----

| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
|-----|------------------------------------------------------------------------------------------|

|   | OR |
|--------|----|

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

| Delaware(State or Other Jurisdiction of Incorporation or Organization) | 95-4654481(I.R.S. Employer Identification No.) |
|------------------------------------------------------------------------|------------------------------------------------|

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

----

----

----

|                                                                                                                                                                   |   | September 30,2010 |        |   | December 31,2009 |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-------------|--------|------------------|--------|
|                                                                                                                                                                   |   | (Unaudited)       |        |   |             |   |
| Assets                                                                                                                                                                 |   |              |        |   |             |   |
| Current Assets:                                                                                                                                                        |   |              |        |   |             |   |
| Cash and cash equivalents                                                                                                                                              |   | $                 | 2,016,648   |   |             | $      | 2,264,606 |   |
| Accounts receivable, net                                                                                                                                               |   |              | 2,858,307   |   |             |   | 3,021,642 |   |
| Inventories, net                                                                                                                                                       |   |              | 1,279,391   |   |             |   | 1,679,302 |   |
| Prepaid expenses and other current assets                                                                                                                              |   |              | 354,283     |   |             |   | 240,554 |   |
| Total current assets                                                                                                                                                   |   |              | 6,508,629   |   |             |   | 7,206,104 |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Property and equipment, net                                                                                                                                            |   |              | 1,741,761   |   |             |   | 2,280,586 |   |
| Intangible assets, net                                                                                                                                                 |   |              | 4,110,751   |   |             |   | 4,110,751 |   |
| Other assets                                                                                                                                                           |   |              | 413,962     |   |             |   | 236,386 |   |
| Total assets                                                                                                                                                           |   | $                 | 12,775,103  |   |             | $      | 13,833,827 |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Liabilities, Preferred Stock and Stockholders’ Equity (Deficit)                                                                                                  |   |              |        |   |             |   |   |   |
| Current liabilities:                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Accounts payable                                                                                                                                                       |   | $                 | 4,578,047   |   |             | $      | 6,337,368 |   |
| Accrued director’s fee                                                                                                                                           |   |              | 399,825     |   |             |   | 426,125 |   |
| Other accrued expenses                                                                                                                                                 |   |              | 1,399,850   |   |             |   | 2,252,534 |   |
| Revolver note payable                                                                                                                                                  |   |              | -           |   |             |   | 4,988,988 |   |
| Term notes payable, net of discounts                                                                                                                                   |   |              | -           |   |             |   | 9,876,114 |   |
| Notes payable to related parties                                                                                                                                       |   |              | 272,867     |   |             |   | 265,871 |   |
| Other notes and current portion of capital lease obligations                                                                                                           |   |              | 68,745      |   |             |   | 115,336 |   |
| Total current liabilities                                                                                                                                              |   |              | 6,719,334   |   |             |   | 24,262,336 |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Capital lease obligations, net of current portion                                                                                                                      |   |              | 19,049      |   |             |   | 23,477 |   |
| Deferred income tax                                                                                                                                                    |   |              | 568,467     |   |             |   | - |   |
| Other liabilities                                                                                                                                                      |   |              | 697,515     |   |             |   | 726,875 |   |
| Total liabilities                                                                                                                                                      |   |              | 8,004,365   |   |             |   | 25,012,688 |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Commitments and contingencies (Note 11)                                                                                                                                |   |              |        |   |             |   |   |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Series B Convertible Preferred Stock, $0.001 par value; 407,160 shares authorized, issued and outstanding at September 30, 2010                                        |   |              | 17,152,196  |   |             |   | - |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
| Stockholders’ Equity (Deficit):                                                                                                                                  |   |              |        |   |             |   |   |   |
| Series A Preferred Stock, $0.001 par value; 250,000 shares authorized; no shares issued or outstanding                                                                 |   |              | -           |   |             |   | - |   |
|                                                                                                                                                                   |   |              |        |   |             |   |   |   |
|     Common stock, $0.001 par value, 100,000,000 shares authorized; 20,291,433 shares issued and outstanding at September 30, 2010 and December 31, 2009 |   |              | 20,291      |   |             |   | 20,291 |   |
| Additional paid-in capital                                                                                                                                             |   |              | 56,693,948  |   |             |   | 55,070,568 |   |
| Accumulated deficit                                                                                                                                                    |   |              | (69,135,825 | )      |             |   | (66,344,009 | ) |
| Accumulated other comprehensive income                                                                                                                                 |   |              | 40,128      |   |             |   | 74,289 |   |
| Total stockholders’ equity (deficit)                                                                                                                             |   |              | (12,381,458 | )      |             |   | (11,178,861 | ) |
| Total liabilities, preferred stock and stockholders’ equity (deficit)                                                                                            |   | $                 | 12,775,103  |   |             | $      | 13,833,827 |   |

|   | See accompanying notes to consolidated financial statements. |
|--------|--------------------------------------------------------------|

