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<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Optimizer Systems, LLC was formed in the
State of Michigan on January 31, 2006. It then became a corporation in the State of Michigan on October 22, 2007 and changed its
name to OptimizeRx Corporation. On April 14, 2008, RFID, Ltd., a Colorado corporation, consummated a reverse merger by entering
into a share exchange agreement with the stockholders of OptimizeRx Corporation, pursuant to which the stockholders of OptimizeRx
Corporation exchanged all of the issued and outstanding capital stock of OptimizeRx Corporation for 1,256,958 shares of common
stock of RFID, Ltd., representing 100% of the outstanding capital stock of RFID, Ltd. As of April 30, 2008, RFID’s officers
and directors resigned their positions and RFID changed its business to OptimizeRx’s business. On April 15, 2008, RFID, Ltd.’s
corporate name was changed to OptimizeRx Corporation. On September 4, 2008, a migratory merger was completed, thereby changing
the state of incorporation from Colorado to Nevada, resulting in the current corporate structure, in which OptimizeRx Corporation,
a Nevada corporation, is the parent corporation, and OptimizeRx Corporation, a Michigan corporation, is a wholly-owned subsidiary
(together, "OptimizeRx" and "the Company").</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The wholly-owned subsidiary, OptimizeRx
Corporation, is a technology solutions company targeting the health care industry. Their objective is to bring better access to
better care through connecting patients, physicians and pharmaceutical manufacturers through technology. Once defined as a marketing
and advertising company through its consumer website, OptimizeRx is maturing as a technology solutions provider as it launched
its direct to physician solution, SampleMD. SampleMD allows physicians to search, print and send available sample trial vouchers
and/or co-pay coupons on behalf of their patients. The SampleMD solution can either sit on the doctor’s desktop or can be
integrated into the ePrescribing or Electronic Medical Records applications. OptimizeRx solutions provide pharmaceutical manufacturers
either a direct to consumer and/or direct to physician channels for communicating and promoting their products. It provides health
care providers a means to provide sampling and coupons without having to physically store samples on site, and it provides better
access and affordability to the patients.</p>
<p style="margin: 0pt"></p>
2006-01-31
2007-10-22
1256958
1.00
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Basis of Presentation</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The financial statements of the Company
have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented
in US dollars.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Accounting Basis</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company uses the accrual basis of accounting
and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted
a December 31 fiscal year end.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: center"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"><font style="font-weight: normal"><u>Principles
of Consolidation</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The financial statements
reflect the consolidated results of OptimizeRx Corporation (a Nevada corporation) and its wholly owned subsidiary OptimizeRx Corporation
(a Michigan corporation). All material inter-company transactions have been eliminated in the consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: center"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Reclassifications</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain accounts and financial statement
captions in the prior periods have been reclassified to conform to the current period financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="letter-spacing: -0.1pt"><b></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"><font style="font-weight: normal"><u>Cash
and Cash Equivalents</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">For purposes of
the accompanying financial statements, the Company considers all highly liquid instruments with an initial maturity of three months
or less to be cash equivalents.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Fair Value of Financial Instruments</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The fair value
of cash, accounts receivable, prepaid expenses, patent rights, web development costs, accounts payable, accounts payable –
related party, accrued expenses and deferred revenue approximates the carrying amount of these financial instruments due to their
short-term nature. The fair value of long-term debt, which approximates its carrying value, is based on current rates at which
the Company could borrow funds with similar remaining maturities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Accounts Receivable and Allowance for
Doubtful Accounts</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounts receivable are reported at realizable
value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded.
The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors,
including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of
the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its
billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates.
Bad debt expense was $6,923 and $0 for the years ended December 31, 2012 and 2011, respectively. The allowance for doubtful accounts
was $0 as of December 31, 2012 and 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Property and Equipment</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The capital assets
are being depreciated over their estimated useful lives, three to seven years using the straight-line method of depreciation for
book purposes.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Revenue Recognition</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All revenue is recognized when it is earned.
