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NOTE A THE COMPANY Corporate Overview and History of Therapeutics TherapeuticsMD, Inc., a Nevada corporation (Therapeutics or the Company) was incorporated in Utah in 1907 under the name Croff Mining Company. The Company changed its name to Croff Oil Company in 1952 and in 1996 changed its name to Croff Enterprises, Inc. In the twenty (20) years prior to 2008, Croffs operations consisted entirely of oil and natural gas leases. Due to a spin-off of its operations in December 2007, Croff had no business operations or revenue source and had reduced its operations to a minimal level although it continued to file reports required under the Exchange Act. As a result of the spin-off, Croff was a shell company under the rules of the Commission. In July 2009, the Company (i) closed a transaction to acquire Americas Minority Health Network, Inc. as a wholly owned subsidiary, (ii) ceased being a shell company, and (iii) experienced a change in control in which the former shareholders of Americas Minority Health Network, Inc. acquired control of the Company. On September 14, 2009, the Company changed its name to AMHN, Inc. On June 11, 2010, the Company closed a transaction to acquire Spectrum Health Network, Inc. as a wholly owned subsidiary. On July 20, 2010, the Company filed Articles of Conversion and Articles of Incorporation to redomicile in the State of Nevada and changed the par value of its shares of capital stock to $0.001 per share. On July 31, 2010, the Company transferred the assets of Americas Minority Health Network, Inc. to a secured noteholder in exchange for the satisfaction of debt associated therewith. On February 15, 2011, the Company transferred the assets of Spectrum Health Network, Inc. to a secured noteholder in exchange for the satisfaction of debt associated therewith and in exchange for an Exclusive Licensing, Distribution and Advertising Sales Agreement (Licensing Agreement) under which the Company could sell subscription services and advertising on the Spectrum Health Network for commissions. On August 3, 2011 (with an effective date of October 3, 2011), in anticipation of closing the Merger (as defined and described below), the Company filed Amended and Restated Articles of Incorporation to change its name to TherapeuticsMD, Inc. and to increase the shares of Common Stock authorized for issuance to 250,000,000. On October 4, 2011, the Company closed the Merger with vitaMedMD, LLC, a Delaware limited liability company (VitaMed). As of December 31, 2011, Company management determined that VitaMed would become the sole focus of the Company and services performed relative to the Licensing Agreement were discontinued. Unless otherwise stated or unless the context otherwise requires, the description of our business set forth below is provided on a combined basis, taking into account our newly-acquired wholly owned subsidiary, VitaMed. The Company maintains a website at www.therapeuticsmd.com. Agreement and Plan of Merger with VitaMed On July 18, 2011, Therapeutics entered into an Agreement and Plan of Merger (Merger Agreement) by and among VitaMed and VitaMed Acquisition, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (the Merger Sub), pursuant to which the Company would acquire 100% of VitaMed. The proposed acquisition was to be accomplished by the merger of Merger Sub with and into VitaMed with VitaMed being the surviving limited liability company (the Merger) in accordance with the Limited Liability Company Act of the State of Delaware. The Merger became effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware on October 4, 2011 (the Effective Time). In preparation of and prior to the closing of the Merger Agreement, the Company completed the following required corporate actions with an effective date of October 3, 2011:   <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%"> </td> <td style="width: 5%; text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="width: 90%; text-align: justify; text-indent: 0pt">a reverse split of the Companys 16,575,209 issued and outstanding shares of Common Stock on a ratio of 1 for 100 (the Reverse Split). As a result of the Reverse Split, each share of Common Stock outstanding on July 28, 2011 (the Record Date), without any action on the part of the holder thereof, became one one-hundredth of a share of Common Stock. The Reverse Split decreased the number of outstanding shares of the Companys Common Stock by approximately 99% resulting in 165,856 shares outstanding after the Reverse Split. The effectuation of the Reverse Split did not result in a change in the relative equity position or voting power of the shareholders of the Company,</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">an increase of its authorized shares of Common Stock to 250,000,000,</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">a change in the name of the Company to TherapeuticsMD, Inc., and</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">an amendment to the Companys Long Term Incentive Compensation Plan (LTIP) to increase the authorized shares for issuance thereunder to 25,000,000.