----

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

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

| Nevada                                                        |   | 11-3320709                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. EmployerIdentification No.) |
|                                                          |   |                                |
| 5348 Vegas Drive, #89Las Vegas, Nevada                        |   | 89108                               |
| (Address of principal executive offices)                      |   | (Zip Code)                          |

| Title of each classto be so registered |   | Name of each exchange on whicheach class is to be registered |
|----------------------------------------|--------|--------------------------------------------------------------|
|                                   |   |                                                         |
| None                                   |   | N/A                                                          |

----

----

|   | Large accelerated filer o |   | Accelerated filer  o |   |
|--------|--------------------------------|--------|--------------------------------|--------|
|   | Non-accelerated filer o   |   | Smaller reporting company x    |   |

----

|   | 1. | Item 8 Financial Statements |
|--------|----|-----------------------------|

|   | a. | Auditor’s report |
|--------|----|------------------------|

|   | b. | Balance sheet – added liquidation preference information |
|--------|----|----------------------------------------------------------------|

|   | c. | Statement of operations – changes made in loss per share calculation section |
|--------|----|------------------------------------------------------------------------------------|

|   | d. | Note 3 – Convertibles notes – Added a table with details of convertible notes to the end of this note. |
|--------|----|--------------------------------------------------------------------------------------------------------------------|

|   | 2. | Item  15 Exhibits and Financial Statement Schedules – Added exhibits 10.16 through 10.20. |
|--------|----|-----------------------------------------------------------------------------------------------------------|

----

----

----

----

----

----

----

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|   | ●  | the possibility that such third parties may not be available to us as and when needed; and |
|--------|---------------|--------------------------------------------------------------------------------------------|

|   | ● | the risk that we may not be able to properly control the timing and quality of work conducted with respect to our projects. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------|

----

----

----

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

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

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

----

| ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. |
|---------|---------------------------------------------------------------------------------------------------------------------|

|   | Quarter Ended      | Low         | High        |   |
|--------|--------------------|-------------|-------------|--------|
|   |               |        |        |   |
|   | March 31, 2009     | $ 1.91 | $ 4.75 |   |
|   | June 30, 2009      | $ 1.80 | $ 4.50 |   |
|   | September 30, 2009 | $ 1.80 | $ 2.95 |   |
|   | December 31, 2009  | $ 0.77 | $ 2.15 |   |
|   |               |        |        |   |
|   | March 31, 2010     | $ 0.60 | $ 1.10 |   |
|   | June 30, 2010      | $ 0.40 | $ 0.95 |   |
|   | September 30, 2010 | $ 0.35 | $ 0.60 |   |
|   | December 31, 2010  | $ 0.25 | $ 0.69 |   |

----

|    Plan Category                            |   | Number of CommonShares to Be Issued Upon Exercise of Outstanding Options |      |   | Weighted-AverageExercise Price ofOutstanding Options |   |   | Number of CommonShares RemainingAvailable for Issuance |   |
|------------------------------------------------------------|--------|--------------------------------------------------------------------------|-----------|--------|------------------------------------------------------|--------|--------|--------------------------------------------------------|--------|
|                                                       |   |                                                                     |      |   |                                                 |   |   |                                                   |   |
| Equity compensation plans approved by shareholders         |   |                                                                     | 200,000   |   |                                                 | $      | 4.75   |                                                   |   |   | 2,560,534 |   |
| Equity compensation plans not approved by shareholders (1) |   |                                                                     | 1,653,907 |   |                                                 | $      | 7.90   |                                                   |   |   | N/A |   |

----

----

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

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

----

----

----

----

| Quarter ending March 31, 2012:    |   | $ | 423,148   |   |
|-----------------------------------|--------|---|-----------|--------|
| Quarter ending June 30, 2012:     |   | $ | 255,030   |   |
| Quarter ending September 30, 2012 |   | $ | 314,843   |   |
| Quarter ending December 31, 2012  |   | $ | 91,341    |   |
| Total potential cash outlay:      |   | $ | 1,084,362 |   |

----

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

----

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

| Report of Independent Registered Public Accounting Firm                                                                                             | F-1  |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|------|
| Consolidated Balance Sheets at December 31, 2010 and 2009                                                                                           | F-2  |
| Consolidated Statements of Operations for the two years ended December 31, 2010 and cumulative from inception (April 11, 1996) to December 31, 2010 | F-3  |
| Consolidated Statements of Shareholders' Equity (Deficit) from inception (April 11, 1996) to December 31, 2010                                      | F-4  |
| Consolidated Statements of Cash Flows for the two years ended December 31, 2010 and cumulative from inception (April 11, 1996) to December 31, 2010 | F-8  |
| Notes to Consolidated Financial Statements                                                                                                          | F-10 |

----

----

|                                                                                                                                                                                                                                                                               |   | December 31, |        |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|-------------|
|                                                                                                                                                                                                                                                                               |   | 2010         |        |   | 2009 |   |
| ASSETS                                                                                                                                                                                                                                                                             |   |         |        |   |   |   |
| Current assets                                                                                                                                                                                                                                                                     |   |         |        |   |   |   |
| Cash and equivalents                                                                                                                                                                                                                                                               |   | $            | 57,755      |   |   | $ | 5,583 |   |
| Prepaid expenses                                                                                                                                                                                                                                                                   |   |         | 51,703      |   |   |   | 93,933 |   |
|                                                                                                                                                                                                                                                                               |   |         |        |   |   |   |   |   |
| Total current assets                                                                                                                                                                                                                                                               |   |         | 109,458     |   |   |   | 99,516 |   |
|                                                                                                                                                                                                                                                                               |   |         |        |   |   |   |   |   |
| Patents, net of accumulated amortization of $372,373 in 2010 and $326,853 in 2009                                                                                                                                                                                                  |   |         | 185,127     |   |   |   | 230,647 |   |
|                                                                                                                                                                                                                                                                               |   |         |        |   |   |   |   |   |
| Trademark, net of accumulated amortization of $5,959 in 2010 and $5,544 in 2009                                                                                                                                                                                                    |   |         | 273         |   |   |   | 688 |   |
| TOTAL ASSETS                                                                                                                                                                                                                                                                       |   | $            | 294,858     |   |   | $ | 330,851 |   |
| LIABILITIES AND SHAREHOLDERS' DEFICIT                                                                                                                                                                                                                                              |   |         |        |   |   |   |   |   |
| Current liabilities                                                                                                                                                                                                                                                                |   |         |        |   |   |   |   |   |
| Loan from officer                                                                                                                                                                                                                                                                  |   | $            | -           |   |   | $ | 47,717 |   |
| Accounts payable                                                                                                                                                                                                                                                                   |   |         | 276,352     |   |   |   | 343,977 |   |
| Accrued payroll and related taxes                                                                                                                                                                                                                                                  |   |         | 582,569     |   |   |   | 291,808 |   |
| Accrued directors' compensation                                                                                                                                                                                                                                                    |   |         | 25,000      |   |   |   | - |   |
| Accrued interest                                                                                                                                                                                                                                                                   |   |         | 103,296     |   |   |   | - |   |
| Accrued dividends payable                                                                                                                                                                                                                                                          |   |         | 3,789,350   |   |   |   | 3,326,077 |   |
| Total current liabilities                                                                                                                                                                                                                                                          |   |         | 4,776,567   |   |   |   | 4,009,579 |   |
|                                                                                                                                                                                                                                                                               |   |         |        |   |   |   |   |   |
| Convertible notes, net of $46,603 discount and $113,334 premium                                                                                                                                                                                                                    |   |         | 677,447     |   |   |   | - |   |
| Total liabilities                                                                                                                                                                                                                                                                  |   |         | 5,454,014   |   |   |   | 4,009,579 |   |
|                                                                                                                                                                                                                                                                               |   |         |        |   |   |   |   |   |
| Commitments and contingencies                                                                                                                                                                                                                                                      |   |         | -           |   |   |   | - |   |
|                                                                                                                                                                                                                                                                               |   |         |        |   |   |   |   |   |
| Shareholders' deficit                                                                                                                                                                                                                                                              |   |         |        |   |   |   |   |   |
| Convertible preferred stock, 5,000,000 shares authorized, $.001 par value, Series C -  271,721  shares issued and outstanding at December 31, 2010 and 2009, respectively  (Aggregate liquidation preference of $2,418,317 at December 31, 2010 and 2009) |   |         | 272         |   |   |   | 272 |   |
| Series D -  594,342 shares issued and outstanding at December 31, 2010 and 2009, respectively  (Aggregate liquidation preference of $5,438,229 at December 31, 2010 and 2009)                                                                                       |   |         | 594         |   |   |   | 594 |   |
| Series E -  399,037 and 590,537 shares issued and outstanding at December 31, 2010 and 2009, respectively  (Aggregate liquidation preference of $2,394,222 and $3,543,222 at December 2010 and 2009 respectively)                                                   |   |         | 399         |   |   |   | 590 |   |
| Common stock, 20,000,000 shares authorized, $.0005 par value, 10,149,838 and 9,537,051 shares issued and outstanding at December 31, 2010 and 2009, respectively                                                                                                                   |   |         | 5,076       |   |   |   | 4,769 |   |
| Additional paid-in capital - preferred                                                                                                                                                                                                                                             |   |         | 14,808,584  |   |   |   | 16,622,353 |   |
| Additional paid-in capital - common                                                                                                                                                                                                                                                |   |         | 32,077,877  |   |   |   | 30,578,607 |   |
| Deficit accumulated during the development stage                                                                                                                                                                                                                                   |   |         | (52,051,958 | ) |   |   | (50,885,913 | ) |
| Total shareholders' deficit                                                                                                                                                                                                                                                        |   |         | (5,159,156  | ) |   |   | (3,678,728 | ) |
| TOTAL LIABILITIES & SHAREHOLDERS' DEFICIT                                                                                                                                                                                                                                      |   | $            | 294,858     |   |   | $ | 330,851 |   |