Revenues are generated either through the Company’s website activities, in which we earn revenue from advertising and lead
generation activities, or from our SampleMD activities, which include offering setup within the systems and our offers, coupons,
and vouchers that enable our customers to save money on medical products and services. The Company’s processes are monitored
by third parties who collect revenues from clients on a per activity basis and report and forward the revenue to the Company’s
account.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Research and Development</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company’s
key members are part of a continual research development team and monitor new technologies, trends, services and partnerships that
can provide the Company with additional services, value to healthcare and pharmaceutical industries and to the patients it serves.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.25in 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company seeks
to educate team members through understanding of all market dynamics that have the potential to affect the business both short
term and longer term. The primary goal is to help patients better afford and access the medicines their doctor prescribes, as well
as other healthcare products and services they need. Based on this, the Company continually seeks better ways to meet this mission
through technology, better user experiences and new ways to engage industries to provide new support for patients needing their
products. The Company is always seeking new services and solutions to offer. At this time, the three current platforms provide
robust opportunities and growth during the next five years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><font style="letter-spacing: -0.1pt"><b></b></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Income Taxes</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Income taxes are computed using the asset
and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on
the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted
tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence,
are not expected to be realized.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Concentration of Credit Risks</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company maintains
its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences
financial difficulties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Use of Estimates</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the depreciable lives
of such assets and the allowance for doubtful accounts receivable. Actual results could differ from these estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Earnings Per Common and Common Equivalent
Share</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The computation
of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year.
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year
plus common stock equivalents which would arise from the exercise of warrants outstanding using the treasury stock method and the
average market price per share during the year. Options, warrants and convertible preferred stock which are common stock equivalents
are not included in the diluted earnings per share calculation for December 31, 2012 and 2011, respectively, since their effect
is anti-dilutive.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Impairment of Long-Lived Assets</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company continually
monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable.
When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining
whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the
future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess
of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount
or the fair value less costs to sell.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Recently Issued Accounting Guidance</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company does
not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results
of operations, financial position or cash flow.</p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Basis of Presentation</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The financial statements of the Company
have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented
in US dollars.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Accounting Basis</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company uses the accrual basis of accounting
and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted
a December 31 fiscal year end.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"><font style="font-weight: normal"><u>Principles
of Consolidation</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The financial statements
reflect the consolidated results of OptimizeRx Corporation (a Nevada corporation) and its wholly owned subsidiary OptimizeRx Corporation
(a Michigan corporation). All material inter-company transactions have been eliminated in the consolidation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Reclassifications</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain accounts and financial statement
captions in the prior periods have been reclassified to conform to the current period financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"><font style="font-weight: normal"><u>Cash
and Cash Equivalents</u></font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">For purposes of
the accompanying financial statements, the Company considers all highly liquid instruments with an initial maturity of three months
or less to be cash equivalents.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Fair Value of Financial Instruments</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The fair value
of cash, accounts receivable, prepaid expenses, patent rights, web development costs, accounts payable, accounts payable –
related party, accrued expenses and deferred revenue approximates the carrying amount of these financial instruments due to their
short-term nature. The fair value of long-term debt, which approximates its carrying value, is based on current rates at which
the Company could borrow funds with similar remaining maturities.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Accounts Receivable and Allowance for
Doubtful Accounts</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accounts receivable are reported at realizable
value, net of allowances for doubtful accounts, which is estimated and recorded in the period the related revenue is recorded.
The Company has a standardized approach to estimate and review the collectability of its receivables based on a number of factors,
including the period they have been outstanding. Historical collection and payer reimbursement experience is an integral part of
the estimation process related to allowances for doubtful accounts. In addition, the Company regularly assesses the state of its
billing operations in order to identify issues, which may impact the collectability of these receivables or reserve estimates.
Bad debt expense was $6,923 and $0 for the years ended December 31, 2012 and 2011, respectively. The allowance for doubtful accounts
was $0 as of December 31, 2012 and 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Property and Equipment</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The capital assets
are being depreciated over their estimated useful lives, three to seven years using the straight-line method of depreciation for
book purposes.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Revenue Recognition</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All revenue is recognized when it is earned.