----

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                     |   | Three Months Ended September 30, |       |   | Nine Months Ended September 30, |   |
|--------------------------------------------------------------------------|--------|----------------------------------|------------|--------|---------------------------------|--------|
|                                                                     |   | 2010                             |       |   | 2009                            |   |   | 2010 |   |   | 2009 |   |
| Net sales                                                                |   | $                                | 9,277,334  |   |                            | $      | 10,426,764 |   |   | $ | 32,485,666 |   |   | $ | 29,526,283 |   |
| Cost of goods sold                                                       |   |                             | 6,563,278  |   |                            |   | 7,476,061 |   |   |   | 22,995,680 |   |   |   | 21,029,966 |   |
| Gross profit                                                             |   |                             | 2,714,056  |   |                            |   | 2,950,703 |   |   |   | 9,489,986 |   |   |   | 8,496,317 |   |
|                                                                     |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing expenses                                             |   |                             | 840,779    |   |                            |   | 616,000 |   |   |   | 2,285,132 |   |   |   | 2,034,814 |   |
| General and administrative expenses                                      |   |                             | 1,971,458  |   |                            |   | 2,133,795 |   |   |   | 5,780,968 |   |   |   | 5,963,720 |   |
| Total operating expenses                                                 |   |                             | 2,812,237  |   |                            |   | 2,749,795 |   |   |   | 8,066,100 |   |   |   | 7,998,534 |   |
|                                                                     |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations                                            |   |                             | (98,181    | )      |                            |   | 200,908 |   |   |   | 1,423,886 |   |   |   | 497,783 |   |
|                                                                     |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                                    |   |                             | 160,765    |   |                            |   | 683,501 |   |   |   | 1,752,783 |   |   |   | 1,981,539 |   |
| Loss on extinguishment of debt                                           |   |                             | 570,915    |   |                            |   | - |   |   |   | 570,915 |   |   |   | - |   |
| Loss before provision for income taxes                                   |   |                             | (829,861   | )      |                            |   | (482,593 | ) |   |   | (899,812 | ) |   |   | (1,483,756 | ) |
| Provision for income taxes                                               |   |                             | 412,305    |   |                            |   | 164,563 |   |   |   | 543,321 |   |   |   | 267,073 |   |
| Net loss                                                                 |   | $                                | (1,242,166 | )      |                            | $      | (647,156 | ) |   | $ | (1,443,133 | ) |   | $ | (1,750,829 | ) |
|                                                                     |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Returns to Preferred Stockholders:                                       |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Series B Preferred Stock original issue discount                         |   |                             | (903,172   | )      |                            |   | - |   |   |   | (903,172 | ) |   |   | - |   |
| Series B Preferred Stock Dividends                                       |   |                             | (445,511   | )      |                            |   | - |   |   |   | (445,511 | ) |   |   | - |   |
| Loss attributable to common stockholders                            |   | $                                | (2,590,849 | )      |                            | $      | (647,156 | ) |   | $ | (2,791,816 | ) |   | $ | (1,750,829 | ) |
|                                                                     |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Loss per share:                                                          |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Loss attributable to common stockholders                            |   | $                                | (2,590,849 | )      |                            | $      | (647,156 | ) |   | $ | (2,791,816 | ) |   | $ | (1,750,829 | ) |
| Weighted average number of common shares outstanding - Basic and diluted |   |                             | 20,291,433 |   |                            |   | 20,291,433 |   |   |   | 20,291,433 |   |   |   | 20,291,433 |   |
|                                                                     |   |                             |       |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net loss per share                                     |   | $                                | (0.13      | )      |                            | $      | (0.03 | ) |   | $ | (0.14 | ) |   | $ | (0.09 | ) |

|   | See accompanying notes to consolidated financial statements. |
|--------|--------------------------------------------------------------|