----

|                                                                                                                                                                          |   |                    |       |   |            |   |       | Cumulative       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------|--------|------------|------------------|--------|
|                                                                                                                                                                          |   |                    |       |   |            |   |       | from inception   |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       | (April 11, 1996) |   |
|                                                                                                                                                                          |   | Year ended December 31, |       |   | to December 31, |   |
|                                                                                                                                                                          |   | 2010                    |       |   | 2009            |   |       | 2010             |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |
| Costs and expenses:                                                                                                                                                           |   |                    |       |   |            |   |       |             |   |
|   Research and development - related party                                                                                                                          |   | $                       | -          |   |            | $      | 173,247    |             |   | $ | 10,016,111 |   |
|   Research and development - other                                                                                                                                  |   |                    | 141,319    |   |            |   | 1,563,180  |             |   |   | 13,487,669 |   |
|                                                                                                                                                                          |   |                    | 141,319    |   |            |   | 1,736,427  |             |   |   | 23,503,780 |   |
|   General and administrative - related party                                                                                                                        |   |                    | -          |   |            |   | 59,044     |             |   |   | 1,781,577 |   |
|   General and administrative - other                                                                                                                                |   |                    | 753,243    |   |            |   | 1,094,256  |             |   |   | 18,354,842 |   |
|                                                                                                                                                                          |   |                    | 753,243    |   |            |   | 1,153,300  |             |   |   | 20,136,419 |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
| Operating loss                                                                                                                                                                |   |                    | (894,562   | )      |            |   | (2,889,727 | )                |   |   | (43,640,199 | ) |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
| Other income (expense):                                                                                                                                                       |   |                    |       |   |            |   |       |             |   |   |   |   |
|   Interest expense                                                                                                                                                  |   |                    | (114,070   | )      |            |   | -          |             |   |   | (123,024 | ) |
|   Interest income                                                                                                                                                   |   |                    | -          |   |            |   | 2,496      |             |   |   | 332,588 |   |
|   Loss on extinguishment of debt                                                                                                                                    |   |                    | (157,413   | )      |            |   | -          |             |   |   | (157,413 | ) |
|   Increase in cash surrender value of insurance                                                                                                                     |   |                    | -          |   |            |   | -          |             |   |   | 790,910 |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
|                                                                                                                                                                          |   |                    | (271,483   | )      |            |   | 2,496      |             |   |   | 843,061 |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
| Net loss                                                                                                                                                                      |   | $                       | (1,166,045 | )      |            | $      | (2,887,231 | )                |   | $ | (42,797,138 | ) |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
| Loss per share calculation:                                                                                                                                                   |   |                    |       |   |            |   |       |             |   |   |   |   |
| Net loss                                                                                                                                                                      |   | $                       | (1,166,045 | )      |            | $      | (2,887,231 | )                |   |   |   |   |
| Beneficial conversion feature                                                                                                                                                 |   |                    | (57,378    | )      |            |   | (2,464,166 | )                |   |   |   |   |
| Preferred dividend                                                                                                                                                            |   |                    | (664,960   | )      |            |   | (746,449   | )                |   |   |   |   |
|   Net loss applicable to common shares - Numerator                                                                                                                  |   | $                       | (1,888,383 | )      |            | $      | (6,097,846 | )                |   |   |   |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
| Basic and diluted weighted average number of common shares outstanding - Denominator                                                                                          |   |                    | 9,873,454  |   |            |   | 9,433,757  |             |   |   |   |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
| Basic and diluted net loss per share                                                                                                                                          |   | $                       | (0.19      | )      |            | $      | (0.65      | )                |   |   |   |   |
|                                                                                                                                                                          |   |                    |       |   |            |   |       |             |   |   |   |   |
|                                                                                                                                                                          |   |
| Maximum number of common shares (not included in denominator of diluted loss per share calculation due to their anti-dilutive nature) attributable to exercise/conversion of: |   |                    |       |   |            |
|   Outstanding options                                                                                                                                               |   |                    | 1,853,907  |   |            |   | 1,853,907  |             |   |   |   |   |
|   Preferred stock                                                                                                                                                   |   |                    | 2,340,771  |   |            |   | 2,758,435  |             |   |   |   |   |
|   Convertible notes                                                                                                                                                      |   |                    | 1,613,595  |   |            |   | -          |             |   |   |   |   |

----

|                                                                       |   |            |   |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |      |    |   |   |       |   |   |          |   |   | Deficit     |   |      |      |   |
|----------------------------------------------------------------------------|--------|-----------------|--------|--------|--------------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|-----------|---------|--------|--------|------------|--------|--------|---------------|--------|--------|-------------|--------|-----------|-----------|--------|
|                                                                       |   | Preferred Stock |   |   | Common Stock |   |   |      |   |   | Additional |   |   | Additional |   |   | Accumulated |   |      | Total   |   |
|                                                                       |   | Series A        |   |   | Series B     |   |   |      |   |   |       |   |   | Stock      |   |   | Paid-in     |   |      | Paid-in |   |   | During the |   |   | Shareholders' |   |
|                                                                       |   | Number          |   |   |         |   |   | Number    |   |   |       |   |   | Number     |   |   |        |   |      | Option  |   |   | Capital-   |   |   | Capital-      |   |   | Development |   |      | Equity    |   |
|                                                                       |   | of Shares       |   |   | Total        |   |   | of Shares |   |   | Total      |   |   | of Shares  |   |   | Total       |   |      | Costs   |   |   | Common     |   |   | Preferred     |   |   | Stage       |   |      | (Deficit) |   |
| Initial capitalization                                                     |   |            | -      |   |         | $      | -      |      |   |   | -          |   |   | $          | -      |   |        |   | 2,400,000 |    |   | $      | 1,200      |   |   | $             | -      |   |        | $      | -         |      |   | $ | - |   |   | $ | - |   |   | $ | 1,200 |   |
| Issuance of common stock for a note                                        |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 300,000   |    |   |   | 150        |   |   |          | -      |   |        |   | -         |      |   |   | - |   |   |   | - |   |   |   | 150 |   |
| Issuance of common stock for cash                                          |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 100,000   |    |   |   | 50         |   |   |          | -      |   |        |   | 4,950     |      |   |   | - |   |   |   | - |   |   |   | 5,000 |   |
| Issuance of common stock for services                                      |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 764,000   |    |   |   | 382        |   |   |          | -      |   |        |   | 37,818    |      |   |   | - |   |   |   | - |   |   |   | 38,200 |   |
| Net loss for 1996                                                          |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | - |   |   |   | (59,079 | ) |   |   | (59,079 | ) |
| Balance, December 31, 1996                                                 |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 3,564,000 |    |   |   | 1,782      |   |   |          | -      |   |        |   | 42,768    |      |   |   | - |   |   |   | (59,079 | ) |   |   | (14,529 | ) |
| Exercise of options                                                        |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 26,666    |    |   |   | 13         |   |   |          | -      |   |        |   | 29,987    |      |   |   | - |   |   |   | - |   |   |   | 30,000 |   |
| Issuance of common stock for cash and conversion of note payable ($77,000) |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 640,000   |    |   |   | 320        |   |   |          | -      |   |        |   | 927,680   |      |   |   | - |   |   |   | - |   |   |   | 928,000 |   |
| Net loss for 1997                                                          |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | - |   |   |   | (457,829 | ) |   |   | (457,829 | ) |
| Balance, December 31, 1997                                                 |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 4,230,666 |    |   |   | 2,115      |   |   |          | -      |   |        |   | 1,000,435 |      |   |   | - |   |   |   | (516,908 | ) |   |   | 485,642 |   |
| Exercise of options                                                        |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 57,000    |    |   |   | 29         |   |   |          | -      |   |        |   | 114,971   |      |   |   | - |   |   |   | - |   |   |   | 115,000 |   |
| Issuance of common stock for cash                                          |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 40,000    |    |   |   | 20         |   |   |          | -      |   |        |   | 57,980    |      |   |   | - |   |   |   | - |   |   |   | 58,000 |   |
| Issuance of preferred stock for cash                                       |   |            | 8,824  |   |         |   | 9      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | 74,991 |   |   |   | - |   |   |   | 75,000 |   |
| Valuation of beneficial conversion feature on Series A Preferred           |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | 25,000 |   |   |   | (25,000 | ) |   |   | - |   |
| Contribution of officer's salary                                           |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | 80,000    |      |   |   | - |   |   |   | - |   |   |   | 80,000 |   |
| Net loss for 1998                                                          |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | - |   |   |   | (640,580 | ) |   |   | (640,580 | ) |
| Balance, December 31, 1998                                                 |   |            | 8,824  |   |         |   | 9      |      |   |   | -          |   |   |       | -      |   |        |   | 4,327,666 |    |   |   | 2,164      |   |   |          | -      |   |        |   | 1,253,386 |      |   |   | 99,991 |   |   |   | (1,182,488 | ) |   |   | 173,062 |   |
| Exercise of warrants                                                       |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 209,490   |    |   |   | 105        |   |   |          | -      |   |        |   | 366,503   |      |   |   | - |   |   |   | - |   |   |   | 366,608 |   |
| Exercise of options                                                        |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 146,904   |    |   |   | 73         |   |   |          | -      |   |        |   | 177,289   |      |   |   | - |   |   |   | - |   |   |   | 177,362 |   |
| Issuance of preferred stock for cash                                       |   |            | 70,469 |   |         |   | 70     |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | 598,930 |   |   |   | - |   |   |   | 599,000 |   |
| Preferred stock dividend                                                   |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | (25,725 | ) |   |   | - |   |   |   | (25,725 | ) |
| Valuation of beneficial conversion feature on Series A Preferred           |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | 199,486 |   |   |   | (199,486 | ) |   |   | - |   |
| Repurchase of common shares                                                |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | (560,000  | )       |   |   | (280       | )      |   |          | -      |   |        |   | -         |      |   |   | - |   |   |   |   |   |   |   | (280 | ) |
| Net loss for 1999                                                          |   |            | -      |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -         |    |   |   | -          |   |   |          | -      |   |        |   | -         |      |   |   | - |   |   |   | (1,329,328 | ) |   |   | (1,329,328 | ) |
| Balance, December 31, 1999                                                 |   |            | 79,293 |   |         | $      | 79     |      |   |   | -          |   |   | $          | -      |   |        |   | 4,124,060 |    |   | $      | 2,062      |   |   | $             | -      |   |        | $      | 1,797,178 |      |   | $ | 872,682 |   |   | $ | (2,711,302 | ) |   | $ | (39,301 | ) |