Revenues are generated either through the Company’s website activities, in which we earn revenue from advertising and lead
generation activities, or from our SampleMD activities, which include offering setup within the systems and our offers, coupons,
and vouchers that enable our customers to save money on medical products and services. The Company’s processes are monitored
by third parties who collect revenues from clients on a per activity basis and report and forward the revenue to the Company’s
account.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Research and Development</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company’s
key members are part of a continual research development team and monitor new technologies, trends, services and partnerships that
can provide the Company with additional services, value to healthcare and pharmaceutical industries and to the patients it serves.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0.25in 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company seeks
to educate team members through understanding of all market dynamics that have the potential to affect the business both short
term and longer term. The primary goal is to help patients better afford and access the medicines their doctor prescribes, as well
as other healthcare products and services they need. Based on this, the Company continually seeks better ways to meet this mission
through technology, better user experiences and new ways to engage industries to provide new support for patients needing their
products. The Company is always seeking new services and solutions to offer. At this time, the three current platforms provide
robust opportunities and growth during the next five years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Income Taxes</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Income taxes are computed using the asset
and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on
the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted
tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence,
are not expected to be realized.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Concentration of Credit Risks</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company maintains
its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts; however, amounts in excess of the federally insured limit may be at risk if the bank experiences
financial difficulties.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Use of Estimates</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The preparation
of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the depreciable lives
of such assets and the allowance for doubtful accounts receivable. Actual results could differ from these estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Earnings Per Common and Common Equivalent
Share</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The computation
of basic earnings per common share is computed using the weighted average number of common shares outstanding during the year.
The computation of diluted earnings per common share is based on the weighted average number of shares outstanding during the year
plus common stock equivalents which would arise from the exercise of warrants outstanding using the treasury stock method and the
average market price per share during the year. Options, warrants and convertible preferred stock which are common stock equivalents
are not included in the diluted earnings per share calculation for December 31, 2012 and 2011, respectively, since their effect
is anti-dilutive.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Impairment of Long-Lived Assets</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company continually
monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable.
When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining
whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the
future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess
of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount
or the fair value less costs to sell.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><u>Recently Issued Accounting Guidance</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company does
not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results
of operations, financial position or cash flow.</p>
0
0
P3Y
P7Y
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">Prepaid expenses
consisted of the following as of December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt; width: 54%">Insurance</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">6,437</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">5,937</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Website maintenance</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">17,500</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Rent</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">5,049</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="padding-left: 5.4pt">Consulting</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">31,672</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">91,811</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Employee advances</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">694</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="padding-left: 5.4pt">Advertising</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,090</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Legal</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">25,000</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total prepaid expenses</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">68,158</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">119,032</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt; width: 54%">Insurance</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">6,437</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">5,937</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Website maintenance</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">17,500</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Rent</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">5,049</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="padding-left: 5.4pt">Consulting</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">31,672</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">91,811</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Employee advances</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">694</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="padding-left: 5.4pt">Advertising</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,090</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Legal</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">25,000</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total prepaid expenses</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">68,158</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">119,032</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
6437
5937
0
17500
5049
0
31672
91811
0
694
0
3090
25000
0
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company owned equipment recorded at
cost which consisted of the following as of December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: center"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">Computer equipment</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">22,360</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">20,130</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Furniture and fixtures</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">11,088</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">11,088</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Subtotal</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">33,448</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">31,218</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accumulated depreciation</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(12,763</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(7,287</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Property and equipment, net</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">20,685</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">23,931</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation expense was $5,476 and $2,230