----

|   | TALON INTERNATIONAL, INC. |
|--------|---------------------------|

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                            |   | Nine Months Ended September 30, |       |
|-----------------------------------------------------------------|--------|---------------------------------|------------|
|                                                            |   | 2010                            |       |   | 2009 |   |
| Cash flows from operating activities:                           |   |                            |       |   |   |   |
|   Net loss                                            |   | $                               | (1,443,133 | ) |   | $ | (1,750,829 | ) |
|   Adjustments to reconcile net loss to net cash       |   |                            |       |   |   |   |   |   |
| provided by (used in) operating activities:                     |   |                            |       |   |   |   |   |   |
| Depreciation, amortization, and loss from disposal of equipment |   |                            | 587,015    |   |   |   | 558,326 |   |
| Loss on extinguishment of debt                                  |   |                            | 570,915    |   |   |   | - |   |
| Amortization of deferred financing cost and debt discounts      |   |                            | 854,096    |   |   |   | 1,071,457 |   |
| Stock based compensation                                        |   |                            | 340,037    |   |   |   | 249,703 |   |
| Deferred income tax, net                                        |   |                            | 520,531    |   |   |   | 123,695 |   |
| Bad debt (recoveries) expense on accounts receivable            |   |                            | (53,133    | ) |   |   | 116,090 |   |
| Related party note recovery                                     |   |                            | (275,000   | ) |   |   | - |   |
| Inventory valuation provisions                                  |   |                            | 145,134    |   |   |   | (4,946 | ) |
|   Changes in operating assets and liabilities:        |   |                            |       |   |   |   |   |   |
| Accounts and note receivable, including related parties         |   |                            | 499,322    |   |   |   | (8,080 | ) |
| Inventories                                                     |   |                            | 254,777    |   |   |   | 40,197 |   |
| Prepaid expenses and other current assets                       |   |                            | (112,782   | ) |   |   | (126,431 | ) |
| Other assets.                                                   |   |                            | (73,579    | ) |   |   | 48,079 |   |
| Accounts payable and accrued expenses                           |   |                            | (1,669,233 | ) |   |   | (617,809 | ) |
| Other liabilities                                               |   |                            | (29,360    | ) |   |   | (38,075 | ) |
| Net cash provided by (used in) operating activities             |   |                            | 115,607    |   |   |   | (338,623 | ) |
|                                                            |   |                            |       |   |   |   |   |   |
| Cash flows from investing activities:                           |   |                            |       |   |   |   |   |   |
|   Proceeds from sale of equipment                     |   |                            | 2,609      |   |   |   | 2,058 |   |
|   Acquisitions of property and equipment              |   |                            | (46,597    | ) |   |   | (476,116 | ) |
| Net cash used in investing activities                           |   |                            | (43,988    | ) |   |   | (474,058 | ) |
|                                                            |   |                            |       |   |   |   |   |   |
| Cash flows from financing activities:                           |   |                            |       |   |   |   |   |   |
|   Preferred stock issuance costs                      |   |                            | (190,744   | ) |   |   | - |   |
|   Payment of revolver fees - financing costs          |   |                            | (60,000    | ) |   |   | - |   |
|   Payment of capital leases                           |   |                            | (52,909    | ) |   |   | (114,565 | ) |
|   Revolver note borrowings                            |   |                            | -          |   |   |   | 350,000 |   |
|   Term note borrowings                                |   |                            | -          |   |   |   | 125,000 |   |
|   Payment of notes payable                            |   |                            | -          |   |   |   | (144,064 | ) |
| Net cash (used in) provided by financing activities             |   |                            | (303,653   | ) |   |   | 216,371 |   |
|                                                            |   |                            |       |   |   |   |   |   |
| Net effect of foreign currency exchange translation on cash     |   |                            | (15,924    | ) |   |   | (17,657 | ) |
| Net decrease in cash and cash equivalents                       |   |                            | (247,958   | ) |   |   | (613,967 | ) |
| Cash and cash equivalents at beginning of period                |   |                            | 2,264,606  |   |   |   | 2,399,717 |   |
| Cash and cash equivalents at end of period                      |   | $                               | 2,016,648  |   |   | $ | 1,785,750 |   |

|   | See accompanying notes to consolidated financial statements. |
|--------|--------------------------------------------------------------|

----

|   |  CONSOLIDATED STATEMENTS OF CASH FLOWS |
|--------|---------------------------------------------|

| Supplemental disclosures of cash flow information:            |   |                            |       |   |   |   |
|---------------------------------------------------------------|--------|---------------------------------|------------|--------|--------|--------|
|                                                          |   | Nine Months Ended September 30, |       |
|                                                          |   | 2010                            |       |   | 2009   |   |
| Cash received (paid) during the period for:                   |   |                            |       |   |   |   |
| Interest paid                                                 |   | $                               | (399,169   | )      |   | $      | (667,895 | ) |
| Interest received                                             |   | $                               | 30,130     |   |   | $      | 1,016 |   |
| Foreign income tax paid                                       |   | $                               | (63,130    | )      |   | $      | (96,205 | ) |
| Non-cash financing activities:                                |   |                            |       |   |   |   |   |   |
| Conversion of revolver and term notes to preferred stock      |   | $                               | 16,706,685 |   |   | $      | - |   |
| Beneficial conversion feature for issuance of preferred stock |   | $                               | (1,283,343 | )      |   | $      | - |   |
| Series B preferred stock original issue discount              |   | $                               | 903,172    |   |   | $      | - |   |
| Series B preferred stock dividends                            |   | $                               | 445,511    |   |   | $      | - |   |
| Note payable issued for executive bonus earned                |   | $                               | -          |   |   | $      | 35,000 |   |
| Debt waiver, modification fee and interest                    |   | $                               | 8,886      |   |   | $      | 233,385 |   |
| Effect of foreign currency translation on net assets          |   | $                               | (34,161    | )      |   | $      | (18,154 | ) |
| Capital lease obligation                                      |   | $                               | -          |   |   | $      | 31,450 |   |

----

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

----

----

|   | · | When an equity instrument is not currently redeemable and it is probable that the equity instrument will become redeemable (for example, when the redemption depends solely on the passage of time), then the changes in the redemption value (for example, fair value) are recognized immediately as they occur, and the carrying amount of the instrument is adjusted to equal the redemption value at the end of each reporting period. This method views the end of the reporting period as if it were also the redemption date for the instrument. The resulting increases in the carrying amount of the redeemable security reduce income applicable to common shareholders in the calculation of earnings per share. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Dividends on preferred shares are accrued against the preferred stock and reduce income applicable to common shareholders in the calculation of earnings per share. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                                 |   | Three Months endedSeptember 30, |       |   | Nine Months endedSeptember 30, |   |
|------------------------------------------------------|--------|---------------------------------|------------|--------|--------------------------------|--------|
|                                                 |   | 2010                            |       |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| Net loss                                             |   | $                               | (1,242,166 | )      |                           | $      | (647,156 | ) |   | $ | (1,443,133 | ) |   | $ | (1,750,829 | ) |
| Other comprehensive income -                         |   |                            |       |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|     Foreign currency translation |   |                            | 27,813     |   |                           |   | 14,079 |   |   |   | 34,161 |   |   |   | 18,154 |   |
| Total comprehensive loss                             |   | $                               | (1,214,353 | )      |                           | $      | (633,077 | ) |   | $ | (1,408,972 | ) |   | $ | (1,732,675 | ) |

