (367   | )            |   |   | 458,334    |   |   | $           | 458    |   |          |   |   |      |   |   | (92              | )      |   |   |   |   |   |   | - |   |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Stock Compensation Expense                                   |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 128,910          |   |   |   |   |   |   |   | 128,910 |   |
|  Beneficial Conversion Feature of Promissory Note             |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 100,000          |   |   |   |   |   |   |   | 100,000 |   |
|  Net loss for the period ended September 30, 2010             |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   | (1,159,287 | ) |   |   | (1,159,287 | ) |
|                                                               |   |            |       |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |

----

STATEMENTS

|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   | Additional    |   |   |      |   |   | Total            |   |
|-------------------------------------------------------------------|--------|-----------------|-----------|--------|--------------|--------|--------|--------------|--------|--------|------------|--------|--------|-------------|--------|--------|---------------|--------|--------|-----------|--------|--------|------------------|--------|
|                                                              |   | Preferred Stock |      |   | Common Stock |   |   | Subscription |   |   | Paid-in    |   |   | Accumulated |   |   | Stockholders' |   |
|                                                              |   | Shares          |      |   | Amount       |   |   | Shares       |   |   | Amount     |   |   | Receivable  |   |   | Capital       |   |   | (Deficit) |   |   | Equity (Deficit) |   |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |
| Balances  September 30, 2010                            |   |            | 2,863,335 |   |         | $      | 2,863  |         |   |   | 68,477,860 |   |   | $           | 68,478 |   |          | $      | -      |      |   | $      | 6,517,667        |   |   | $ | (5,437,287 | ) |   | $ | 1,151,722 |   |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock for cash                           |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  October 27, 2010 one issuance at $0.20                      |   |            |      |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 19,900           |   |   |   |   |   |   |   | 20,000 |   |
|  October 29, 2010 one issuance at $0.25                      |   |            |      |   |         |   |   |         |   |   | 50,000     |   |   | $           | 50     |   |          |   |   |      |   |   | 12,450           |   |   |   |   |   |   |   | 12,500 |   |
|  November 16, 2010 two issuances at $0.25                    |   |            |      |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 24,900           |   |   |   |   |   |   |   | 25,000 |   |
|  December 28, 2010 Debt Conversion at $0.18                  |   |            |      |   |         |   |   |         |   |   | 421,414    |   |   | $           | 421    |   |          |   |   |      |   |   | 75,433           |   |   |   |   |   |   |   | 75,855 |   |
|  December 28, 2010 Debt Conversion at $0.10                  |   |            |      |   |         |   |   |         |   |   | 545,000    |   |   | $           | 545    |   |          |   |   |      |   |   | 53,955           |   |   |   |   |   |   |   | 54,500 |   |
|  Issuance of common stock for services                       |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   | - |   |
|  October 27, 2010 three issuances at $0.25                   |   |            |      |   |         |   |   |         |   |   | 340,000    |   |   | $           | 340    |   |          |   |   |      |   |   | 84,660           |   |   |   |   |   |   |   | 85,000 |   |
|  October 1, 2010 three issuances at $0.25                    |   |            |      |   |         |   |   |         |   |   | 100,000    |   |   | $           | 100    |   |          |   |   |      |   |   | 24,900           |   |   |   |   |   |   |   | 25,000 |   |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock to adjust issue price              |   |            |      |   |         |   |   |         |   |   | 179,554    |   |   | $           | 180    |   |          |   |   |      |   |   | 44,709           |   |   |   |   |   |   |   | 44,889 |   |
|  Stock Compensation Expense                                  |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 128,910          |   |   |   |   |   |   |   | 128,910 |   |
|  Beneficial Conversion Feature of Promissory Note            |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 117,500          |   |   |   |   |   |   |   | 117,500 |   |
|  Net loss for the period ended December 31, 2010             |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   | (2,578,643 | ) |   |   | (2,578,643 | ) |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Balances December 31, 2010                                  |   |            | 2,863,335 |   |         | $      | 2,863  |         |   |   | 70,313,828 |   |   | $           | 70,314 |   |          | $      | -      |      |   | $      | 7,104,986        |   |   | $ | (8,015,930 | ) |   | $ | (837,767 | ) |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Issuance of common stock for cash                           |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  March 4, 2011 six issuances at $0.10                        |   |            |      |   |         |   |   |         |   |   | 1,025,000  |   |   | $           | 1,025  |   |          |   |   |      |   |   | 101,475          |   |   |   |   |   |   |   | 102,500 |   |