for the years ended December 31, 2012 and 2011, respectively.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">Computer equipment</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">22,360</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">20,130</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Furniture and fixtures</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">11,088</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">11,088</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Subtotal</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">33,448</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">31,218</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accumulated depreciation</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(12,763</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(7,287</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Property and equipment, net</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">20,685</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">23,931</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
5476
2230
22360
20130
11088
11088
33448
31218
-12763
-7287
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has capitalized costs in developing
their website and web-based products, which consisted of the following as of December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">OptimizeRx web development</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">154,133</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">154,133</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">SampleMD web development</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">602,517</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">553,877</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Subtotal, web development costs</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">756,650</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">708,010</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Accumulated amortization</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(310,352</td>
<td style="text-align: left">)</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(183,429</td>
<td style="text-align: left">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Impairment</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(59,083</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(59,083</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Web development costs, net</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">387,215</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">465,498</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Amortization is recorded using the straight-line
method over a period of five years. The Company determined that the original OptimizeRx website was no longer useful so the remaining
unamortized balance of $59,083 was impaired as of December 31, 2010. Amortization expense for the web development costs was $126,923
and $88,379 for the years ended December 31, 2012 and 2011, respectively.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">OptimizeRx web development</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">154,133</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">154,133</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">SampleMD web development</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">602,517</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">553,877</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Subtotal, web development costs</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">756,650</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">708,010</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Accumulated amortization</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(310,352</td>
<td style="text-align: left">)</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">(183,429</td>
<td style="text-align: left">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-bottom: 1pt; padding-left: 5.4pt">Impairment</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(59,083</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(59,083</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Web development costs, net</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">387,215</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">465,498</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
P5Y
59083
59083
126923
88379
154133
154133
602517
553877
756650
708010
-310352
-183429
387215
465498
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 26, 2010, the Company acquired
from an officer and shareholder the technical contributions and assignment of all exclusive rights to and for the SampleMD patent
currently in process in exchange for 300,000 shares of common stock to be granted at the discretion of the seller in addition to
200,000 stock options valued at $360,000. The shares were valued on the grant date at $570,000 and have been recorded as a payable
to the related party.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has capitalized costs in purchasing
the SampleMD patent, which consisted of the following as of December 31, 2012 and 2011:</p>
<p style="font: 10pt/6pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">Patent rights and intangible assets</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">930,000</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">930,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accumulated amortization</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(136,764</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(82,059</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Patent rights and intangible assets, net</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">793,236</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">847,941</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: left"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company began amortizing the patent,
using the straight-line method over the estimated useful life of 17 years, once it was put into service in July 2010. Amortization
expense was $54,705 and $54,706 for the years ended December 31, 2012 and 2011, respectively.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">Patent rights and intangible assets</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">930,000</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">930,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accumulated amortization</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(136,764</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(82,059</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Patent rights and intangible assets, net</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">793,236</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">847,941</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
930000
930000
-136764
-82059
793236
847941
P17Y
54705
54706
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accrued expenses consisted of the following
as of December 31, 2012 and 2011:</p>
<p style="font: 10pt/6pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">Accrued bonuses</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">0</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">60,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accrued audit fees</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">6,000</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">6,000</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total accrued expenses</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">6,000</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">66,000</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt; width: 54%">Accrued bonuses</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">0</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">60,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">Accrued audit fees</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">6,000</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">6,000</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total accrued expenses</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">6,000</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">66,000</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
