Events subsequent to December 31, 2012 have been evaluated through the date these financial statements were issued, to determine whether they should be disclosed to keep the financial statements from being misleading.  The following events have occurred since December 31, 2012.

On January 29, 2012, we signed a 12 month extension to our lease for our current location at 85 Enterprise, Suite 410, Aliso Viejo, CA 92656. The lease period starts on February 1, 2013 and ends January 31, 2014. The monthly rent remains the same as our 2012 monthly rate at $4,147 with the 9th month of the lease, October 2013, being a rent-free month.

On February 6, 2013, the Company filed with the Securities and Exchange Commission (“SEC”) Schedule 14f-1 in connection with the change in a majority of the Board. The 14f-1 was mailed to stockholders of record by February 13, 2013. On December 10, 2012, the Company’s Board had approved the appointment of Richard W. Turner, Robert J. Follman, Andrew H. Sassine and Thomas T. Tierney (collectively, the “New Board Members”) to the Board of the Company to fill vacancies. The New Board Members are expected to take office as directors no earlier than February 24, 2013. Messrs. Turner and Sassine were appointed to the Board as nominees of Equity Dynamics, Inc. (“Equity Dynamics”), an entity owned by Board member John Pappajohn, pursuant to the terms of the governance agreement, dated November 28, 2012, between the Company and Equity Dynamics. Messrs. Tierney and Follman were appointed to the Board as nominees of SAIL Capital Partners, which is affiliated with Board member Walter Schindler, pursuant to the terms of the governance agreement, dated November 28, 2012, between the Company and SAIL Capital Partners. 

As of February 13, 2013, holders of convertible notes in the aggregate principal amount of $1,922,600 and $238,500 of interest thereon have exercised their conversion to 16,102,902 shares of common stock. Of these conversions $672,600 were of October 2012 Notes together with interest of $18,700 converted into 14,633,086 shares of common stock at a conversion price of $0.04718. The remaining conversions were of $1,250,000 of October 2010 Notes and January 2011 Notes together with interest of $219,800 converted into 1,469,816 shares of common stock at a conversion price of $1.00. Of these conversions, 4,300,551 shares were converted by John Pappajohn, a director of the Company; 5,631,699 shares were converted by Walter Schindler, a director of the Company, on behalf of the various SAIL entities, and 4,403,349 shares were converted by Thomas Tierney, a director nominee and trustee of the Tierney Family Trust.