|  April 27, 2011 two issuances at $0.10                       |   |            |      |   |         |   |   |         |   |   | 475,000    |   |   | $           | 475    |   |          |   |   |      |   |   | 47,025           |   |   |   |   |   |   |   | 47,500 |   |
|  May 24, 2011 seven issuances at $0.10                       |   |            |      |   |         |   |   |         |   |   | 2,700,000  |   |   | $           | 2,700  |   |          |   |   |      |   |   | 267,300          |   |   |   |   |   |   |   | 270,000 |   |
|  Issuance of common stock for services                       |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  January 13, 2011 one issuance at $0.25                      |   |            |      |   |         |   |   |         |   |   | 40,000     |   |   | $           | 40     |   |          |   |   |      |   |   | 9,960            |   |   |   |   |   |   |   | 10,000 |   |
|  January 31, 2011 one issuance at $0.25                      |   |            |      |   |         |   |   |         |   |   | 200,000    |   |   | $           | 200    |   |          |   |   |      |   |   | 49,800           |   |   |   |   |   |   |   | 50,000 |   |
|  February 11, 2011 one issuance at $0.25                     |   |            |      |   |         |   |   |         |   |   | 200,000    |   |   | $           | 200    |   |          |   |   |      |   |   | 49,800           |   |   |   |   |   |   |   | 50,000 |   |
|  March 1, 2011 one issuance at $0.25                         |   |            |      |   |         |   |   |         |   |   | 40,000     |   |   | $           | 40     |   |          |   |   |      |   |   | 9,960            |   |   |   |   |   |   |   | 10,000 |   |
|  April 27, 2011 one issuance at $0.13                        |   |            |      |   |         |   |   |         |   |   | 15,000     |   |   | $           | 15     |   |          |   |   |      |   |   | 1,985            |   |   |   |   |   |   |   | 2,000 |   |
|  May 24, 2011 four issuances at $0.10                        |   |            |      |   |         |   |   |         |   |   | 242,500    |   |   | $           | 243    |   |          |   |   |      |   |   | 24,008           |   |   |   |   |   |   |   | 24,251 |   |
|  Conversion of notes to common stock                         |   |            |      |   |         |   |   |         |   |   | 3,442,031  |   |   | $           | 3,442  |   |          |   |   |      |   |   | 191,558          |   |   |   |   |   |   |   | 195,000 |   |
|  Issuance of common stock to adjust issue price (see note 6) |   |            |      |   |         |   |   |         |   |   | 325,000    |   |   | $           | 325    |   |          |   |   |      |   |   | (325             | )      |   |   |   |   |   |   | - |   |
|  Stock Compensation Expense                                  |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 396,628          |   |   |   |   |   |   |   | 396,628 |   |
|  Beneficial Conversion Feature of Promissory Note            |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   | 133,000          |   |   |   |   |   |   |   | 133,000 |   |
|  Subscriptions Received in Advance                           |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          | $      | 10,000 |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Net loss for the six months ended June 30, 2011             |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   | (1,407,713 | ) |   |   | (1,407,713 | ) |
|                                                              |   |            |      |   |         |   |   |         |   |   |       |   |   |        |   |   |          |   |   |      |   |   |             |   |   |   |   |   |   |   |   |   |
|  Balances June 30, 2011 (Unaudited)                          |   |            | -         |   |         | $      | 2,863  |         |   | $      | 79,018,359 |   |   | $           | 79,019 |   |          | $      | 10,000 |      |   | $      | 8,387,160        |   |   | $ | (9,423,643 | ) |   | $ | (954,601 | ) |

----

NOTES

----

|                                                         |   | 2011   |     |   | 2010   |   |
|--------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
|                                                         |   |   |     |   |   |   |
| Property and Equipment                                       |   |   |     |   |   |   |
| Equipment                                                    |   | $      | 16,689   |   |   | $      | 16,689 |   |
| Software                                                     |   |   | 167,910  |   |   |   | 167,910 |   |
| Total property and equipment before accumulated depreciation |   |   | 184,599  |   |   |   | 184,599 |   |
|                                                         |   |   |     |   |   |   |   |   |
| Less accumulated depreciation                                |   |   | (100,405 | )      |   |   | (71,031 | ) |
| Total property and equipment                                 |   | $      | 84,194   |   |   | $      | 113,568 |   |