----

|                                                             |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   | Deficit     |   |     |      |   |
|------------------------------------------------------------------|--------|-----------------|---------|--------|--------------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|---------|-----------|--------|--------|---------|--------|--------|-----------|---------|--------|------------|--------|--------|---------------|--------|--------|-----------|--------|--------|-----------|--------|--------|-------------|--------|----------|-----------|--------|
|                                                             |   | Preferred Stock |    |   | Common Stock |   |   |      |   |   | Additional |   |   | Additional |   |   | Accumulated |   |    | Total     |   |
|                                                             |   | Series A        |    |   | Series B     |   |   | Series C  |   |   | Series D   |   |   |       |   |   |        |   |    | Stock     |   |   | Paid-in |   |   | Paid-in   |    |   | During the |   |   | Shareholders' |   |
|                                                             |   | Number          |    |   |         |   |   | Number    |   |   |       |   |   | Number     |   |   |        |   |    | Number    |   |   |    |   |   | Number    |    |   |       |   |   | Option        |   |   | Capital-  |   |   | Capital-  |   |   | Development |   |     | Equity    |   |
|                                                             |   | of Shares       |    |   | Total        |   |   | of Shares |   |   | Total      |   |   | of Shares  |   |   | Total       |   |    | of Shares |   |   | Total   |   |   | of Shares |    |   | Total      |   |   | Costs         |   |   | Common    |   |   | Preferred |   |   | Stage       |   |     | (Deficit) |   |
|                                                             |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |
| Balance, December 31, 1999                                       |   |            | 79,293  |   |         | $      | 79     |      |   |   | -          |   |   | $          | -      |   |        |   | -       |      |   | $      | -       |   |   |      | -       |   |       | $      | -      |          |   |   | 4,124,060 |   |   | $         | 2,062  |   |        | $      | -        |      |   | $ | 1,797,178 |   |   | $ | 872,682 |   |   | $ | (2,711,302 | ) |   | $ | (39,301 | ) |
| Exercise of warrants                                             |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 365,500   |   |   |      | 183    |   |        |   | -        |      |   |   | 639,442 |   |   |   | - |   |   |   | - |   |   |   | 639,625 |   |
| Exercise of options                                              |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 223,832   |   |   |      | 113    |   |        |   | -        |      |   |   | 258,528 |   |   |   | - |   |   |   | - |   |   |   | 258,641 |   |
| Issuance of preferred stock for cash                             |   |            | -       |   |         |   | -      |      |   |   | 71,429     |   |   |       | 71     |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | 624,929 |   |   |   | - |   |   |   | 625,000 |   |
| Valuation of beneficial conversion feature on Series B Preferred |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | 208,125 |   |   |   | (208,125 | ) |   |   | - |   |
| Conversion of Series A Preferred into common shares              |   |            | (70,469 | )      |         |   | (70    | )         |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 131,996   |   |   |      | 66     |   |        |   | -        |      |   |   | 624,659 |   |   |   | (598,930 | ) |   |   | - |   |   |   | 25,725 |   |
| Beneficial conversion feature on                                 |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Series  A Preferred shares                             |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | 199,486 |   |   |   | (199,486 | ) |   |   | - |   |   |   | - |   |
| Settlement of lawsuit                                            |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 33,333    |   |   |      | 17     |   |        |   | -        |      |   |   | 199,983 |   |   |   | - |   |   |   | - |   |   |   | 200,000 |   |
| Purchase of patent                                               |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 47,042    |   |   |      | 24     |   |        |   | -        |      |   |   | 235,184 |   |   |   | - |   |   |   | - |   |   |   | 235,208 |   |
| Stock option costs                                               |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | (280,000 | )         |   |   | 280,000 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Amortization of stock option costs                               |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | 105,000  |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 105,000 |   |
| Cancellation of common shares                                    |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | (89,000   | )      |   |      | (45    | )      |        |   | -        |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (45 | ) |
| Net loss for 2000                                                |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | - |   |   |   | (1,749,444 | ) |   |   | (1,749,444 | ) |
|                                                             |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2000                                       |   |            | 8,824   |   |         |   | 9      |      |   |   | 71,429     |   |   |       | 71     |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 4,836,763 |   |   |      | 2,420  |   |        |   | (175,000 | )         |   |   | 4,234,460 |   |   |   | 907,320 |   |   |   | (4,668,871 | ) |   |   | 300,409 |   |
| Exercise of options                                              |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 360,394   |   |   |      | 180    |   |        |   | -        |      |   |   | 413,483 |   |   |   | - |   |   |   | - |   |   |   | 413,663 |   |
| Issuance of common stock for services                            |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 100,000   |   |   |      | 50     |   |        |   | -        |      |   |   | 255,450 |   |   |   | - |   |   |   | - |   |   |   | 255,500 |   |
| Issuance of preferred stock for cash                             |   |            | -       |   |         |   | -      |      |   |   | 113,715    |   |   |       | 114    |   |        |   | 95,123  |      |   |   | 95      |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | 1,841,392 |   |   |   | - |   |   |   | 1,841,601 |   |
| Valuation of beneficial conversion                               |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| feature on Series B Preferred                                    |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | 331,636 |   |   |   | (331,636 | ) |   |   | - |   |
| Valuation of beneficial conversion                               |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| feature on Series C Preferred                                    |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | 282,233 |   |   |   | (282,233 | ) |   |   | - |   |
| Conversion of  preferred stock and                     |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares                             |   |            | (8,824  | )      |         |   | (9     | )         |   |   | (113,715   | )      |   |       | (114   | )      |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 330,327   |   |   |      | 165    |   |        |   | -        |      |   |   | 1,081,316 |   |   |   | (1,069,887 | ) |   |   | - |   |   |   | 11,471 |   |
| Preferred stock dividend                                         |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | (63,397 | ) |   |   | - |   |   |   | (63,397 | ) |
| Issuance of common stock                                         |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| options for services                                             |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | 20,000 |   |   |   | - |   |   |   | - |   |   |   | 20,000 |   |
| Amortization of stock option costs                               |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | 140,000  |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 140,000 |   |
| Net loss for 2001                                                |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | - |   |   |   | (1,968,471 | ) |   |   | (1,968,471 | ) |
|                                                             |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2001                                       |   |            | -       |   |         |   | -      |      |   |   | 71,429     |   |   |       | 71     |   |        |   | 95,123  |      |   |   | 95      |   |   |      | -       |   |       |   | -      |          |   |   | 5,627,484 |   |   |      | 2,815  |   |        |   | (35,000  | )         |   |   | 6,004,709 |   |   |   | 2,229,297 |   |   |   | (7,251,211 | ) |   |   | 950,776 |   |
| Exercise of options                                              |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 282,480   |   |   |      | 140    |   |        |   | -        |      |   |   | 317,650 |   |   |   | - |   |   |   | - |   |   |   | 317,790 |   |
| Conversion of  preferred stock and                     |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares                             |   |            | -       |   |         |   | -      |      |   |   | (71,429    | )      |   |       | (71    | )      |        |   | (18,576 | )         |   |   | (19     | )      |   |      | -       |   |       |   | -      |          |   |   | 241,627   |   |   |      | 120    |   |        |   | -        |      |   |   | 790,205 |   |   |   | (783,495 | ) |   |   | - |   |   |   | 6,740 |   |
| Valuation of beneficial conversion                               |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |    |      |   |   |    |   |   |      |    |   |       |   |   |          |   |   |      |   |   |      |   |   |        |   |     |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| feature on Series C & D Preferred                            |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | 1,122,521 |   |   |   | (1,122,521 | ) |   |   | - |   |
| Cancellations of shares                                          |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   |    |      |   |   |    |   |   |      | -       |   |       |   | -      |          |   |   | (535,933  | )      |   |      | (268   | )      |        |   | -        |      |   |   | (199,732 | ) |   |   | - |   |   |   | - |   |   |   | (200,000 | ) |
| Issuance of preferred stock for cash                             |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 264,657 |      |   |   | 265     |   |   |      | 110,627 |   |       |   | 111    |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   |   |   |   |   | 3,367,233 |   |   |   | - |   |   |   | 3,367,609 |   |
| Amortization of stock option costs                               |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | 35,000   |      |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 35,000 |   |
| Preferred stock dividend                                         |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | (122,861 | ) |   |   | - |   |   |   | (122,861 | ) |
| Purchase of Med Enclosure Stock                                  |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | 10,000    |   |   |      | 5      |   |        |   | -        |      |   |   | 53,495 |   |   |   | - |   |   |   | - |   |   |   | 53,500 |   |
| Net loss for 2002                                                |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -       |      |   |   | -       |   |   |      | -       |   |       |   | -      |          |   |   | -         |   |   |      | -      |   |        |   | -        |      |   |   | - |   |   |   | - |   |   |   | (3,460,574 | ) |   |   | (3,460,574 | ) |
| Balance December 31, 2002                                        |   |            | -       |   |         | $      | -      |      |   |   | -          |   |   | $          | -      |   |        |   | 341,204 |      |   | $      | 341     |   |   |      | 110,627 |   |       | $      | 111    |          |   |   | 5,625,658 |   |   | $         | 2,812  |   |        | $      | -        |      |   | $ | 6,966,327 |   |   | $ | 5,812,695 |   |   | $ | (11,834,306 | ) |   | $ | 947,980 |   |

----

|                                         |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |
|----------------------------------------------|--------|-----------------|--------|--------|--------------|--------|--------|----------|--------|--------|----------|--------|--------|--------|--------|--------|---------|--------|---------|--------|--------|--------|------------|--------|--------|------------|----------|--------|-------------|--------|--------|--------|--------|--------|-----------|--------|--------|-----------|--------|--------|-------------|--------|--------|---------------|--------|
|                                         |   | Preferred Stock |   |   | Common Stock |   |   |     |   |   |     |   |   |   |   |   | Deficit |   |    |   |   |
|                                         |   | Series A        |   |   | Series B     |   |   | Series C |   |   | Series D |   |   |   |   |   |    |   |    |   |   |   | Additional |   |   | Additional |     |   | Accumulated |   |   | Total  |   |
|                                         |   | Number          |   |   |         |   |   | Number   |   |   |     |   |   | Number |   |   |    |   |    | Number |   |   |       |   |   | Number     |     |   |        |   |   | Stock  |   |   | Paid-in   |   |   | Paid-in   |   |   | During the  |   |   | Shareholders' |   |
|                                         |   | of              |   |   |         |   |   | of       |   |   |     |   |   | of     |   |   |    |   |    | of     |   |   |       |   |   | of         |     |   |        |   |   | Option |   |   | Capital-  |   |   | Capital-  |   |   | Development |   |   | Equity        |   |
|                                         |   | Shares          |   |   | Total        |   |   | Shares   |   |   | Total    |   |   | Shares |   |   | Total   |   |    | Shares |   |   | Total      |   |   | Shares     |     |   | Total       |   |   | Costs  |   |   | Common    |   |   | Preferred |   |   | Stage       |   |   | (Deficit)     |   |
|                                         |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |
|                                         |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |
| Balance, December 31, 2002                   |   |            | -      |   |         | $      | -      |     |   |   | -        |   |   | $      | -      |   |    |   | 341,204 |   |   | $      | 341        |   |   |       | 110,627  |   |        | $      | 111    |   |   |   | 5,625,658 |   |   | $         | 2,812  |   |        | $      | -      |          |   | $ | 6,966,327 |   |   | $ | 5,812,695 |   |   | $ | (11,834,306 | ) |   | $ | 947,980 |   |
| Exercise of options                          |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | 775,117   |   |   |      | 388    |   |        |   | -      |          |   |   | 1,351,807 |   |   |   | - |   |   |   | - |   |   |   | 1,352,195 |   |
| Conversion of  preferred stock and |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | (26,786 | )      |   |   | (27        | )      |   |       | -        |   |        |   | -      |   |   |   | 73,800    |   |   |      | 37     |   |        |   | -      |          |   |   | 263,034 |   |   |   | (244,973 | ) |   |   | - |   |   |   | 18,071 |   |
| Valuation of beneficial conversion           |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| feature on Series D Preferred                |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | 2,161,694 |   |   |   | (2,161,694 | ) |   |   | - |   |
| Issuance of preferred stock for cash         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | 708,824  |   |        |   | 709    |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | 6,484,373 |   |   |   | - |   |   |   | 6,485,082 |   |
| Preferred stock dividend                     |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | (390,289 | ) |   |   |   |   |   |   | (390,289 | ) |
| Net loss for 2003                            |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |   |   | (2,759,466 | ) |   |   | (2,759,466 | ) |
| Balance, December 31, 2003                   |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | 314,418 |   |   |   | 314        |   |   |       | 819,451  |   |        |   | 820    |   |   |   | 6,474,575 |   |   |      | 3,237  |   |        |   | -      |          |   |   | 8,581,168 |   |   |   | 13,823,500 |   |   |   | (16,755,466 | ) |   |   | 5,653,573 |   |
| Exercise of options                          |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | 460,775   |   |   |      | 230    |   |        |   | -      |          |   |   | 1,082,034 |   |   |   | - |   |   |   | - |   |   |   | 1,082,264 |   |
| Conversion of  preferred stock and |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | (11,236 | )      |   |   | (11        | )      |   |       | (27,873  | )      |        |   | (28    | )      |   |   | 70,918    |   |   |      | 36     |   |        |   | -      |          |   |   | 383,428 |   |   |   | (354,961 | ) |   |   | - |   |   |   | 28,464 |   |
| Preferred stock dividend                     |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | (478,594 | ) |   |   |   |   |   |   | (478,594 | ) |
| Stock option costs                           |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | 4,527,784 |   |   |   | - |   |   |   | - |   |   |   | 4,527,784 |   |
| Net loss for 2004                            |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |   |   | (8,314,255 | ) |   |   | (8,314,255 | ) |
| Balance, December 31, 2004                   |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | 303,182 |   |   |   | 303        |   |   |       | 791,578  |   |        |   | 792    |   |   |   | 7,006,268 |   |   |      | 3,503  |   |        |   | -      |          |   |   | 14,574,414 |   |   |   | 12,989,945 |   |   |   | (25,069,721 | ) |   |   | 2,499,236 |   |
| Exercise of options                          |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | 470,393   |   |   |      | 235    |   |        |   | -      |          |   |   | 777,724 |   |   |   | - |   |   |   | - |   |   |   | 777,959 |   |
| Conversion of  preferred stock and |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| accrued dividends into common shares         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | (6,180  | )      |   |   | (6         | )      |   |       | (106,922 | )      |        |   | (107   | )      |   |   | 176,405   |   |   |      | 88     |   |        |   | -      |          |   |   | 1,150,457 |   |   |   | (1,033,109 | ) |   |   | - |   |   |   | 117,323 |   |
| Preferred stock dividend                     |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | (501,921 | ) |   |   |   |   |   |   | (501,921 | ) |
| Issuance of common stock for patent          |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | 4,000     |   |   |      | 2      |   |        |   | -      |          |   |   | 153,998 |   |   |   | - |   |   |   | - |   |   |   | 154,000 |   |
| Net loss for 2005                            |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |   |   | (1,625,516 | ) |   |   | (1,625,516 | ) |
| Balance, December 31, 2005                   |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | 297,002 |   |   |   | 297        |   |   |       | 684,656  |   |        |   | 685    |   |   |   | 7,657,066 |   |   |      | 3,828  |   |        |   | -      |          |   |   | 16,656,593 |   |   |   | 11,454,915 |   |   |   | (26,695,237 | ) |   |   | 1,421,081 |   |
| Exercise of options                          |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | 732,699   |   |   |      | 367    |   |        |   | -      |          |   |   | 1,187,471 |   |   |   | - |   |   |   | - |   |   |   | 1,187,838 |   |
| Conversion of  preferred stock and |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | (5,618  | )      |   |   | (6         | )      |   |       | (28,418  | )      |        |   | (28    | )      |   |   | 60,219    |   |   |      | 30     |   |        |   | -      |          |   |   | 358,881 |   |   |   | (309,966 | ) |   |   | - |   |   |   | 48,911 |   |
| Preferred stock dividend                     |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | (430,176 | ) |   |   | - |   |   |   | (430,176 | ) |
| Stock option costs                           |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | 264,297 |   |   |   | - |   |   |   | - |   |   |   | 264,297 |   |
| Expenses paid by officer/shareholder         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | 61,252 |   |   |   | - |   |   |   | - |   |   |   | 61,252 |   |
| Net loss for 2006                            |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |   |   | (2,811,855 | ) |   |   | (2,811,855 | ) |
| Balance, December 31, 2006                   |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | 291,384 |   |   |   | 291        |   |   |       | 656,238  |   |        |   | 657    |   |   |   | 8,449,984 |   |   |      | 4,225  |   |        |   | -      |          |   |   | 18,528,494 |   |   |   | 10,714,773 |   |   |   | (29,507,092 | ) |   |   | (258,652 | ) |
| Exercise of options                          |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | 621,551   |   |   |      | 311    |   |        |   | -      |          |   |   | 1,553,566 |   |   |   | - |   |   |   | - |   |   |   | 1,553,877 |   |
| Conversion of  preferred stock and |   |            |   |   |         |   |   |     |   |   |     |   |   |   |   |   |    |   |    |   |   |   |       |   |   |       |     |   |        |   |   |   |   |   |      |   |   |      |   |   |        |   |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   | - |   |
| accrued dividends into common shares         |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | (2,809  | )      |   |   | (3         | )      |   |       | (27,014  | )      |        |   | (28    | )      |   |   | 52,964    |   |   |      | 26     |   |        |   | -      |          |   |   | 333,659 |   |   |   | (272,117 | ) |   |   | - |   |   |   | 61,537 |   |
| Preferred stock dividend                     |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | (434,044 | ) |   |   | - |   |   |   | (434,044 | ) |
| Stock option costs                           |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | 23,063 |   |   |   | - |   |   |   | - |   |   |   | 23,063 |   |
| Net loss for 2007                            |   |            | -      |   |         |   | -      |     |   |   | -        |   |   |   | -      |   |    |   | -       |   |   |   | -          |   |   |       | -        |   |        |   | -      |   |   |   | -         |   |   |      | -      |   |        |   | -      |          |   |   | - |   |   |   | - |   |   |   | (2,435,774 | ) |   |   | (2,435,774 | ) |
| Balance, December 31, 2007                   |   |            | -      |   |         | $      | -      |     |   |   | -        |   |   | $      | -      |   |    |   | 288,575 |   |   | $      | 288        |   |   |       | 629,224  |   |        | $      | 629    |   |   |   | 9,124,499 |   |   | $         | 4,562  |   |        | $      | -      |          |   | $ | 20,438,782 |   |   | $ | 10,008,612 |   |   | $ | (31,942,866 | ) |   | $ | (1,489,993 | ) |

