The Company has
sustained recurring losses and negative cash flows from operations. Over the past year, the Companys operations have been
funded primarily from proceeds from a secondary public offering of common stock completed in March and April 2012, as described
more fully in Note 8. As of September 30, 2012 the Company had cash and cash equivalents of approximately $5.5 million and a working
capital balance of approximately $5.8 million. The Company believes that it has sufficient liquidity to meet its funding requirements
over the next year. However, the Companys products have not yet generated significant revenues and the Companys technology
licensing strategy is in the early stages and has not generated any revenues to date. Although management believes that future
growth in product and licensing revenues will result in profitable operations and positive cash flows, there can be no assurance
that the Company will achieve profitable operations and sufficient cash flow to fund future operations. In the event that the
Company is unable to achieve profitable operations and cash flows through expected product sales and/or licensing revenues, it
may be necessary to seek additional debt or equity financing in order to accomplish its business plan over the next few years.
There can be no assurance as to the availability or terms upon which such financing and capital might be available.