----

----

|                                       |   | Net loss    |       |   | Shares        |   |       | Per Share |   |
|--------------------------------------------|--------|-------------|------------|--------|---------------|--------|------------|-----------|--------|
| Three months ended September 30, 2010:     |   | (Numerator) |       |   | (Denominator) |   |       | Amount    |   |
| Basic net loss per share:                  |   |        |       |   |          |   |       |      |   |
| Net loss                                   |   | $           | (1,242,166 | )      |          |   | 20,291,433 |      |   | $ | (0.06 | ) |
| Series B preferred stock original discount |   |        | (903,172   | )      |          |   |       |      |   |   | (0.05 | ) |
| Series B preferred stock dividends         |   |        | (445,511   | )      |          |   |       |      |   |   | (0.02 | ) |
| Applicable to common stockholders          |   |        | (2,590,849 | )      |          |   | 20,291,433 |      |   |   | (0.13 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Effect of Dilutive Securities -            |   |        |       |   |          |   |       |      |   |   |   |   |
| Options, Preferred stock and RSU’s   |   |        | -          |   |          |   | -          |      |   |   | - |   |
| Net loss to common stockholders            |   | $           | (2,590,849 | )      |          |   | 20,291,433 |      |   | $ | (0.13 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Three months ended September 30, 2009:     |   |        |       |   |          |   |       |      |   |   |   |   |
| Basic net loss per share -                 |   |        |       |   |          |   |       |      |   |   |   |   |
| Applicable to common stockholders          |   | $           | (647,156   | )      |          |   | 20,291,433 |      |   | $ | (0.03 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Effect of Dilutive Securities -            |   |        |       |   |          |   |       |      |   |   |   |   |
| Options                                    |   |        | -          |   |          |   | -          |      |   |   | - |   |
| Net loss to common stockholders            |   | $           | (647,156   | )      |          |   | 20,291,433 |      |   | $ | (0.03 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Nine months ended September 30, 2010:      |   |        |       |   |          |   |       |      |   |   |   |   |
| Basic net loss per share:                  |   |        |       |   |          |   |       |      |   |   |   |   |
| Net loss                                   |   | $           | (1,443,133 | )      |          |   | 20,291,433 |      |   | $ | (0.07 | ) |
| Series B preferred stock original discount |   |        | (903,172   | )      |          |   |       |      |   |   | (0.05 | ) |
| Series B preferred stock dividends         |   |        | (445,511   | )      |          |   |       |      |   |   | (0.02 | ) |
| Applicable to common stockholders          |   |        | (2,791,816 | )      |          |   | 20,291,433 |      |   |   | (0.14 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Effect of Dilutive Securities -            |   |        |       |   |          |   |       |      |   |   |   |   |
| Options, Preferred stock and RSU’s   |   |        | -          |   |          |   | -          |      |   |   | - |   |
| Net loss to common stockholders            |   | $           | (2,791,816 | )      |          |   | 20,291,433 |      |   | $ | (0.14 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Nine months ended September 30, 2009:      |   |        |       |   |          |   |       |      |   |   |   |   |
| Basic net loss per share -                 |   |        |       |   |          |   |       |      |   |   |   |   |
| Applicable to common stockholders          |   | $           | (1,750,829 | )      |          |   | 20,291,433 |      |   | $ | (0.09 | ) |
|                                       |   |        |       |   |          |   |       |      |   |   |   |   |
| Effect of Dilutive Securities -            |   |        |       |   |          |   |       |      |   |   |   |   |
| Options                                    |   |        | -          |   |          |   | -          |      |   |   | - |   |
| Net loss to common stockholders            |   | $           | (1,750,829 | )      |          |   | 20,291,433 |      |   | $ | (0.09 | ) |

----

|              |   | September 30, |       |   | December 31, |   |
|-------------------|--------|---------------|------------|--------|--------------|--------|
|              |   | 2010          |       |   | 2009         |   |
|              |   |          |       |   |         |   |
| Finished goods    |   | $             | 2,344,407  |   |         | $      | 2,863,923 |   |
| Less reserves     |   |          | (1,065,016 | )      |         |   | (1,184,621 | ) |
| Total inventories |   | $             | 1,279,391  |   |         | $      | 1,679,302 |   |