----

|                                         |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   | Deficit     |   |   |      |       |
|----------------------------------------------|--------|-----------------|---------|--------|--------------|--------|--------|-----------|--------|--------|------------|--------|--------|------------|--------|--------|-------------|--------|----------|-----------|--------|--------|---------|--------|--------|------------|------------|--------|---------------|--------|--------|-----------|--------|--------|-------------|--------|--------|-----------|------------|
|                                         |   | Preferred Stock |    |   | Common Stock |   |   |      |   |   | Additional |   |   | Additional |   |   | Accumulated |   |     | Total     |   |
|                                         |   | Series C        |    |   | Series D     |   |   | Series E  |   |   |       |   |   |       |   |   | Stock       |   |     | Paid-in   |   |   | Paid-in |   |   | During the |       |   | Shareholders' |   |
|                                         |   | Number          |    |   |         |   |   | Number    |   |   |       |   |   | Number     |   |   |        |   |     | Number    |   |   |    |   |   | Option     |       |   | Capital-      |   |   | Capital-  |   |   | Development |   |   | Equity    |       |
|                                         |   | of Shares       |    |   | Total        |   |   | of Shares |   |   | Total      |   |   | of Shares  |   |   | Total       |   |     | of Shares |   |   | Total   |   |   | Costs      |       |   | Common        |   |   | Preferred |   |   | Stage       |   |   | (Deficit) |       |
|                                         |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |
|                                         |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |
| Balance, December 31, 2007                   |   |            | 288,575 |   |         | $      | 288    |      |   |   | 629,224    |   |   | $          | 629    |   |        |   | -        |      |   | $      | -       |   |   |       | 9,124,499  |   |          | $      | 4,562  |      |   | $      | -           |   |   | $         | 20,438,782 |   |   | $ | 10,008,612 |   |   | $ | (31,942,866 | ) |   | $ | (1,489,993 | ) |
| Exercise of options                          |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | 154,150    |   |          |   | 77     |      |   |   | -           |   |   |      | 592,502    |   |   |   | - |   |   |   | - |   |   |   | 592,579 |   |
| Conversion of  preferred stock and |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares         |   |            | -       |   |         |   | -      |      |   |   | (4,826     | )      |   |       | (5     | )      |        |   | -        |      |   |   | -       |   |   |       | 8,045      |   |          |   | 4      |      |   |   | -           |   |   |      | 55,159     |   |   |   | (44,145 | ) |   |   | - |   |   |   | 11,013 |   |
| Valuation of beneficial conversion           |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| on Series E Preferred                        |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | 2,459,959 |   |   |   | (2,459,959 | ) |   |   | - |   |
| Issuance of preferred stock                  |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 551,703  |      |   |   | 552     |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | 3,309,668 |   |   |   | - |   |   |   | 3,310,220 |   |
| Preferred stock dividend                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | (637,465 | ) |   |   |   |   |   |   | (637,465 | ) |
| Stock option costs                           |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | 7,712,616  |   |   |   | - |   |   |   | - |   |   |   | 7,712,616 |   |
| Contribution of officer's salary             |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | 344,966    |   |   |   | - |   |   |   | - |   |   |   | 344,966 |   |
| Net loss                                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | - |   |   |   | (11,131,691 | ) |   |   | (11,131,691 | ) |
| Balance, December 31, 2008                   |   |            | 288,575 |   |         |   | 288    |      |   |   | 624,398    |   |   |       | 624    |   |        |   | 551,703  |      |   |   | 552     |   |   |       | 9,286,694  |   |          |   | 4,643  |      |   |   | -           |   |   |      | 29,144,025 |   |   |   | 15,096,629 |   |   |   | (45,534,516 | ) |   |   | (1,287,755 | ) |
| Exercise of options                          |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | 29,404     |   |          |   | 15     |      |   |   | -           |   |   |      | 232,276    |   |   |   | - |   |   |   | - |   |   |   | 232,291 |   |
| Conversion of  preferred stock and |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares         |   |            | (16,854 | )      |         |   | (16    | )         |   |   | (30,056    | )      |   |       | (30    | )      |        |   | -        |      |   |   | -       |   |   |       | 109,048    |   |          |   | 55     |      |   |   | -           |   |   |      | 560,900    |   |   |   | (424,954 | ) |   |   | - |   |   |   | 135,955 |   |
| Issuance of preferred stock                  |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | 38,834   |      |   |   | 38      |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | 232,961 |   |   |   | - |   |   |   | 232,999 |   |
| Issuance of common stock                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | 111,905    |   |          |   | 56     |      |   |   | -           |   |   |      | 288,944    |   |   |   | - |   |   |   | - |   |   |   | 289,000 |   |
| Valuation of beneficial conversion           |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| feature on Series E Preferred                |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | 2,464,166 |   |   |   | (2,464,166 | ) |   |   | - |   |
| Preferred stock dividend                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | (746,449 | ) |   |   | - |   |   |   | (746,449 | ) |
| Contribution of officer's salary             |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | 352,462    |   |   |   | - |   |   |   | - |   |   |   | 352,462 |   |
| Net loss                                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | - |   |   |   | (2,887,231 | ) |   |   | (2,887,231 | ) |
| Balance, December 31, 2009                   |   |            | 271,721 |   |         |   | 272    |      |   |   | 594,342    |   |   |       | 594    |   |        |   | 590,537  |      |   |   | 590     |   |   |       | 9,537,051  |   |          |   | 4,769  |      |   |   | -           |   |   |      | 30,578,607 |   |   |   | 16,622,353 |   |   |   | (50,885,913 | ) |   |   | (3,678,728 | ) |
| Conversion of  preferred stock and |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| accrued dividends into common shares         |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | (191,500 | )         |   |   | (191    | )      |   |       | 491,165    |   |          |   | 246    |      |   |   | -           |   |   |      | 1,350,443  |   |   |   | (1,148,809 | ) |   |   | - |   |   |   | 201,689 |   |
| Valuation of beneficial conversion           |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       |       |   |          |   |   |      |   |   |        |   |   |      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| feature on convertible debt                  |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | 57,378     |   |   |   | - |   |   |   | - |   |   |   | 57,378 |   |
| Preferred stock dividend                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | (664,960 | ) |   |   | - |   |   |   | (664,960 | ) |
| Shares issued for commitment fee             |   |            |    |   |         |   |   |      |   |   |       |   |   |       |   |   |        |   |     |      |   |   |    |   |   |       | 121,622    |   |          |   | 61     |      |   |   |        |   |   |      | 47,372     |   |   |   |   |   |   |   |   |   |   |   | 47,433 |   |
| Amortization of convertible note premium     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | 44,077     |   |   |   | - |   |   |   | - |   |   |   | 44,077 |   |
| Net loss                                     |   |            | -       |   |         |   | -      |      |   |   | -          |   |   |       | -      |   |        |   | -        |      |   |   | -       |   |   |       | -          |   |          |   | -      |      |   |   | -           |   |   |      | -          |   |   |   | - |   |   |   | (1,166,045 | ) |   |   | (1,166,045 | ) |
| Balance, December 31, 2010                   |   |            | 271,721 |   |         | $      | 272    |      |   |   | 594,342    |   |   | $          | 594    |   |        |   | 399,037  |      |   | $      | 399     |   |   |       | 10,149,838 |   |          | $      | 5,076  |      |   |   | -           |   |   | $         | 32,077,877 |   |   | $ | 14,808,584 |   |   | $ | (52,051,958 | ) |   | $ | (5,159,156 | ) |