0
60000
6000
6000
6000
66000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has signed several contracts
with customers for either the distribution or redemption of coupons. The payments are not taken into revenue until either the coupon
is distributed to a patient or the coupon has been redeemed depending on the specific contract. The distributions and redemptions
are tracked by the company’s administrative tool. Additionally, customer setup contracts that have been paid in full are
deferred until the Company has completed the obligations of the contacts. Deferred revenue was $49,252 and $330,605 as of December
31, 2012 and 2011 respectively.</p>
<p style="margin: 0pt"></p>
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">During the year
ended December 31, 2010, the Company acquired from an officer and shareholder the technical contributions and assignment of all
exclusive rights to and for the SampleMD patent currently in process in exchange for 300,000 shares of common stock to be granted
at the discretion of the seller in addition to 200,000 stock options valued at $360,000. The shares were valued on the grant date
at $570,000 and have been recorded as a payable to the related party.</p>
<p style="margin: 0pt"></p>
300000
200000
570000
360000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">OptimizeRx Corporation has 500,000,000
shares of $.001 par value common stock authorized as of December 31, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were 14,232,496 and 14,192,496 common
shares issued and outstanding at December 31, 2012 and 2011, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 30, 2011, the Company entered into
a settlement agreement with Midtown Partners. Under the settlement agreement, the Company will pay Midtown Partners $57,500 and
grant 100,000 shares of its common stock. The cost of the settlement has been recorded as equity issuance costs. As a result of
the settlement, the litigation in the Eastern District of Michigan was dismissed.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2011,
the Company issued 475,820 shares of common stock to satisfy $500,000 of preferred dividends. The Company has not declared any
dividends in 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 1, 2012, the Company entered into
a consulting agreement with North Coast Advisors, Inc. for various services. The Company agreed to issue 40,000 shares of common
stock as of the date of the contract. However, these shares were not issued until July 12, 2012. The Company also agreed to issue
an additional 40,000 shares every six months in alignment with the agreement renewal up to the two years of the agreement. The
first 40,000 shares were valued at the Company’s common stock price as of the date of the contract, which was $1.12/share
and has been expensed. No additional shares were issued as of December 31, 2012.</p>
<p style="margin: 0pt"></p>
57500
100000
475820
500000
40000
1.12
40000
P2Y
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: left"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Series A Preferred</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2008,
35 preferred shares were issued for $3,500,000. Issuance costs totaled $515,000 resulting in net proceeds of $2,985,000. The 35
shares are convertible to 3,500,000 shares of common stock and bear a 10% cumulative dividend. In addition, there was a warrant
issued to purchase 6,000,000 shares of common stock at an exercise price of $2 for a period of seven years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of the preferred stock are
entitled to semi-annual dividends payable on the stated value of the Series A preferred stock at a rate of 10% per annum, which
shall be cumulative, and accrue daily from the issuance date. The dividends may be paid in cash or shares of the Company's common
stock at management’s discretion. If after the conversion eligibility date, the market price for the common stock for any
ten consecutive trading days in which the stock trades for over $2 per share and trading exceeds 100,000 shares per day, the preferred
shareholders can be required to convert their shares to common stock. Each share of Series A preferred stock shall also be convertible
at the option of the holder into that number of shares of common stock of the Company at the stated value of such share at a $1
conversion price.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holder may cause this conversion at
the time the shares are eligible for resale by the holder. The conversion price is subject to adjustment as hereinafter provided,
at any time, or from time to time upon the terms and in the manner hereinafter set forth in the shareholder agreement. There is
no conversion expiration date, however, the holder must provide 30 days notice for the registration of the conversion.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 12, 2010, the Company’s Board
declared and issued 236,598 common shares as payment for all cumulative and current semi-annual dividends. On November 16, 2010,
the Company’s Board declared and issued 173,922 common shares for its semi-annual dividend payment. On March 25, 2011, the
Company’s Board declared and issued 176,768 common shares for its semi-annual dividend payment. On September 21, 2011, the
Company's Board declared and issued 156,306 common shares for its semi-annual dividend payment. The Company has undeclared dividends
that were due in February and September 2012 totaling $350,000 as of December 31, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><u>Series B Preferred</u></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2010,
15 preferred shares were issued for $1,500,000. The 15 shares are convertible to 1,500,000 shares of common stock and bear a 10%
cumulative dividend. In addition, there was a warrant issued to purchase 3,000,000 shares of common stock at an exercise price
of $3 for a period of seven years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preferred stock was issued for $1,500,000
less associated issuance costs of $350,000 for net proceeds of $1,150,000. Additionally, 3,000,000 common stock warrants were issued
with the preferred stock. Based on the fair values of the preferred stock and common stock warrants on the issue date, $341,100
was allocated to preferred stock and $1,158,900 was allocated to the common stock warrants. Equity issuance costs of $350,000 were
allocated to the preferred stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the quarter ended September 30,
2011, 15 preferred shares were issued to an investor for $1,500,000. The 15 shares are convertible to 1,500,000 shares of common
stock and bear a 10% cumulative dividend. In addition, there was a warrant issued to purchase 1,000,000 shares of common stock
at an exercise price of $3 for a period of seven years. Based on the fair values of the preferred stock and common stock warrants
on the issue date, $855,460 was allocated to preferred stock and $644,540 was allocated to the common stock warrants. See Note
12.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of the preferred stock are
entitled to semi-annual dividends payable on the stated value of the Series B preferred stock at a rate of 10% per annum, which
shall be cumulative, and accrue daily from the issuance date. The dividends may be paid in cash or shares of the Company's common
stock at management’s discretion. If after the conversion eligibility date, the market price for the common stock for any
ten consecutive trading days in which the stock trades for over $2 per share and trading exceeds 100,000 shares per day, the preferred
shareholders can be required to convert their shares to common stock. Each share of Series B preferred stock shall also be convertible
at the option of the holder into that number of shares of common stock of the Company at the stated value of such share at a $1.50
conversion price.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holder may cause this conversion at
the time the shares are eligible for resale by the holder. The conversion price is subject to adjustment as hereinafter provided,
at any time, or from time to time upon the terms and in the manner hereinafter set forth in the shareholder agreement. On March