----

----

|   | · | Interest on debt related to the Loan Agreement for the three and nine months ended September 30, 2010 was $144,871 and $892,857, respectively. For the three and nine months ended September 30, 2009 interest on debt related to Loan Agreement was $299,911 and $876,453, respectively. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Amortization of the debt discount related to the Loan Agreement for the three and nine months ended September 30, 2010 was $0 and $725,983, respectively.  For the three and nine months ended September 30, 2009 amortization of the debt discount was $313,019 and $897,010, respectively. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Amortization of deferred financing costs related to the Loan Agreement for the three and nine months ended September 30, 2010 was $5,000 and $128,114, respectively.  For the three and nine months ended September 30, 2009 amortization of deferred financing costs was $58,098 and $174,446, respectively. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The Series B Preferred Stock ranks senior to the common stock and to any other preferred stock unless such preferred stock is created and issued on a senior or pari passu basis in accordance with the Company’s certificate of incorporation. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Series B Preferred Stock will accrue dividends at the rate of 16% per annum, compounded annually.  The dividends however are only payable to the holder upon the liquidation, dissolution or winding up of the Company.  No accrued dividends will be convertible into common stock, nor will any accrued dividends be payable on shares of Series B Preferred Stock upon or following the conversion of such shares into common stock. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Upon the liquidation, dissolution or winding up of the Company, each share of Series B Preferred Stock will be entitled to receive, prior to any distribution to holders of other equity securities, an amount equal to $41.033 per share plus all accrued dividends (the “Liquidation Preference”) upon the surrender and cancellation of such shares.  A merger, consolidation, share exchange or other reorganization resulting in a change in control of the Company, or any sale of all or substantially all of the Company’s assets, shall be deemed a liquidation and winding up for purposes of the Company’s obligation to pay the Liquidation Preference. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The Company has the right, at any time upon not less than thirty (30) days’ prior written notice to the holders of Series B Preferred Stock, to redeem the Series B Preferred Stock in whole (but not in part) for a price equal to the then-applicable Liquidation Preference.  The holders of Series B Preferred Stock shall have the option, exercisable at any time and from time to time commencing on July 31, 2016, to require the Company to redeem any or all of the Series B Preferred Stock held by such holders, at the then-applicable Liquidation Preference amount. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Each share of Series B Preferred Stock is convertible into 100 shares of the Company’s common stock (subject to adjustment for stock splits, reverse stock split, etc.) at any time and from time to time at each holder’s option. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The Series B Preferred Stock vote with the common stock as a single class on all matters submitted or required to be submitted to a vote of the Company’s stockholders, with each share of Series B Preferred Stock having a number of votes equal to the number of shares of common stock that may be acquired upon conversion thereof as of the applicable date of determination.  Additionally, the Series B Preferred Stock have the right to vote as a separate class with respect to certain matters affecting the Series B Preferred Stock, including but not limited to (i) the creation or issuance of any other class or series of preferred stock, (ii) any amendments with respect to the rights, powers, preferences and limitations of the Series B Preferred Stock, (iii) paying dividends or distributions in respect of or redeem the Company’s common stock or any other junior securities; and (iv) certain affiliate transactions.  Any such vote shall require the affirmative vote or consent of a majority of the outstanding shares of Series B Preferred Stock. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | As long as the outstanding Series B Preferred Stock represents 35% or more of the voting shares of the Company, on an as-converted to common stock basis, (a) our Board of Directors shall consist of not more than seven (7) members, (b) the holders of Series B Preferred Stock shall have the right to elect three (3) directors if the Board has five (5) or fewer total directors, and four (4) directors if the Board has six (6) or seven (7) directors (the directors elected by the Series B Preferred Stock are referred to as the “Series B Directors”), and (c) those members serving on the Board who were not elected by holders of the Series B Preferred Stock shall have the right to designate all remaining directors.  At least two (2) of the Series B Directors must be, and remain at all times while serving as a director, an independent director that qualifies for service on the audit committee of a corporation with securities listed on the Nasdaq Stock Market as provided in Nasdaq Marketplace Rule 5605(c)(2) (or any successor thereto). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The Series B Preferred Stock is not currently redeemable but it is probable that the preferred stock will become redeemable due to the redemption option available to the preferred stock holders on July 30, 2016. Changes in the redemption value (for example, fair value) are recognized immediately as they occur, and the carrying amount of the instrument is adjusted to equal the redemption value at the end of each reporting period. This method views the end of the reporting period as if it were also the redemption date for the Series B Preferred Stock. Accordingly, the original preferred stock discount in the amount of $903,172 was charged against the preferred stock carrying value and retained earnings during the three months ended September 30, 2010. In addition, the resulting increase in the carrying amount of the Series B Preferred Stock reduces the income applicable to common shareholders reported in the calculation of earnings per share. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The 16% annual dividend (compounded annually) on outstanding preferred shares is accrued each reporting period as an addition to the carrying value of the preferred stock and reduces the income applicable to common shareholders reported in the calculation of earnings per share. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Series B Preferred Stock as of December 31, 2009 and June 30, 2010 |   | $      | -          |   |
|--------------------------------------------------------------------|--------|--------|------------|--------|
| Series B Preferred Stock, net fair value issued on July 30, 2010   |   |   | 15,803,513 |   |
| Series B Preferred Stock original issue discount                   |   |   | 903,172    |   |
|     Series B Preferred Stock dividends              |   |   | 445,511    |   |
| Series B Preferred Stock as of September 30, 2010                  |   | $      | 17,152,196 |   |