----

|                                                                              |   |                    |       |   |            |   |       | Cumulative       |   |
|-----------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------|--------|------------|------------------|--------|
|                                                                              |   |                    |       |   |            |   |       | from inception   |   |
|                                                                              |   |                    |       |   |            |   |       | (April 11, 1996) |   |
|                                                                              |   | Year ended December 31, |       |   | to December 31, |   |
|                                                                              |   | 2010                    |       |   | 2009            |   |       | 2010             |   |
| Cash flows from operating activities:                                             |   |                    |       |   |            |   |       |             |   |
|   Net loss                                                              |   | $                       | (1,166,045 | )      |            | $      | (2,887,231 | )                |   | $ | (42,797,138 | ) |
|   Adjustments to reconcile net loss to net cash                         |   |                    |       |   |            |   |       |             |   |   |   |   |
|     used by operating activities:                             |   |                    |       |   |            |   |       |             |   |   |   |   |
|     Depreciation and amortization                             |   |                    | 45,936     |   |            |   | 45,936     |             |   |   | 410,985 |   |
|     Amortization of loan discount                             |   |                    | 10,774     |   |            |   | -          |             |   |   | 10,774 |   |
|     Loss on extinguishment of debt                            |   |                    | 157,413    |   |            |   | -          |             |   |   | 157,413 |   |
|     Contribution of officer's salary/expenses paid by officer |   |                    | -          |   |            |   | 352,462    |             |   |   | 838,680 |   |
|     Issuance of common stock and options for services         |   |                    | 47,433     |   |            |   | 521,291    |             |   |   | 17,396,008 |   |
|     Issuance of preferred stock for services                  |   |                    | -          |   |            |   | 115,999    |             |   |   | 145,999 |   |
|     Issuance of debt for services                             |   |                    | 153,000    |   |            |   | -          |             |   |   | 153,000 |   |
|   Changes in operating assets and liabilities                           |   |                    |       |   |            |   |       |             |   |   |   |   |
|     Decrease (increase) in other assets                       |   |                    | 42,230     |   |            |   | 18,483     |             |   |   | 2,070 |   |
|     Increase (decrease) in accounts and other payable         |   |                    | (67,625    | )      |            |   | 176,188    |             |   |   | 277,528 |   |
|     (Decrease) increase in accrued expenses                   |   |                    | 419,056    |   |            |   | 17,232     |             |   |   | 898,590 |   |
|     Net cash used by operating activities                     |   |                    | (357,828   | )      |            |   | (1,639,640 | )                |   |   | (22,506,091 | ) |
|                                                                              |   |                    |       |   |            |   |       |             |   |   |   |   |
| Cash flows from investing activities:                                             |   |                    |       |   |            |   |       |             |   |   |   |   |
|   Purchase of patent                                                    |   |                    | -          |   |            |   | -          |             |   |   | (114,795 | ) |
|   Redemption of cash surrender value of life insurance                  |   |                    | -          |   |            |   | -          |             |   |   | 790,910 |   |
|   Increase in cash surrender value of life insurance                    |   |                    | -          |   |            |   | -          |             |   |   | (790,910 | ) |
|   Capital expenditures                                                  |   |                    | -          |   |            |   | -          |             |   |   | (148,016 | ) |
|     Net cash used by investing activities                     |   |                    | -          |   |            |   | -          |             |   |   | (262,811 | ) |
|                                                                              |   |                    |       |   |            |   |       |             |   |   |   |   |
| Cash flows from financing activities:                                             |   |                    |       |   |            |   |       |             |   |   |   |   |
|   Proceeds from shareholder notes                                       |   |                    | -          |   |            |   | 47,717     |             |   |   | 564,917 |   |
|   Proceeds from convertible debt                                        |   |                    | 410,000    |   |            |   | -          |             |   |   | 410,000 |   |
|   Payments on note payable to shareholder                               |   |                    | -          |   |            |   | -          |             |   |   | (102,017 | ) |
|   Exercise of options and warrants                                      |   |                    | -          |   |            |   | -          |             |   |   | 4,853,421 |   |
|   Issuance of preferred stock                                           |   |                    | -          |   |            |   | 117,000    |             |   |   | 16,390,512 |   |
|   Issuance of common stock                                              |   |                    | -          |   |            |   | -          |             |   |   | 915,200 |   |
|   Dividends                                                             |   |                    | -          |   |            |   | -          |             |   |   | (5,051 | ) |
|   Cancellation of common stock                                          |   |                    | -          |   |            |   | -          |             |   |   | (200,325 | ) |
|     Net cash provided by financing activities                 |   |                    | 410,000    |   |            |   | 164,717    |             |   |   | 22,826,657 |   |
|                                                                              |   |                    |       |   |            |   |       |             |   |   |   |   |
| Net increase (decrease) in cash                                                   |   |                    | 52,172     |   |            |   | (1,474,923 | )                |   |   | 57,755 |   |
| Cash, beginning of period                                                         |   |                    | 5,583      |   |            |   | 1,480,506  |             |   |   | - |   |
| Cash, end of period                                                               |   | $                       | 57,755     |   |            | $      | 5,583      |             |   | $ | 57,755 |   |

----

|                                                                                               |   |                    |    |   |            |   |      | Cumulative       |   |
|----------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------|--------|-----------|------------------|--------|
|                                                                                               |   |                    |    |   |            |   |      | from inception   |   |
|                                                                                               |   |                    |    |   |            |   |      | (April 11, 1996) |   |
|                                                                                               |   | Year ended December 31, |    |   | to December 31, |   |
|                                                                                               |   | 2010                    |    |   | 2009            |   |      | 2010             |   |
|                                                                                               |   |                    |    |   |            |   |      |             |   |
| Non-cash investing and financing activities:                                                       |   |                    |    |   |            |   |      |             |   |
|   Issuance of common stock for note receivable                                           |   | $                       | -       |   |            | $      | -         |             |   | $ | 150 |   |
|   Debt to equity conversion                                                              |   | $                       | -       |   |            | $      | -         |             |   | $ | 422,033 |   |
|   Acquisition of minority interest                                                       |   | $                       | -       |   |            | $      | -         |             |   | $ | 33,250 |   |
|   Sale of Tercero - elimination of goodwill                                              |   | $                       | -       |   |            | $      | -         |             |   | $ | (40,000 | ) |
|   Preferred dividends accrued                                                            |   | $                       | 664,960 |   |            | $      | 746,449   |             |   | $ | 3,892,336 |   |
|   Conversion of preferred stock and preferred dividends paid through issuance of common stock |   | $                       | 201,689 |   |            | $      | 560,955   |             |   | $ | 1,290,759 |   |
|   Acquisition of Med Enclosures for note payable                                         |   | $                       | -       |   |            | $      | -         |             |   | $ | 250,000 |   |
|   Acquisition of patent paid by issuance of common stock                                 |   | $                       | -       |   |            | $      | -         |             |   | $ | 288,708 |   |
|   Settlement of lawsuit by issuance of common stock                                      |   | $                       | -       |   |            | $      | -         |             |   | $ | 200,000 |   |
|   Valuation of beneficial conversion features                                            |   | $                       | 57,378  |   |            | $      | 2,464,166 |             |   | $ | 9,312,198 |   |
|   Conversion of loan to convertible debt                                                 |   | $                       | 47,717  |   |            | $      | -         |             |   | $ | 47,717 |   |
|   Amortization of loan premium                                                           |   | $                       | 44,077  |   |            | $      | -         |             |   | $ | 44,077 |   |

----

----

----

|   | ● | Level 1   inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Level 2   inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Level 3   inputs to the valuation methodology are unobservable and significant to the fair value. |
|--------|---------|------------------------------------------------------------------------------------------------------------------|

----

|                     |   | 2010   |    |   | 2009   |   |
|--------------------------|--------|--------|---------|--------|--------|--------|
| Patents                  |   |   |    |   |   |   |
| Gross carrying amount    |   | $      | 557,500 |   |   | $      | 557,500 |   |
| Accumulated amortization |   | $      | 372,373 |   |   | $      | 326,853 |   |
| Amortization expense     |   | $      | 45,520  |   |   | $      | 45,520 |   |
|                     |   |   |    |   |   |   |   |   |
| Trademark                |   |   |    |   |   |   |   |   |
| Gross carrying amount    |   | $      | 6,232   |   |   | $      | 6,232 |   |
| Accumulated amortization |   | $      | 5,959   |   |   | $      | 5,544 |   |
| Amortization expense     |   | $      | 416     |   |   | $      | 416 |   |

----

----

----

|                                   |   | CEO    |    |   | CFO    |   |    | Total  |   |
|----------------------------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|
| 2009 Salary                            |   | $      | 218,206 |   |   | $      | 45,000  |   |   | $ | 263,206 |   |
| 2010 Salary                            |   |   | 175,000 |   |   |   | 120,000 |   |   |   | 295,000 |   |
|                                   |   | $      | 393,206 |   |   | $      | 165,000 |   |   |   | 558,206 |   |
| Estimated employer taxes               |   |   |    |   |   |   |    |   |   |   | 24,363 |   |
| Total accrued salary and related taxes |   |   |    |   |   |   |    |   |   | $ | 582,569 |   |

----

| Quarter ending March 31, 2012:    |   | $ | 423,148   |   |
|-----------------------------------|--------|---|-----------|--------|
| Quarter ending June 30, 2012:     |   | $ | 255,030   |   |
| Quarter ending September 30, 2012 |   | $ | 314,843   |   |
| Quarter ending December 31, 2012  |   | $ | 91,341    |   |
| Total potential cash outlay:      |   | $ | 1,084,362 |   |