25, 2011, the Company’s Board declared and issued 75,758 common shares for its semi-annual dividend payment. On September
21, 2011, the Company's Board declared and issued 66,988 common shares for its semi-annual dividend payment. The Company has undeclared
dividends that were due in February and September 2012 totaling $150,000 as of December 31, 2012.</p>
<p style="margin: 0pt"></p>
35
3500000
515000
2985000
3500000
0.10
6000000
2000000
1000000
2
3
3
P7Y
P7Y
P7Y
236598
173922
176768
156306
15
15
1500000
1500000
1500000
1500000
0.10
0.10
350000
1150000
3000000
341100
855460
1158900
644540
75758
66988
150000
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: left"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for employee stock-based
compensation in accordance with the guidance of ASC Topic 718: Compensation - Stock Compensation, which requires all share-based
payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their
fair values.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows ASC Topic 505-50, formerly
EITF 96-18, “Accounting for Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling Goods and Services,” for stock options and warrants issued to consultants and other non-employees. In accordance
with ASC Topic 505-50, these stock options and warrants issued as compensation for services provided to the Company are accounted
for based upon the fair value of the services provided or the estimated fair market value of the option or warrant, whichever can
be more clearly determined. The fair value of the equity instrument is charged directly to compensation expense and additional
paid-in capital over the period during which services are rendered.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 1, 2010, the Company issued
25,000 stock options to an employee with a vesting period of one year and an exercise price of $1.21. The options were valued on
the grant date using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected volatility
of 241%, risk-free interest rate of 1.26% and expected life of 60 months. The options were fully expensed as of December 31, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 27, 2011, the Company issued 100,000
stock options to an individual at an exercise price of $0.73. The options were valued on the grant date using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of 221%, risk-free interest rate
of 2.06% and expected life of 60 months. The agreement is for a period of six months. The Company recognized expenses of $83,992
during the year ended December 31, 2011.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 31, 2011, the Company issued 285,000
stock options to 3 employees at an exercise price of $1.00. The options were valued on the grant date using the Black-Scholes option-pricing
model with the following assumptions: dividend yield of 0%, expected volatility of 218%, risk-free interest rate of 1.68% and expected
life of 60 months. The total value of the options was $320,585. The options vest over one year. The Company recognized share-based
compensation expense of $187,005 during the year ended December 31, 2011. The remaining balance of $133,580 was recognized over
the first five months of 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the quarter ended September 30,
2011, there was a warrant issued to purchase 1,000,000 shares of common stock at an exercise price of $3 for a period of seven
years. In addition, 15 preferred shares were issued to an investor for $1,500,000. The 15 shares are convertible to 1,500,000 shares
of common stock and bear a 10% cumulative dividend. Based on the fair values of the preferred stock and common stock warrants on
the issue date, $855,460 was allocated to preferred stock and $644,540 was allocated to the common stock warrants. See Note 11.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the quarter ended December 31, 2011,
the Company issued 20,000 stock options to 2 employees at an exercise price of $1.00. The options were valued on the grant date
using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of 204-205%,
risk-free interest rate of 0.88-0.93% and expected life of 60 months. The total value of the options was $19,270. The options vest
over one year. The Company recognized share-based compensation expense of $2,480 and $16,790 of expense during the years ended
December 31, 2012 and 2011, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 21, 2011, the Company issued
100,000 stock options to an individual at an exercise price of $0.73. The options were valued on the grant date using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of 205%, risk-free interest rate
of 0.92% and expected life of 60 months. The Company recognized expenses of $8,346 during the year ended December 31, 2011 and
$91,811 during the year ended December 31, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the quarter ended March 31, 2012,
the Company issued 50,000 stock options to 4 non-employees at an exercise price of $0.89. The options were valued on the grant
date using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of
198%, risk-free interest rate of 0.65% and expected life of 48 months. The total value of the options was $35,091. The options
vest over 4 months. The Company recognized share-based compensation expense of $35,091 during the six months ended June 30, 2012.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the quarter ended December 31, 2012,
the Company issued 25,000 stock options to a non-employee at an exercise price of $1.58. The options were valued on the grant date
using the Black-Scholes option-pricing model with the following assumptions: dividend yield of 0%, expected volatility of 200%,
risk-free interest rate of 0.67% and expected life of 60 months. The total value of the options was $40,007. The options vest over
1 year. The Company recognized share-based compensation expense of $8,335 during the three months ended December 31, 2012. The
remaining balance will be recognized in the following year.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had the following options outstanding
for the years ended December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td colspan="3"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Number of Options</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Weighted average exercise price</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: left; width: 31%; font-size: 10pt">Outstanding, January 1, 2011</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: right; width: 31%">0</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 30%">0.00</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">505,000</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.01</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2011</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(100,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(1.00</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Balance, December 31, 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">405,000</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.01</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">75,000</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.17</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2012</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(455,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(.98</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; font-size: 10pt">Balance, December 31, 2012</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right">25,000</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">1.58</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had the following warrants