----

|   | · | Messrs. Schnell and Dyne agreed with CVC to vote their shares of Company voting stock in favor of a merger or consolidation of the Company into or with another corporation or any share exchange, business combination or other such transaction in which the Company is a constituent party, or any sale of all or substantially all of the Company’s assets (a “Triggering Transaction”), in each case to the extent such transaction is first approved by CVC.  Messrs. Schnell and Dyne also provided CVC with an irrevocable proxy to vote their shares of Company voting stock in favor of any such transaction. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | CVC agreed with the Company that in connection with any director nominees to be submitted to holders of the Company’s common stock for election at a stockholders’ meeting, a committee of our Board comprised solely of directors then serving on the Board who were not elected or appointed by holders of Series B Preferred Stock, acting by majority vote, shall have the right to designate all of the Board’s nominees for director to be elected by holders of the Company’s Common Stock. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | CVC agreed with the Company that in connection with any election of directors submitted to the Company’s stockholders for election at a stockholders’ meeting, CVC will attend the stockholders’ meeting, in person or by proxy, and vote (or cause to be voted) all of CVC’s shares of the Company’s voting stock in favor of the Board’s nominees for director.  CVC also provided the Company’s chief executive officer with an irrevocable proxy to vote its shares of the Company voting stock in favor of such nominees. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Messrs. Schnell and Dyne provided CVC with a right of first refusal with respect to any shares of the Company’s voting securities that Messrs. Schnell and Dyne propose to sell in a private placement transaction, and agreed to provide CVC with advance notice of their intent to sell the Company’s voting securities in any public sale transaction. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | CVC provided Messrs. Schnell and Dyne with a tag-along right, providing Messrs. Schnell and Dyne with the right to sell their shares of the Company’s voting securities in a transaction where CVC is selling its shares of the Company’s voting securities. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | CVC agreed with the Company not to sell or otherwise transfer its shares of the Company’s voting securities, or to vote its shares of the Company’s voting securities in favor of any Triggering Transaction, at any time on or before July 31, 2011, other than in connection with a transaction that is approved by a majority of the Company’s voting shares (where, in calculating such majority, the votes attributable to CVC’s shares of the Company’s voting securities are excluded in the numerator but included in the denominator). |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The Company provided CVC with a preemptive right, pursuant to which CVC will have the right, subject to certain exceptions set forth in the Stockholders Agreement, to acquire in a subsequent issuance of securities by the Company a number of offered securities that will allow CVC to maintain its percentage ownership of the Company’s voting securities. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | CVC agreed with Messrs. Schnell and Dyne that in connection with a Triggering Transaction, CVC, and any other holder of Series B Preferred Stock and shares of common stock acquired upon conversion thereof, shall pay to Messrs. Schnell and Dyne a portion (beginning at 5% and increasing to 10%) of the sales proceeds payable in the Triggering Transaction to CVC or such other holder in respect of such Series B Preferred Stock or conversion shares.  Each of Messrs. Schnell and Dyne’s right to receive such portion of the sales proceeds is conditional upon the Triggering Transaction occurring (i) while employed by the Company or (ii) within 12 months following termination of employment with the Company for any reason other than termination of employment for “cause” or termination of employment by Messrs. Schnell or Dyne without “good reason” (as such terms are defined in their respective employment agreements). |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Number of Shares |       |   | Weighted Average Exercise Price |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|------------|--------|---------------------------------|--------|
| Employees and Directors                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |             |       |   |                            |   |
| Options outstanding - January 1, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |             | 6,637,850  |   |                            | $      | 0.73 |   |
| Granted                                                                               |   |             | -          |   |                            | $      | - |   |
| Exercised                                                                             |   |             | -          |   |                            | $      | - |   |
| Cancelled                                                                             |   |             | (66,479    | )      |                            | $      | 4.55 |   |
| Options outstanding - March 31, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |             | 6,571,371  |   |                            | $      | 0.69 |   |
| Granted                                                                               |   |             | -          |   |                            | $      | - |   |
| Exercised                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |             | -          |   |                            | $      | - |   |
| Cancelled                                                                             |   |             | (147,771   | )      |                            | $      | 1.88 |   |
| Options outstanding - June 30, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |             | 6,423,600  |   |                            | $      | 0.66 |   |
| Granted                                                                               |   |             | 530,000    |   |                            | $      | 0.16 |   |
| Exercised                                                                             |   |             | -          |   |                            | $      | - |   |
| Cancelled                                                                             |   |             | (1,793,314 | )      |                            | $      | 1.42 |   |
| Options outstanding - September 30, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |             | 5,160,286  |   |                            | $      | 0.35 |   |