----

| Name           |   | InterestRate |   | IssueDate |       | ExpirationDate |       | ConversionRate |   |   | PrincipalAmount |   |
|----------------|--------|--------------|--------|-----------|------------|----------------|------------|----------------|--------|--------|-----------------|--------|
|           |   |         |   |      |       |           |       |           |   |   |            |   |
| Lender 1.      |   |         | 30%    |      | 5/7/2010   |           | 1/7/2012   |           |   | 0.57   |            |   | $ | 20,000 |   |
| Lender 2.      |   |         | 20%    |      | 2/11/2010  |           | 2/11/2012  |           |   | 0.74   |            |   |   | 10,000 |   |
| Lender 3       |   |         | 30%    |      | 8/31/2010  |           | 2/26/2012  |           |   | 0.33   |            |   |   | 106,500 |   |
| Lender 4       |   |         | 30%    |      | 8/31/2010  |           | 2/26/2012  |           |   | 0.33   |            |   |   | 10,000 |   |
| Lender 5       |   |         | 30%    |      | 8/31/2010  |           | 2/26/2012  |           |   | 0.33   |            |   |   | 10,000 |   |
| Lender 6.      |   |         | 30%    |      | 8/31/2010  |           | 2/26/2012  |           |   | 0.33   |            |   |   | 30,000 |   |
| Lender 7       |   |         | 30%    |      | 8/31/2010  |           | 2/26/2012  |           |   | 0.33   |            |   |   | 10,000 |   |
| Lender 8 - CEO |   |         | 20%    |      | 3/8/2010   |           | 3/8/2012   |           |   | 0.61   |            |   |   | 47,717 |   |
| Lender 1       |   |         | 30%    |      | 5/7/2010   |           | 5/7/2012   |           |   | 0.57   |            |   |   | 10,000 |   |
| Lender 7.      |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 5,000 |   |
| Lender 3       |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 8,000 |   |
| Lender 5       |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 3,475 |   |
| Lender 5       |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 4,300 |   |
| Lender 4       |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 25,675 |   |
| Lender 4       |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 4,830 |   |
| Lender 6       |   |         | 30%    |      | 8/31/2010  |           | 4/28/2012  |           |   | 0.33   |            |   |   | 36,720 |   |
| Lender 9.      |   |         | 30%    |      | 5/27/2010  |           | 5/27/2012  |           |   | 0.61   |            |   |   | 10,000 |   |
| Lender 10      |   |         | 30%    |      | 5/27/2010  |           | 5/27/2012  |           |   | 0.61   |            |   |   | 15,000 |   |
| Lender 11      |   |         | 30%    |      | 6/21/2010  |           | 6/21/2012  |           |   | 0.57   |            |   |   | 18,000 |   |
| Lender 4       |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 1,675 |   |
| Lender 4       |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 8,775 |   |
| Lender 5       |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 6,200 |   |
| Lender 5       |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 1,525 |   |
| Lender 6       |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 1,825 |   |
| Lender 12.     |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 5,000 |   |
| Lender 3       |   |         | 30%    |      | 8/4/2010   |           | 8/4/2012   |           |   | 0.33   |            |   |   | 2,500 |   |
| Lender 13.     |   |         | 25%    |      | 8/16/2010  |           | 8/16/2012  |           |   | 0.40   |            |   |   | 10,000 |   |
| Lender 5       |   |         | 30%    |      | 8/31/2010  |           | 8/31/2012  |           |   | 0.33   |            |   |   | 11,425 |   |
| Lender 5       |   |         | 30%    |      | 8/31/2010  |           | 8/31/2012  |           |   | 0.33   |            |   |   | 6,650 |   |
| Lender 4       |   |         | 30%    |      | 8/31/2010  |           | 8/31/2012  |           |   | 0.33   |            |   |   | 3,945 |   |
| Lender 4       |   |         | 30%    |      | 8/31/2010  |           | 8/31/2012  |           |   | 0.33   |            |   |   | 2,980 |   |
| Lender 3       |   |         | 30%    |      | 8/31/2010  |           | 8/31/2012  |           |   | 0.33   |            |   |   | 2,500 |   |
| Lender 14.     |   |         | 30%    |      | 9/17/2010  |           | 9/16/2012  |           |   | 0.37   |            |   |   | 100,000 |   |
| Lender 15      |   |         | 30%    |      | 9/17/2010  |           | 9/16/2012  |           |   | 0.37   |            |   |   | 10,000 |   |
| Lender 16.     |   |         | 30%    |      | 11/4/2010  |           | 11/3/2012  |           |   | 0.37   |            |   |   | 15,000 |   |
| Lender 17.     |   |         | 30%    |      | 11/17/2010 |           | 11/16/2012 |           |   | 0.37   |            |   |   | 10,000 |   |
| Lender 18      |   |         | 30%    |      | 11/17/2010 |           | 11/21/2012 |           |   | 0.37   |            |   |   | 20,000 |   |
| Lender 11      |   |         | 30%    |      | 11/17/2010 |           | 11/16/2012 |           |   | 0.37   |            |   |   | 5,500 |   |
|           |   |         |   |      |       |           |       |           |   |   |            |   | $ | 610,717 |   |

----

----

----

|   |   | # of      |   |   |      |    |   | # of      |   |    |      |   |   | # of      |   |   |      |    |   | # of   |   |
|--------|--------|-----------|--------|--------|-----------|---------|--------|-----------|--------|---------|-----------|--------|--------|-----------|--------|--------|-----------|---------|--------|--------|--------|
|   |   | Series C  |   |   | Accrued   |    |   | Series D  |   |    | Accrued   |   |   | Series E  |   |   | Accrued   |    |   | Common |   |
|   |   | Shares    |   |   | Dividends |    |   | Shares    |   |    | Dividends |   |   | Shares    |   |   | Dividends |    |   | Shares |   |
| Year   |   | Converted |   |   | Converted |    |   | Converted |   |    | Converted |   |   | Converted |   |   | Converted |    |   | Issued |   |
| 2002   |   | 18,576    |   |   | $         | 6,625   |   |      |   | -       |      |   | $      | -         |   |   |      | -       |   |   | $      | - |   |   |   | 46,314 |   |
| 2003   |   | 26,786    |   |   | $         | 18,071  |   |      |   | -       |      |   | $      | -         |   |   |      | -       |   |   | $      | - |   |   |   | 73,800 |   |
| 2004   |   | 11,236    |   |   | $         | 11,758  |   |      |   | 27,873  |      |   | $      | 16,706    |   |   |      | -       |   |   | $      | - |   |   |   | 70,918 |   |
| 2005   |   | 6,180     |   |   | $         | 9,500   |   |      |   | 106,922 |      |   | $      | 107,823   |   |   |      | -       |   |   | $      | - |   |   |   | 176,405 |   |
| 2006   |   | 5,618     |   |   | $         | 9,520   |   |      |   | 28,418  |      |   | $      | 39,390    |   |   |      | -       |   |   | $      | - |   |   |   | 60,219 |   |
| 2007   |   | 2,809     |   |   | $         | 7,137   |   |      |   | 27,014  |      |   | $      | 54,000    |   |   |      | -       |   |   | $      | - |   |   |   | 52,964 |   |
| 2008   |   | -         |   |   | $         | -       |   |      |   | 4,826   |      |   | $      | 11,013    |   |   |      | -       |   |   | $      | - |   |   |   | 8,045 |   |
| 2009   |   | 16,854    |   |   | $         | 53,011  |   |      |   | 30,056  |      |   | $      | 82,944    |   |   |      | -       |   |   | $      | - |   |   |   | 109,048 |   |
| 2010   |   | -         |   |   | $         | -       |   |      |   | -       |      |   | $      | -         |   |   |      | 191,500 |   |   | $      | 201,689 |   |   |   | 491,165 |   |
| Totals |   | 88,059    |   |   | $         | 115,622 |   |      |   | 225,109 |      |   | $      | 311,876   |   |   |      | 191,500 |   |   | $      | 201,689 |   |   |   | 1,088,878 |   |

----

----

|     |   |   |        |   |      |         |   |   | Weighted |   |   |        |   |   | Weighted |   |
|----------|--------|--------|-------------|--------|-----------|--------------|--------|--------|----------|--------|--------|-------------|--------|--------|----------|--------|
|     |   |   |        |   |      | Average      |   |   | average  |   |   |        |   |   | average  |   |
| Exercise |   |   | Options     |   |      | remaining    |   |   | exercise |   |   | Number      |   |   | exercise |   |
| Price    |   |   | Outstanding |   |      | life (years) |   |   | price    |   |   | exercisable |   |   | price    |   |
|     |   |   |        |   |      |         |   |   |     |   |   |        |   |   |     |   |
| $        | 4.45   |   |        |   | 100,000   |         |   |   | 2.75     |   |   | $           | 4.45   |   |     |   | 100,000 |   |   | $ | 4.45 |   |
| $        | 5.05   |   |        |   | 100,000   |         |   |   | 2.11     |   |   | $           | 5.05   |   |     |   | 100,000 |   |   | $ | 5.05 |   |
| $        | 7.90   |   |        |   | 1,653,907 |         |   |   | 2.33     |   |   | $           | 7.90   |   |     |   | 1,653,907 |   |   | $ | 7.90 |   |

|     |   |   |        |   |    |         |   |   | Weighted |   |   |        |   |   | Weighted |   |
|----------|--------|--------|-------------|--------|---------|--------------|--------|--------|----------|--------|--------|-------------|--------|--------|----------|--------|
|     |   |   |        |   |    | Average      |   |   | average  |   |   |        |   |   | average  |   |
| Exercise |   |   | Options     |   |    | remaining    |   |   | exercise |   |   | Number      |   |   | exercise |   |
| Price    |   |   | Outstanding |   |    | life (years) |   |   | price    |   |   | exercisable |   |   | price    |   |
|     |   |   |        |   |    |         |   |   |     |   |   |        |   |   |     |   |
| $        | 7.90   |   |        |   | 100,000 |         |   |   | 2.33     |   |   | $           | 7.90   |   |     |   | 100,000 |   |   | $ | 7.90 |   |
| $        | 4.45   |   |        |   | 50,000  |         |   |   | 2.75     |   |   | $           | 4.45   |   |     |   | 50,000 |   |   | $ | 4.45 |   |

|                             |   | Number of |       |   | Exercise |   |         |       |   |
|----------------------------------|--------|-----------|------------|--------|----------|--------|--------------|------------|--------|
|                             |   | Options   |       |   | Price    |   |         | Expiration |   |
| Inception (April 11, 1996)       |   |      | -          |   |     |   | -            |       |   |   | - |   |
| Granted                          |   |      | 4,420,000  |   |     | $      | 1.125 - 1.25 |       |   |   | 1997 - 2006 |   |
| Outstanding at December 31, 1996 |   |      | 4,420,000  |   |     | $      | 1.125 - 1.25 |       |   |   | 1997 - 2006 |   |
| Exercised                        |   |      | (26,666    | )      |     | $      | 1.125        |       |   |   |   |   |
| Expired                          |   |      | (200,000   | )      |     | $      | 1.18         |       |   |   |   |   |
| Outstanding at December 31, 1997 |   |      | 4,193,334  |   |     | $      | 1.125 - 1.25 |       |   |   | 2006 |   |
| Granted                          |   |      | 4,152,000  |   |     | $      | 1.25 - 9.00  |       |   |   | 2008 |   |
| Exercised                        |   |      | (57,000    | )      |     | $      | 1.125 - 2.50 |       |   |   |   |   |
| Canceled                         |   |      | (1,173,334 | )      |     | $      | 1.125        |       |   |   |   |   |
| Outstanding at December 31, 1998 |   |      | 7,115,000  |   |     | $      | 1.125 - 9.00 |       |   |   | 2003 - 2008 |   |
| Granted                          |   |      | 25,000     |   |     | $      | 5.50         |       |   |   | 2004 |   |
| Exercised                        |   |      | (146,904   | )      |     | $      | 1.125 - 2.50 |       |   |   |   |   |
| Canceled                         |   |      | (490,000   | )      |     | $      | 1.125        |       |   |   |   |   |
| Outstanding at December 31, 1999 |   |      | 6,503,096  |   |     | $      | 1.125 - 9.00 |       |   |   | 2003 - 2008 |   |
| Granted                          |   |      | 175,000    |   |     | $      | 5.00 - $5.75 |       |   |   | 2004 - 2005 |   |
| Exercised                        |   |      | (223,832   | )      |     | $      | 1.125 - 2.50 |       |   |   |   |   |
| Outstanding at December 31, 2000 |   |      | 6,454,264  |   |     | $      | 1.125 - 9.00 |       |   |   | 2003 - 2008 |   |
| Granted                          |   |      | 15,800     |   |     | $      | 2.50         |       |   |   | 2004 |   |
| Exercised                        |   |      | (360,394   | )      |     | $      | 1.125 - 2.50 |       |   |   |   |   |
| Outstanding at December 31, 2001 |   |      | 6,109,670  |   |     | $      | 1.125 - 9.00 |       |   |   | 2003 - 2008 |   |
| Exercised                        |   |      | (282,480   | )      |     | $      | 1.125        |       |   |   |   |   |
| Canceled                         |   |      | (100,000   | )      |     | $      | 5.50         |       |   |   |   |   |
| Outstanding at December 31, 2002 |   |      | 5,727,190  |   |     | $      | 1.125 - 9.00 |       |   |   | 2003 - 2008 |   |