----

|   | · | $100,000 loan received September 22, 2010 due March 22, 2011 including interest at 5%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to $0.10 per share. As of June 30, 2011, this note was converted to shares of common stock. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $80,000 loan received October 8, 2010 due July 11, 2011 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price. As of June 30, 2011, this note was converted to shares of common stock. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $37,500 loan received November 29, 2010 due September 1, 2011 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price. As of June 30, 2011, $15,000 of this note was converted to shares of common stock. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $42,500 loan received February 9, 2011 due November 11, 2011 including interest at 8%. The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price. As of June 30, 2011, no portion of this note had been converted to common stock. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $53,000 loan received April 21, 2011 due January 25, 2012 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price. As of June 30, 2011, no portion of this note had been converted to common stock. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $37,500 loan received May 23, 2011 due February 27, 2012 including interest at 8%.  The convertible promissory note provides the holder the right to convert at any time, all or any unpaid principal and interest into shares of the Company’s common stock at a price equal to 61% of the market price. As of June 30, 2011, no portion of this note had been converted to common stock. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Date                   |   | Number of Shares |      |   | Value  |   |
|------------------------|--------|------------------|-----------|--------|--------|--------|
| January 2011           |   |             | 240,000   |   |   | $      | 60,000 |   |
| February 2011          |   |             | 200,000   |   |   |   | 50,000 |   |
| March 2011             |   |             | 1,390,000 |   |   |   | 112,500 |   |
| April 2011             |   |             | 490,000   |   |   |   | 49,500 |   |
| May 2011               |   |             | 6,384,531 |   |   |   | 489,250 |   |
| June 2011              |   |             | -         |   |   |   | - |   |
| Total Common Issuances |   |             | 8,704,531 |   |   | $      | 761,250 |   |

| Date of Grant |   | Warrants Granted |      |   | ExercisePrice |   |      | Warrants Outstandingas of 6/30/2011 |   | ExpirationDate |
|---------------|--------|------------------|-----------|--------|---------------|--------|-----------|-------------------------------------|--------|----------------|
| December 2010 |   |             | 2,222,789 |   |          | $      | 0.20-0.80 |                                |   |           | 1,465,223 |   | May 2011-December 2011 |
| January 2011  |   |             | 4,050,000 |   |          | $      | 0.15-0.21 |                                |   |           | 4,050,000 |   | January 2012 |
| February 2011 |   |             | 1,350,000 |   |          | $      | 0.20      |                                |   |           | 1,350,000 |   | February 2012 |
| April 2011    |   |             | -         |   |          |   | -         |                                |   |           | - |   |   |
| May 2011      |   |             | -         |   |          |   | -         |                                |   |           | - |   |   |
| June 2011     |   |             | -         |   |          |   | -         |                                |   |           | - |   |   |
| Total         |   |             | 7,622,789 |   |          |   |      |                                |   |           | 6,865,223 |   |   |

| Owed To           |   | Consulting, legal and administrative |    |   | Loan   |   |
|-------------------|--------|--------------------------------------|---------|--------|--------|--------|
| Rowland W. Day II |   | $                                    | 416,258 |   |   | $      | 215,515 |   |

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|                           |   | Six Months Ended |         |
|-------------------------------------|--------|-----------------------|--------------|
|                           |   | June 30, 2011         |         |
|                                |   |                  |         |
| Exercise Price                      |   | $                     | 0.35 - $0.10 |   |
| Expected dividend yield             |   |                  | 0            | % |
| Expected stock price volatility     |   |                  | 418.5        | % |
| Risk-free interest rate   |   |                  | 1.56         | % |