----

|   | · | In accordance with the bylaws of the Company, officers and directors are indemnified for certain events or occurrences arising as a result of the officer or director’s serving in such capacity.  The term of the indemnification period is for the lifetime of the officer or director.  The maximum potential amount of future payments the Company could be required to make under the indemnification provisions of its bylaws is unlimited.  However, the Company has a director and officer liability insurance policy that reduces its exposure and enables it to recover a portion of any future amounts paid.  As a result of its insurance policy coverage, the Company believes the estimated fair value of the indemnification provisions of its bylaws is minimal and therefore, the Company has not recorded any related liabilities. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The Company enters into indemnification provisions under its agreements with investors and its agreements with other parties in the normal course of business, typically with suppliers, customers and landlords.  Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities or, in some cases, as a result of the indemnified party’s activities under the agreement.  These indemnification provisions often include indemnifications relating to representations made by the Company with regard to intellectual property rights.  These indemnification provisions generally survive termination of the underlying agreement.  The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is unlimited.  The Company has not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.  As a result, the Company believes the estimated fair value of these agreements is minimal.  Accordingly, the Company has not recorded any related liabilities. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                 |   | Three Months Ended |      |
|----------------------|--------|--------------------|-----------|
|                 |   | September 30, 2010 |      |
|                 |   | Talon              |      |   | Trim |   |   | Tekfit |   |   | Consolidated |   |
| Net sales            |   | $                  | 5,536,184 |   |   | $ | 3,735,984 |   |   | $ | 5,166 |   |   | $ | 9,277,334 |   |
| Cost of goods sold   |   |               | 4,055,484 |   |   |   | 2,506,275 |   |   |   | 1,519 |   |   |   | 6,563,278 |   |
| Gross profit         |   | $                  | 1,480,700 |   |   | $ | 1,229,709 |   |   | $ | 3,647 |   |   |   | 2,714,056 |   |
| Operating expenses   |   |               |      |   |   |   |   |   |   |   |   |   |   |   | 2,812,237 |   |
| Loss from operations |   |               |      |   |   |   |   |   |   |   |   |   |   | $ | (98,181 | ) |

----

|                   |   | Three Months Ended |      |
|------------------------|--------|--------------------|-----------|
|                   |   | September 30, 2009 |      |
|                   |   | Talon              |      |   | Trim |   |   | Tekfit |   |   | Consolidated |   |
| Net sales              |   | $                  | 5,822,906 |   |   | $ | 4,593,662 |   |   | $ | 10,196 |   |   | $ | 10,426,764 |   |
| Cost of goods sold     |   |               | 4,638,128 |   |   |   | 2,831,826 |   |   |   | 6,107 |   |   |   | 7,476,061 |   |
| Gross profit           |   | $                  | 1,184,778 |   |   | $ | 1,761,836 |   |   | $ | 4,089 |   |   |   | 2,950,703 |   |
| Operating expenses     |   |               |      |   |   |   |   |   |   |   |   |   |   |   | 2,749,795 |   |
| Income from operations |   |               |      |   |   |   |   |   |   |   |   |   |   | $ | 200,908 |   |

|                   |   | Nine Months Ended  |       |
|------------------------|--------|--------------------|------------|
|                   |   | September 30, 2010 |       |
|                   |   | Talon              |       |   | Trim |   |   | Tekfit |   |   | Consolidated |   |
| Net sales              |   | $                  | 20,222,923 |   |   | $ | 12,257,577 |   |   | $ | 5,166 |   |   | $ | 32,485,666 |   |
| Cost of goods sold     |   |               | 14,994,168 |   |   |   | 7,934,742 |   |   |   | 66,770 |   |   |   | 22,995,680 |   |
| Gross profit           |   | $                  | 5,228,755  |   |   | $ | 4,322,835 |   |   | $ | (61,604 | ) |   |   | 9,489,986 |   |
| Operating expenses     |   |               |       |   |   |   |   |   |   |   |   |   |   |   | 8,066,100 |   |
| Income from operations |   |               |       |   |   |   |   |   |   |   |   |   |   | $ | 1,423,886 |   |

|                   |   | Nine Months Ended  |       |
|------------------------|--------|--------------------|------------|
|                   |   | September 30, 2009 |       |
|                   |   | Talon              |       |   | Trim |   |   | Tekfit |   |   | Consolidated |   |
| Net sales              |   | $                  | 16,851,258 |   |   | $ | 12,627,724 |   |   | $ | 47,301 |   |   | $ | 29,526,283 |   |
| Cost of goods sold     |   |               | 13,100,408 |   |   |   | 7,905,553 |   |   |   | 24,005 |   |   |   | 21,029,966 |   |
| Gross profit           |   | $                  | 3,750,850  |   |   | $ | 4,722,171 |   |   | $ | 23,296 |   |   |   | 8,496,317 |   |
| Operating expenses     |   |               |       |   |   |   |   |   |   |   |   |   |   |   | 7,998,534 |   |
| Income from operations |   |               |       |   |   |   |   |   |   |   |   |   |   | $ | 497,783 |   |

----

|    Sales:           |   | Three Months endedSeptember 30, |      |   | Nine Months endedSeptember 30, |   |
|------------------------------------|--------|---------------------------------|-----------|--------|--------------------------------|--------|
|    Country / Region |   | 2010                            |      |   | 2009                           |   |   | 2010 |   |   | 2009 |   |
| United States                      |   | $                               | 761,204   |   |                           | $      | 829,381 |   |   | $ | 2,768,820 |   |   | $ | 2,398,991 |   |
| Hong Kong                          |   |                            | 2,986,107 |   |                           |   | 4,061,003 |   |   |   | 10,960,846 |   |   |   | 9,543,760 |   |
| China                              |   |                            | 2,813,682 |   |                           |   | 2,274,706 |   |   |   | 8,905,062 |   |   |   | 7,897,168 |   |
| Bangladesh                         |   |                            | 557,798   |   |                           |   | 375,463 |   |   |   | 1,945,097 |   |   |   | 1,515,876 |   |
| Taiwan                             |   |                            | 158,508   |   |                           |   | 280,123 |   |   |   | 1,094,619 |   |   |   | 775,675 |   |
| India                              |   |                            | 227,787   |   |                           |   | 334,214 |   |   |   | 760,982 |   |   |   | 1,158,650 |   |
| Other                              |   |                            | 1,772,248 |   |                           |   | 2,271,874 |   |   |   | 6,050,240 |   |   |   | 6,236,163 |   |
|   Total                  |   | $                               | 9,277,334 |   |                           | $      | 10,426,764 |   |   | $ | 32,485,666 |   |   | $ | 29,526,283 |   |