outstanding for the years ended December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td colspan="3"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Number of Warrants</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Weighted average exercise price</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: left; width: 31%; font-size: 10pt">Outstanding, January 1, 2011</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: right; width: 31%">11,111,100</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 30%">2.26</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,333,334</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3.00</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2011</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(100,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(2.50</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Balance, December 31, 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">14,344,434</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2.41</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2012</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; font-size: 10pt">Balance, December 31, 2012</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right">14,344,434</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">2.41</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td colspan="3"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Number of Options</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Weighted average exercise price</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: left; width: 31%; font-size: 10pt">Outstanding, January 1, 2011</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: right; width: 31%">0</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 30%">0.00</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">505,000</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.01</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2011</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(100,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(1.00</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Balance, December 31, 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">405,000</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.01</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">75,000</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1.17</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2012</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(455,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(.98</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; font-size: 10pt">Balance, December 31, 2012</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right">25,000</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">1.58</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td colspan="3"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Number of Warrants</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">Weighted average exercise price</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: left; width: 31%; font-size: 10pt">Outstanding, January 1, 2011</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: right; width: 31%">11,111,100</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 30%">2.26</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3,333,334</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">3.00</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2011</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(100,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(2.50</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Balance, December 31, 2011</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">14,344,434</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">2.41</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Granted - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left; font-size: 10pt">Exercised - 2012</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left; font-size: 10pt">Expired - 2012</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; font-size: 10pt">Balance, December 31, 2012</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right">14,344,434</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">2.41</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
25000
405000
0
1.58
1.01
0.00
75000
505000
1.17
1.01
0
0
0
0
-455000
-100000
-.98
-1.00
14344434
14344434
11111100
2.41
2.41
2.26
0
3333334
0
3.00
0
0
0
0
0
-100000
0
-2.50
25000
50000
P1Y
P1Y
P6M
P1Y
P4M
1.58
1.21
0.73
1.00
0.73
0.89
25000
100000
83992
285000
320858
187005
133580
8335
100000
100157
91811
8346
20000
1.00
19270
2480
9633
P1Y
40007
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company signed a lease for new office
space on December 1, 2011 at an approximate rent of $5,000 per month. The new offices are in Rochester, Michigan. The lease is
for three years with an option to renew for an additional two years at approximately $5,200 per month with six months advance notice
to exercise the option.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Minimum annual rent is as follows for the
initial term of the lease:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 45%; border-collapse: collapse; font-size: 10pt">
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: left; width: 48%; font-size: 10pt">Year ended December 31, 2013</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 47%">60,591</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left">2014</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">55,542</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left">2015</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; font-size: 10pt">Total lease commitment</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">116,133</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 45%; border-collapse: collapse; font-size: 10pt">
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 1%"> </td>
<td style="text-align: left; width: 48%; font-size: 10pt">Year ended December 31, 2013</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 47%">60,591</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left"> </td>
<td style="text-align: left">2014</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">55,542</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: left">2015</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="border-bottom: black 2.5pt double; text-align: left"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left; font-size: 10pt">Total lease commitment</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">116,133</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
60591
55542
0
116133
5000
P3Y
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">The Company had
two major customers that accounted for 52% and two major customers that accounted for 50% of the Company’s revenues for the
years ended December 31, 2012 and 2011, respectively. The Company expects to continue to maintain these relationships with the
customers.</p>
<p style="margin: 0pt"></p>
0.52
0.50
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2012, the
Company incurred a net loss of approximately $364,000 and therefore has no tax liability. The Company began operations in 2007
and has previous net operating loss carry-forwards of $13,479,000 through December 31, 2011. The cumulative loss of $13,843,000
will be carried forward and can be used through the year 2032 to offset future taxable income. In the future, the cumulative net
operating loss carry-forward for income tax purposes may differ from the cumulative financial statement loss due to timing differences
between book and tax reporting.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The provision for Federal income tax consists
of the following for the years ended December 31, 2012 and 2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left">Federal income tax benefit attributable to:</td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 54%">Current operations</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">123,000</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">721,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Valuation allowance</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(123,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(721,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt">Net provision for federal income tax</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The cumulative tax effect at the expected
rate of 34% of significant items comprising our net deferred tax amount is as follows as of December 31, 2012 and December 31,