| Date of |   | Options |      |   | Exercise |   |   | Options Outstanding     |   | Expiration    |
|--------------|--------|---------|-----------|--------|----------|--------|--------|-------------------------|--------|---------------|
| Grant        |   | Granted |      |   | Price    |   |   | As of 6/30/11 |   | Date          |
|         |   |    |      |   |     |   |   |                    |   |     |
| 9/10/09      |   |    | 100,000   |   |     | $      | 0.35   |                    |   |          | 100,000 |   | 9/10/2014 |
| 9/14/09      |   |    | 100,000   |   |     |   | 0.10   |                    |   |          | 100,000 |   | 9/14/2014 |
| 9/14/09      |   |    | 500,000   |   |     |   | 0.10   |                    |   |          | 500,000 |   | 9/14/2014 |
| 01/08/10     |   |    | 900,000   |   |     |   | .025   |                    |   |          | 900,000 |   | 01/08/13 |
| 01/08/10     |   |    | 500,000   |   |     |   | .025   |                    |   |          | 500,000 |   | 01/08/13 |
| 02/18/11     |   |    | 2,000,000 |   |     |   | 0.10   |                    |   |          | 2,000,000 |   | 02/18/12 |
| 02/18/11     |   |    | 330,000   |   |     |   | 0.10   |                    |   |          | 330,000 |   | 02/18/15 |
| Total        |   |    |      |   |     |   |   |                    |   |          | 4,430,000 |   |     |

|                           |    | Number         |    |    | Weighted  |    |              |      |
|-------------------------------------|--------------|----------------|--------------|--------------|-----------|--------------|-------------------|-----------|
|                           |    | of Shares |    |    | Average   |    | Weighted          |      |
|                           |    | Remaining      |    |    | Intrinsic |    | Average           | Aggregate |
| Subject to Exercise  |    | Options        |    |    | Price     |    | Life (Years) | Value     |
|                                |         |           |         |         |      |         |              |      |
| Outstanding as of January 1, 2010   |         |           | 700,000      |         |      | $            | .14               |      | 5.00 | $ | 150,000 |
| Granted – 2010                |         |           | 1,400,000    |         |      | $            | .025              |      | 5.00 | $ | 1,365,000 |
| Forfeited – 2010              |         |           | -            |         |      | $            |              |      | - |   | - |
| Exercised – 2010              |         |           | -            |         |      | $            | -                 |      | - |   | - |
| Outstanding as of December 31, 2010 |         |           | 2,100,000    |         |      |         | .06               |      | 5.00 | $ | 1,515,000 |
| Granted – 2011                |         |           | 2,330,000    |         |      | $            | .10               |      | 1.28 |   | 429,420 |
| Forfeited – 2011              |         |           | (440,000)    |         |      | $            | .01               |      | 5.00 |   | (24,056) |
| Exercised – 2011              |         |           | -            |         |      | $            | -                 |      | - |   | - |
| Outstanding as of June 30, 2011     |         |           | 3,990,000    |         |      | $            | .08               |      | 3.04 | $ | 1,920,364 |
|                                |         |           |         |         |      |         |              |      |   |   |   |
| Exercisable as of June 30, 2011     |         |           | 997,298      |         |      | $            | -                 |      | - | $ | - |

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|                                                 |    | Number of Non- vested Shares Subject to Options |    |    | Weighted- Average Grant- Date Fair Value |    |
|-----------------------------------------------------------|--------------|------------------------------------------------------------------------------------|--------------|--------------|-------------------------------------------------------------------|--------------|
| Non-vested as of December 31, 2010                        |         |                                                                               | 1,493,000    |         |                                                              | $            | .721 |   |
| Non-vested granted —period ended June 30, 2011 |         |                                                                               | 2,330,000    |         |                                                              | $            |   |   |
| Vested — period ended June 30, 2011       |         |                                                                               | (1,069,464)  |         |                                                              | $            | - |   |
| Forfeited — period ended June 30, 2011    |         |                                                                               | -            |         |                                                              | $            |   |   |
| Non-vested as of June 30, 2011                            |         |                                                                               | 2,753,536    |         |                                                              | $            | .48 |   |

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ITEM

ITEM

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Item

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Item

| No.  | Description of Exhibit                                                                                                                               |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer                                                                                              |
| 31.2 | Rule 13e-14(a) Certification of Chief Financial Officer                                                                                              |
| 32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002            |

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SIGNATURES

| Date: August 19, 2011 | By: /s/ Rowland W. Day II   |
|-----------------------|-----------------------------|
|                  | Rowland W. Day II,          |
|                  | Principal Executive Officer |

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