|                           |   | September 30, |      |   | December 31, |   |
|--------------------------------|--------|---------------|-----------|--------|--------------|--------|
|                           |   | 2010          |      |   | 2009         |   |
|   Long-lived Assets: |   |          |      |   |         |   |
| United States                  |   | $             | 4,705,359 |   |         | $      | 4,661,855 |   |
| Hong Kong                      |   |          | 946,916   |   |         |   | 1,193,617 |   |
| China                          |   |          | 197,423   |   |         |   | 236,768 |   |
| Other                          |   |          | 2,814     |   |         |   | 4,097 |   |
|   Total              |   | $             | 5,852,512 |   |         | $      | 6,096,337 |   |

----

----

Item 6.

| Exhibit No. |     Description                                                                                                                                                                                                                            |
|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1         | Certificate of Incorporation of Registrant. Incorporated by reference to Exhibit 3.1 to Form SB-2 filed on October 21, 1997, and the amendments thereto.                                                                                                  |
| 3.1.2       | Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock.  Incorporated by reference to Exhibit A to the Rights Agreement filed as Exhibit 4.1 to Current Report on Form 8-K filed as of November 4, 1998.  |
| 3.1.3       | Certificate of Amendment of Certificate of Incorporation of Registrant.  Incorporated by reference to Exhibit 3.4 to Annual Report on Form 10-KSB, filed March 28, 2000.                                                                        |
| 3.1.4       | Certificate of Amendment of Certificate of Incorporation of Registrant.  Incorporated by reference to Exhibit 3.1.3 to Form 8-K filed on August 4, 2006.                                                                                        |
| 3.1.5       | Certificate of Ownership and Merger.  Incorporated by reference to Exhibit 3.1 to Form 8-K filed on July 20, 2007.                                                                                                                              |
| 3.1.6       | Certificate of Designation of Series B Convertible Preferred Stock. Incorporated by reference to Exhibit 3.1 to Form 8-K filed on August 5, 2010.                                                                                                         |

| 10.1   | Recapitalization Agreement, dated June 30, 2010, between Registrant and CVC California, LLC. Incorporated by reference to Exhibit 10.1 to Form 8-K filed on August 5, 2010.                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2   | Amendment No. 5 to Loan Agreement, dated June 30, 2010, between Registrant and CVC California, LLC. Incorporated by reference to Exhibit 10.2 to Form 8-K filed on August 5, 2010.                      |
| 10.3   | Amendment No. 6 to Loan Agreement, dated July 30, 2010, between Registrant and CVC California, LLC. Incorporated by reference to Exhibit 10.3 to Form 8-K filed on August 5, 2010.                      |
| 10.4   | Amended and Restated Revolving Credit Note, dated July 30, 2010, made by Registrant in favor of CVC California, LLC. Incorporated by reference to Exhibit 10.4 to Form 8-K filed on August 5, 2010.     |
| 10.5   | Stockholders Agreement, dated July 30, 2010, among Registration, CVC California, LLC, Lonnie D. Schnell and Larry Dyne. Incorporated by reference to Exhibit 10.5 to Form 8-K filed on August 5, 2010.  |
| 10.6+* |  Employment Agreement, dated July 30, 2010, between Registrant and Lonnie D. Schnell. Incorporated by reference to Exhibit 10.6 to Form 8-K filed on August 5, 2010.                               |
| 10.7+* | Employment Agreement, dated July 30, 2010, between Registrant and Larry Dyne. Incorporated by reference to Exhibit 10.7 to Form 8-K filed on August 5, 2010.                                            |
| 10.8+  | Restricted Stock Unit Agreement, dated July 30, 2010, between Registrant and Lonnie D. Schnell. Incorporated by reference to Exhibit 10.8 to Form 8-K filed on August 5, 2010.                          |
| 10.9+  | Restricted Stock Unit Agreement, dated July 30, 2010, between Registrant and Larry Dyne. Incorporated by reference to Exhibit 10.9 to Form 8-K filed on August 5, 2010.                                 |

----

| 31.1   | Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|
| 32.1   | Certificate of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.       |
|   |                                                                                                                                |

|   | + | Indicates a management contract or compensatory plan or arrangement. |
|--------|---|----------------------------------------------------------------------|

|   | * | Certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for an order granting confidential treatment pursuant to Rule 24b-2 of the Rules and Regulations under the Securities Exchange Act of 1934, as amended. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Dated:  November 17, 2010 | /s/ Lonnie D. Schnell                                                                Lonnie D. SchnellChief Executive Officer and Chief Financial Officer(Principal Executive Officer and Principal Financial Officer) |
|-------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                | /s/ James E. Reeder                                                      James E. ReederVice President, Corporate Controller(Principal Accounting Officer)                                                                                                          |

----