----

|                             |   |   | Number of |   |   |   | Exercise      |   |   |   |        |   |
|----------------------------------|--------|--------|-----------|--------|--------|--------|---------------|--------|--------|--------|-------------|--------|
|                             |   |   | Options   |   |   |   | Price         |   |   |   | Expiration  |   |
| Exercised                        |   |   | (775,117  | )      |   | $      | 1.125 - 9.00  |   |   |   |        |   |
| Canceled                         |   |   | (10,000   | )      |   | $      | 8.00          |   |   |   |        |   |
| Outstanding at December 31, 2003 |   |   | 4,942,073 |   |   | $      | 1.125 - 5.75  |   |   |   | 2004 - 2008 |   |
| Granted                          |   |   | 550,000   |   |   | $      | 29.12         |   |   |   | 2009        |   |
| Exercised                        |   |   | (460,775  | )      |   | $      | 1.125 - 5.75  |   |   |   |        |   |
| Outstanding at December 31, 2004 |   |   | 5,031,298 |   |   | $      | 1.125 - 29.12 |   |   |   | 2006-2009   |   |
| Exercised                        |   |   | (470,393  | )      |   | $      | 1.125 - 2.50  |   |   |   |        |   |
| Outstanding at December 31, 2005 |   |   | 4,560,905 |   |   | $      | 1.125 - 29.12 |   |   |   | 2006-2009   |   |
| Granted                          |   |   | 200,000   |   |   | $      | 30.00         |   |   |   | 2009        |   |
| Exercised                        |   |   | (732,699  | )      |   | $      | 1.125 - 2.50  |   |   |   |        |   |
| Outstanding at December 31, 2006 |   |   | 4,028,206 |   |   | $      | 2.50 - 30.00  |   |   |   | 2008-2009   |   |

| Exercised                                   |   |   | (621,551   | )      |   | $      | 2.50         |   |   |   | 2008        |   |
|---------------------------------------------|--------|--------|------------|--------|--------|--------|--------------|--------|--------|--------|-------------|--------|
| Outstanding at December 31, 2007            |   |   | 3,406,655  |   |   | $      | 2.50 - 30.00 |   |   |   | 2008 - 2009 |   |
| Granted                                     |   |   | 3,390,876  |   |   | $      | 4.45 - 7.90  |   |   |   | 2013        |   |
| Exercised                                   |   |   | (154,150   | )      |   | $      | 2.50 - 7.90  |   |   |   | 2008 - 2013 |   |
| Canceled/Expired                            |   |   | (2,865,876 | )      |   | $      | 2.50 - 30.00 |   |   |   | 2008 - 2009 |   |
| Outstanding at December 31, 2008            |   |   | 3,777,505  |   |   | $      | 4.45 - 30.00 |   |   |   | 2009 - 2013 |   |
| Exercised                                   |   |   | (29,404    | )      |   | $      | 7.90         |   |   |   | 2013        |   |
| Canceled/Expired                            |   |   | (1,894,194 | )      |   | $      | 7.90 - 30.00 |   |   |   | 2009 - 2013 |   |
| Outstanding at December 31, 2009 & 2010 |   |   | 1,853,907  |   |   | $      | 4.45 - 7.90  |   |   |   | 2013        |   |
|                                        |   |   |       |   |   |   |         |   |   |   |        |   |
| Exercisable at December 31, 2010            |   |   | 1,853,907  |   |   | $      | 4.45 - 7.90  |   |   |   | 2013        |   |

----

----

----

----

----

----

|                                                     |   | Year ended   |    |   |           |   |
|----------------------------------------------------------|--------|--------------|---------|--------|----------------|--------|
|                                                     |   | December 31, |    |   | Cumulative     |   |
|                                                     |   | 2009         |    |   | from inception |   |
|                                                     |   |         |    |   |           |   |
| Research and development:                                |   |         |    |   |           |   |
|   Consulting                                   |   | $            | 173,247 |   |           | $      | 6,309,233 |   |
|   Expense reimbursements                       |   |         | -       |   |           |   | 152,001 |   |
|   Engineering development                      |   |         | -       |   |           |   | 3,554,877 |   |
|     Total R&D to related parties |   |         | 173,247 |   |           |   | 10,016,111 |   |
|                                                     |   |         |    |   |           |   |   |   |
| General and administrative:                              |   |         |    |   |           |   |   |   |
|   Consulting                                   |   |         | 43,312  |   |           |   | 1,553,816 |   |
|   Rent                                         |   |         | 15,732  |   |           |   | 113,972 |   |
|   Expense reimbursements                       |   |         | -       |   |           |   | 113,789 |   |
|                                                     |   |         | 59,044  |   |           |   | 1,781,577 |   |
|                                                     |   |         |    |   |           |   |   |   |
| Total expenses to related parties                        |   | $            | 232,291 |   |           | $      | 11,797,688 |   |

----

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

| ITEM 9A. | CONTROLS AND PROCEDURES |
|----------|-------------------------|

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

----

| ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS |
|----------|----------------------------------|

| Name                |   | Director Since |   | Age    |   | Position Held                         |   |
|---------------------|--------|----------------|--------|--------|--------|---------------------------------------|--------|
| Rod A. Shipman      |   | 1996           |   | 60     |   | President and Chief Executive Officer |   |
|                |   |           |   |   |   |                                  |   |
| Marcia J. Hein      |   | 2008           |   | 52     |   | Treasurer and Chief Financial Officer |   |
|                |   |           |   |   |   |                                  |   |
| Rafe Cohen          |   | 1998           |   | 63     |   | Director                              |   |
|                |   |           |   |   |   |                                  |   |
| William C. Lievense |   | 1996           |   | 63     |   | Director                              |   |
|                |   |           |   |   |   |                                  |   |
| Ronald Cenko        |   | 2008           |   | 47     |   | Director                              |   |

----

| ● | Had any petition under the federal bankruptcy laws or any state insolvency law filed by or against, or had a receiver, fiscal agent, or similar officer appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | Been convicted in a criminal proceeding or a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | i. | Acting as s futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ii. | Engaging in any type of business practice; or |
|--------|-----|-----------------------------------------------|

|   | iii. | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodities laws; |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | Been the subject of any order, judgment, or decree, not subsequently reversed, suspended, or vacated, of any federal or state authority barring, suspending, or otherwise limiting for more than 60 days the right of such person to engage in any activity described in (i.) above, or to be associated with persons engaged in any such activity; |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | Been found by a court of competent jurisdiction in a civil action or by the SEC to have violated any federal or state securities law, where the judgment in such civil action or finding by the SEC has not been subsequently reversed, suspended, or vacated; or |
|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● | Been found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, where the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended, or vacated. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ● | Been subject or, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | i. | Any federal or state securities or commodities law or regulation; or |
|--------|----|----------------------------------------------------------------------|

|   | ii. | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iii. | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
|--------|------|----------------------------------------------------------------------------------------------------------|

| ● | Been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The ability to devote sufficient time and attention to the responsibilities of serving on the Board of Directors of a publicly traded company; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Training and experience in a function or discipline relevant to the business and operations of the Company (e.g. technology, finance, operations, marketing), or in a market or business that is similar to that contemplated by our business plan (e.g. medical devices) or in other areas that would enhance the effectiveness of the Board of Directors; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Awareness of and commitment to act in the best interests of the Company’s stockholders; and |
|--------|--------|---------------------------------------------------------------------------------------------------|

|   | · | A demonstrated record of ethical conduct and sound business judgment established by service for a period of not less than five (5) years in an executive position with a corporation or as a practicing licensed professional, in each case involving substantial responsibility and leadership. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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

| Name and Principal Position |   | Year |   | Salary($) |    | Bonus($) |    | StockAwards($) |    | OptionAwards($) |    | Non-EquityIncentivePlanCompen-sation($) |    | Non-qualifiedDeferredCompen-sationEarnings($) |    | AllOtherComp-ensation($) |    | Total($) |
|--------------------------------------------|--------|------|--------|-----------|---------|----------|---------|----------------|---------|-----------------|---------|-----------------------------------------|---------|-----------------------------------------------|---------|--------------------------|---------|----------|
| Rod A. Shipman, CEO                        |   | 2010 |   | $         | 175,000 | (1)      | ― |           | ― |            | ― |                                    | ― |                                          | ― |                     | 55,449  | (7)      | 230,449 |
|                                       |   | 2009 |   |      | 337,473 | (2)      | ― |           | ― |            |    |                                    | ― |                                          | ― |                     | ---     |     | 337,473 |
| Marcia Hein, CFO                           |   | 2010 |   |      | 120,000 | (3)      | ― |           | ― |            | ― |                                    | ― |                                          | ― |                     | ― |     | 120,000 |
|                                       |   | 2009 |   |      | 60,000  | (4)      | ― |           | 73,000  | (5)(6)          | ― |                                    | ― |                                          | ― |                     | ― |     | 133,000 |

|   | (1     | )      | All the $175,000 in salary for 2010 was accrued as of December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (2     | )      | Of the $337,473 in salary for 2009, $119,266 was paid in cash, and $218,207 was accrued as of December 31, 2009. Mr. Shipman was personally responsible for the payment of and not entitled to seek reimbursement from CPC for any travel, entertainment, or other business expenses he incurred in connection with the performance of his duties on behalf of CPC. In addition, during the reported periods, Mr. Shipman received no benefits from us and paid all routine office expenses, including postage, courier, phone and supplies without reimbursement from us.       |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (3     | )      | All the $120,000 in salary earned in 2010 was accrued as of December 31, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (4     | )      | Of the $60,000 in salary earned in 2009, $15,000 was paid in cash, and $45,000 was accrued as of December 31, 2009. During 2009, Ms. Hein was personally responsible for the payment of and not entitled to seek reimbursement from CPC for any travel, entertainment, or other business expenses she incurred in connection with the performance of her duties on behalf of CPC. In addition, during the reported periods, Ms. Hein received no benefits from us and paid all routine office expenses, including postage, courier, phone and supplies without reimbursement from us. |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (5     | )      | Pursuant to her employment agreement, Ms. Hein was granted 30,000 shares of our Series E Preferred Stock, of which 10,000 shares vested ($60,000) in 2009. Effective January 1, 2010, the                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (6     | )      | In May 2009, Ms. Hein was granted 2,167 shares of our Series E Preferred Stock for total compensation of $13,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | (7     | )      | Life insurance premiums.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