2011:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left">Deferred tax asset attributable to:</td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 54%">Net operating loss carryover</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">4,706,000</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">4,583,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Valuation allowance</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(4,706,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(4,583,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt">Net deferred tax asset</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to the change in ownership provisions
of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $13,843,000 for Federal income tax reporting
purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited
as to use in future years.</p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left">Federal income tax benefit attributable to:</td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 54%">Current operations</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">123,000</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">721,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Valuation allowance</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(123,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(721,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt">Net provision for federal income tax</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td style="text-align: justify; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left">Deferred tax asset attributable to:</td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: right; font-family: Arial, Helvetica, Sans-Serif"> </td>
<td style="text-align: left; font-family: Arial, Helvetica, Sans-Serif"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; width: 54%">Net operating loss carryover</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">4,706,000</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">4,583,000</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt">Valuation allowance</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(4,706,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">(4,583,000</td>
<td style="text-align: left; padding-bottom: 1pt">)</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt">Net deferred tax asset</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">0</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
123000
721000
-123000
-721000
0
0
4706000
4583000
-4706000
-4583000
0
0
13843000
0.34
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Operating expenses consisted of the following
for the years ended December 31, 2012 and 2011, respectively:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 2.5in; text-indent: 0.5in"> </p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt; width: 54%">Advertising</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">57,218</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">544,071</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Professional fees</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">263,396</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">342,503</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Consulting</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">19,148</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">185,174</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Salaries, wages and benefits</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,184,367</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">864,655</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Rent</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">62,362</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">37,868</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Depreciation and amortization</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">187,104</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">145,315</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Stock-based compensation</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">285,605</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">General and administrative</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">353,844</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">445,911</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total Operating Expenses</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">2,413,044</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">2,565,497</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>
<p style="margin: 0pt"></p>
<table cellspacing="0" cellpadding="0" align="center" style="width: 65%; border-collapse: collapse; font-size: 10pt">
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2012</td>
<td style="padding-bottom: 1pt"> </td>
<td colspan="3" style="border-bottom: black 1pt solid; text-align: center">2011</td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt; width: 54%">Advertising</td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">57,218</td>
<td style="text-align: left; width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="text-align: left; width: 1%">$</td>
<td style="text-align: right; width: 20%">544,071</td>
<td style="text-align: left; width: 1%"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Professional fees</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">263,396</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">342,503</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Consulting</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">19,148</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">185,174</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Salaries, wages and benefits</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">1,184,367</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">864,655</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Rent</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">62,362</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">37,868</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-left: 5.4pt">Depreciation and amortization</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">187,104</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">145,315</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="padding-left: 5.4pt">Stock-based compensation</td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">285,605</td>
<td style="text-align: left"> </td>
<td> </td>
<td style="text-align: left"> </td>
<td style="text-align: right">0</td>
<td style="text-align: left"> </td></tr>
<tr style="background-color: white; vertical-align: bottom">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 5.4pt">General and administrative</td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">353,844</td>
<td style="text-align: left; padding-bottom: 1pt"> </td>
<td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: black 1pt solid; text-align: left"> </td>
<td style="border-bottom: black 1pt solid; text-align: right">445,911</td>
<td style="text-align: left; padding-bottom: 1pt"> </td></tr>
<tr style="background-color: rgb(204,238,204); vertical-align: bottom">
<td style="text-align: left; padding-bottom: 2.5pt; padding-left: 5.4pt">Total Operating Expenses</td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">2,413,044</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td>
<td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right">2,565,497</td>
<td style="text-align: left; padding-bottom: 2.5pt"> </td></tr>
</table>
57218
544071
263396
342503
19148
185174
1184367
864655
62362
37868
285605
0
353844
445911
<p style="margin: 0pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 14, 2013, the Company hired
a new CEO. The employment agreement requires annual compensation of $175,000 that will be accrued and deferred until at least January
1, 2014. Additionally, the agreement requires the issuance of 2,000,000 options with an exercise price of $1.00 for a term of five
years. The options are not exercisable until at least January 1, 2014.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; letter-spacing: -0.1pt; text-align: justify">In accordance with
ASC 855-10, the Company has analyzed its operations subsequent to December 31, 2012 through the date these financial statements
were issued and has determined that it does not have any material subsequent events to disclose in these financial statements other
than the events described above.</p>
<p style="margin: 0pt"></p>
2000000
P5Y
175000
2014-01-01
1.00