----

|           |   | Option Awards                                                       |    | Stock Awards |                                                                  |
|----------------|--------|---------------------------------------------------------------------|---------|--------------|-----------------------------------------------------------------------|
| Name           |   | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable |    |         | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable |   |   | EquityIncentivePlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#) |   |   | OptionExercisePrice ($) |   | OptionExpirationDate |   | NumberofSharesor Unitsof StockThatHaveNotVested(#) |   |   | MarketValue ofShares orUnits ofStock ThatHave NotVested ($) |   |   | EquityIncentivePlanAwards:Number ofUnearnedShares,Units,orOtherRightsThatHave NotVested (#) |   |   | EquityIncentivePlan Awards:Market orPayoutValue ofUnearnedShares, Units,or OtherRights ThatHave NotVested (#) |   |
|           |   |                                                                |    |         |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Rod A. Shipman |   |                                                                | 100,000 | (1)          |                                                                  |   | 0 |   |   |   | 0 |   |   | $ | 7.90 |   | 4/24/13 |   |   | ― |   |   |   | ― |   |   |   | ― |   |   |   | ― |   |
| Marcia Hein    |   |                                                                | 50,000  | (2)          |                                                                  |   | 0 |   |   |   | 0 |   |   | $ | 4.45 |   | 10/08/13 |   |   | ― |   |   |   | ― |   |   |   | ― |   |   |   | ― |   |

| (1)    |   | On April 25, 2008, we granted Mr. Shipman options to purchase 1,607,565 shares of common stock which vest and became exercisable immediately.  The exercise price was $7.90 and the options expire April 24, 2013.  Mr. Shipman exercised 38,371 of these shares in lieu of salary in 2008, and cancelled 1,469,194 of the options in 2009. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                            |
| (2)    |   | On October 8, 2008, we granted Ms. Hein options to purchase 50,000 shares of common which vest and became exercisable immediately.                                                                                                                                                                                                                              |

|  Name       |   | Fees Earnedor Paidin Cash($)(b) |   |   | StockAwards($)(c) |   |   | OptionAwards($)(d) |   |   | Non-EquityIncentive PlanCompensation($)(e) |   |   | Change inPensionValue andNonqualifiedDeferredCompensationEarnings($)(f) |   |   | All OtherCompensation($)(g) |   |   | Total($)(h) |   |
|------------------|--------|---------------------------------|--------|--------|-------------------|--------|--------|--------------------|--------|--------|--------------------------------------------|--------|--------|-------------------------------------------------------------------------|--------|--------|-----------------------------|--------|--------|-------------|--------|
| Rod Shipman      |   | 5,000                           |   |   |              |   |   |               |   |   |                                       |   |   |                                                                    |   |   |                        |   |   |        | 5,000  |   |
| Rafe Cohen       |   | 5,000                           |   |   |              | --     |   |               |   | -      |                                       |   |   | --                                                                      |   |   |                        | --     |   |        |   | -- |   |   |   | 5,000 |   |
| William Lievense |   | 5,000                           |   |   |              | --     |   |               |   | -      |                                       |   |   | --                                                                      |   |   |                        | --     |   |        |   | -- |   |   |   | 5,000 |   |
| Ronald Cenko     |   | 5,000                           |   |   |              | --     |   |               |   | -      |                                       |   |   | --                                                                      |   |   |                        | --     |   |        |   | -- |   |   |   | 5,000 |   |
| Marcia Hein      |   | 5,000                           |   |   |              | --     |   |               |   | -      |                                       |   |   | --                                                                      |   |   |                        | --     |   |        |   | -- |   |   |   | 5,000 |   |

----

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

| Name of Director, Executive Officer or Nominee              |   | Shares(1) |   |   |   | Percentage |   |
|-------------------------------------------------------------|--------|-----------|--------|--------|--------|------------|--------|
| Rod A. Shipman                                              |   | 986,832   | (2     | )      |   | 9.6        | %      |
| Rafe Cohen                                                  |   | 117,455   | (3     | )(4)   |   | 1.2        | %      |
| William C. Lievense                                         |   | 119,727   | (4     | )(5)   |   | 1.2        | %      |
| Marcia Hein                                                 |   | 92,909    | (4     | )(6)   |   | *          |   |
| Ronald Cenko                                                |   | 55,455    | (3     | )(4)   |   | *          |   |
|                                                        |   |      |   |   |   |       |   |
| All directors and executive officers as a group (5 persons) |   | 1,372,377 |   |   |   | 13.1       | %      |
| * Less than one percent                                     |   |      |   |   |   |       |   |
|                                                        |   |      |   |   |   |       |   |
| Name and Address of 5% Holder                               |   |      |   |   |   |       |   |
| CTM Group, Inc.                                             |   | 3,169,940 | (7     | )      |   | 27.1       | %      |
| 1350 East Flamingo, #800                                    |   |      |   |   |   |       |   |
| Las Vegas, Nevada 89119                                     |   |      |   |   |   |       |   |

| (1)    |   | Unless otherwise noted, the persons identified in this table have sole voting and sole investment power with regard to the shares beneficially owned by them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (2)    |   | Includes options to purchase 100,000 shares of common stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (3)    |   | Includes 5,455 shares of common stock issuable upon conversion of 2,500 shares of Series E Preferred Stock beneficially owned as of April 2, 2010.  The Series E Preferred Stock was issued for service on the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (4)    |   | Includes options to purchase 50,000 shares of common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| (5)    |   | Includes 4,727 shares of common stock issuable upon conversion of 2,167 shares of Series E Preferred Stock beneficially owned as of April 2, 2010.  The Series E Preferred Stock was issued for service on the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (6)    |   | Includes 42,909 shares of common stock issuable upon conversion of 19,667 shares of Series E Preferred Stock beneficially owned by Ms. Hein as of April 2, 2010.  Pursuant to her employment agreement, Ms. Hein was granted 30,000 shares of our Series E Preferred Stock, of which 5,000 shares vested upon the execution of the employment agreement and the balance will be issued in 30 equal monthly installments, subject to Ms. Hein’s continued employment.  As of April 2, 2010, 17,500 of these shares had vested. In addition, Ms. Hein received 2,167 shares of Series E Preferred Stock in 2009 for service on the Board of Directors.  |
| (7)    |   | Includes options to purchase 1,553,907 shares of common stock at $7.90 which expire on or before April 23, 2013.  Exercise of all these options for cash would create $12,275,865 of capital to the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

----

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

----

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

|               |   | 2010   |   |   | 2009   |   |
|--------------------|--------|--------|--------|--------|--------|--------|
| Audit Fees         |   | $      | 72,000 |   |   | $      | 97,350 |   |
| Audit-Related Fees |   |   | --     |   |   |   | -- |   |
| Tax Fees           |   |   | --     |   |   |   | -- |   |
| All Other Fees     |   |   | --     |   |   |   | -- |   |
|               |   | $      | 72,000 |   |   | $      | 97,350 |   |

| ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
|----------|--------------------------------------------|

|   | 3.1 | Articles of Incorporation of the Company (1) |
|--------|-----|----------------------------------------------|

|   | 3.2 | Certificate of Amendment of Articles of Incorporation (3) |
|--------|-----|-----------------------------------------------------------|

|   | 3.3 | Bylaws of the Company (1) |
|--------|-----|---------------------------|

|   | 3.4 | Amended and Restated Operating Agreement for Med Enclosures LLC (6) |
|--------|-----|---------------------------------------------------------------------|

|   | 4.1 | Specimen of Common Stock Certificate (1) |
|--------|-----|------------------------------------------|

|   | 4.2 | Certificate of Designations of the Company's Series A Preferred Stock (4) |
|--------|-----|---------------------------------------------------------------------------|

|   | 4.3 | Certificate of Designations of the Company's Series B Preferred Stock (7) |
|--------|-----|---------------------------------------------------------------------------|

|   | 4.4 | Certificate of Designations of the Company's Series C Preferred Stock (7) |
|--------|-----|---------------------------------------------------------------------------|

|   | 4.5 | Certificate of Designations of the Company's Series D Preferred Stock (9) |
|--------|-----|---------------------------------------------------------------------------|

|   | 4.6 | Certificate of Designations of the Company's Series E Preferred Stock (12) |
|--------|-----|----------------------------------------------------------------------------|

----

|   | 10.1 | Stock Purchase Agreement between the Company and DSDS Group, Inc. dated July 25, 1997 (1) |
|--------|------|-------------------------------------------------------------------------------------------|

|   | 10.2 | Employment Agreement dated April 23, 1998 between the Company and Rod A. Shipman (2) |
|--------|------|--------------------------------------------------------------------------------------|

|   | 10.3 | Amendment to Employment Agreement dated April 1, 1999 between the Company and Rod A. Shipman (4) |
|--------|------|--------------------------------------------------------------------------------------------------|

|   | 10.4 | Amendment to Consulting Agreement dated April 1, 1999 between the Company and CTM Group, Inc. (4) |
|--------|------|---------------------------------------------------------------------------------------------------|

|   | 10.5 | Letter Agreement between the Company and Leslie J. Kessler dated May 18, 1999 (5) |
|--------|------|-----------------------------------------------------------------------------------|

|   | 10.6 | Membership Interest Purchase Agreement dated September 30, 2002 between Gene Myers Enterprises, Inc. and the Company (8) |
|--------|------|--------------------------------------------------------------------------------------------------------------------------|

|   | 10.7 | Technology agreement dated October 29, 2002 between Med Close Corp. and Med Enclosure LLC (8) |
|--------|------|-----------------------------------------------------------------------------------------------|

|   | 10.8 | Amendment No. 2 dated January 1, 2003 to Employment Agreement dated April 23, 1998 between the Company and Rod A. Shipman (9) |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------|

|   | 10.9 | Amendment No. 3 dated October 15, 2004 to Royalty Agreement between Med Enclosure, LLC and Rod A. Shipman (10) |
|--------|------|----------------------------------------------------------------------------------------------------------------|

|   | 10.10 | Amendment No. 3 dated October 15, 2004 to Royalty Agreement between Med Enclosure, LLC and CTM Group, Inc. (10) |
|--------|-------|-----------------------------------------------------------------------------------------------------------------|

|   | 10.11 | Membership Interest Purchase Agreement dated November 30, 2004 between Gene Myers Enterprises, Inc. and the Company (11) |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------|

|   | 10.12 | Membership Interest Purchase Agreement dated January 31, 2005 between Gene Myers Enterprises, Inc. and the Company (11) |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------|

|   | 10.13 | Amendment No. 3 dated May 31, 2005 to Employment Agreement dated April 23, 1998 between the Company and Rod A. Shipman (12) |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------|

|   | 10.14 | Employment Agreement dated February 4, 2009 between the Company and Marcia J. Hein (14) |
|--------|-------|-----------------------------------------------------------------------------------------|

|   | 10.15 | Product Development Agreement dated March 9, 2009 between the Company and Olex Hnojewyj (15) |
|--------|-------|---------------------------------------------------------------------------------------------------|

|   | 10.16 | Convertible Debenture dated February 26, 2010 between Rodney Schoemann and the Company* |
|--------|-------|-----------------------------------------------------------------------------------------|

|   | 10.17 | Convertible Debenture dated February 26, 2010 between Carol L. Schoemann and the Company* |
|--------|-------|-------------------------------------------------------------------------------------------|

|   | 10.18 | Convertible Debenture dated March 8, 2010 between Rod Shipman and the Company* |
|--------|-------|--------------------------------------------------------------------------------|

|   | 10.19 | Convertible Debenture dated April 28, 2010 between Carol L. Schoemann and the Company* |
|--------|-------|----------------------------------------------------------------------------------------|

|   | 10.20 | Convertible Debenture dated September 17, 2010 between Henry F. Johnson, Jr. and the Company* |
|--------|-------|-----------------------------------------------------------------------------------------------|

|   | 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * |
|--------|------|------------------------------------------------------------------------------------------------------|

|   | 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
|--------|------|-----------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 * |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Name |   | Capacity |   | Date |
|------|--------|----------|--------|------|

| /s/ Rod A. Shipman |   | Chairman of the Board, President                                     |   | September 7, 2011 |
|--------------------|--------|----------------------------------------------------------------------|--------|-------------------|
| Rod A. Shipman     |   | and Chief Executive Officer (principalexecutive officer)             |   |              |
|               |   |                                                                 |   |              |
| /s/ Marcia J. Hein |   | Chief Financial Officer and Treasurer                                |   | September 7, 2011 |
| Marcia J. Hein     |   | (principal financial and accountingOfficer),  and Director |   |              |

| /s/ Rafe Cohen  |   | Director |   | September 7, 2011 |
|----------------------|--------|----------|--------|-------------------|
| Rafe Cohen           |   |     |   |              |

| /s/ William Lievense  |   | Director |   | September 7, 2011 |
|----------------------------|--------|----------|--------|-------------------|
| William Lievense           |   |     |   |              |
|                       |   |     |   |              |
| /s/ Ronald P. Cenko   |   | Director |   | September 7, 2011 |
| Ronald P. Cenko            |   |     |   |              |