</td></tr> </table> On October 4, 2011, the Closing Date of the Merger Agreement, the Company acquired 100% of VitaMed in exchange for the issuance of shares of the Companys Common Stock, as more fully described below (the Merger). In accordance with the provisions of this triangulated merger, the Merger Sub was merged with and into VitaMed as of the Effective Date. Upon consummation of the Merger Agreement and all transactions contemplated therein, the separate existence of the Merger Sub ceased and VitaMed became a wholly owned subsidiary of the Company. Exchange of Securities At the Effective Time, all outstanding membership units of VitaMed (the Units) were exchanged for shares of the Companys Common Stock. In addition, all outstanding VitaMed options to purchase VitaMed membership units (the VitaMed Options) and all outstanding VitaMed warrants to purchase VitaMed membership units (the VitaMed Warrants) were exchanged and converted into options and warrants for the purchase of the Companys Common Stock (Company Options and Company Warrants, respectively). All Units, VitaMed Options and VitaMed Warrants were exchanged on a pro-rata basis for shares of the Companys Common Stock which in the aggregate totaled 70,000,000 shares, resulting in a conversion ratio calculated by the sum of all outstanding Units, VitaMed Options and VitaMed Warrants divided by 70,000,000 (the Conversion Ratio). Pursuant to the Conversion Ratio, the Company issued 58,407,331 shares of the Companys Common Stock in exchange for the outstanding Units, reserved for issuance an aggregate of 10,119,796 shares issuable upon the exercise of the Company Options, and reserved for issuance an aggregate of 1,472,916 shares issuable upon the exercise of the Company Warrants. After giving effect to the Reverse Split, and taking into consideration the 58,407,331 aforementioned shares issued in exchange for the Units, the number of shares of the Companys Common Stock issued and outstanding as of the Closing Date was 58,573,187, of which the former members of VitaMed owned approximately 99%. All shares of the Companys Common Stock issued in exchange for the Units, and to be issued upon exercise of the Company Options and Company Warrants, are subject to a lock-up agreement for a period of eighteen (18) months from the Closing. Corporate Overview and History of VitaMed VitaMed is a specialty pharmaceutical company organized as a limited liability company in the State of Delaware on May 13, 2008. VitaMed is focused on providing the highest quality products to the womens health market. Our national sales force that calls on physicians and pharmacies is enhanced by our patent-pending technology and business methodology. This combination allows us to market both over-the-counter (OTC) and prescription nutritional supplements, drugs, medical foods and other medical products through pharmacies and our web-site with the recommendation of physicians by creating unique value propositions for patients, physician/providers and insurance payors. In the early part of 2009, we completed formulation of our first products, a prenatal multivitamin and a vegan docosahexaenoic acid (DHA) supplement and introduced the product to the market in June 2009 with sales primarily in South Florida. In September 2010, we achieved a milestone of $1 million in total sales and had begun to expand our sales force nationally and currently have product sales into 46 states. Our product line has been expanded to ten core products and our new product development continues to focus on the womens health market. As we continue our product development efforts for both new products and refinements to existing products, we are also seeking proprietary ingredients and formulations that can be exclusively licensed or patented for use in womens healthcare that will further differentiate our products from the competition. VitaMed maintains websites at www.vitamedmd.com and www.vitamedmdrx.com. Throughout these Notes to Consolidated Financial Statements, the terms we, us, our, Therapeutics, or the Company refers to TherapeuticsMD, Inc., and unless otherwise specified, includes our wholly owned subsidiary, VitaMed.

NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All material intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents Cash is maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. All of our non-interest bearing cash balances were fully insured at December 31, 2011 and 2010 due to a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each financial institution, and our non-interest bearing cash balances may again exceed federally insured limits. The Company had no interest-bearing amounts on deposit in excess of federally insured limits at December 31, 2011 and 2010. Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable are customer obligations due under normal trade terms. The Company reviews the accounts receivable for uncollectible accounts and credit card charge-backs and provides an allowance for doubtful accounts which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Trade accounts receivable past due more than 90 days are considered delinquent. Delinquent receivables are written off to bad debt expense based on individual credit evaluations, results of collection efforts, and specific circumstances of the customer. Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received. Historically, our bad debt expense has been limited because the majority of our trade receivables are paid via credit card. Data we use to calculate these estimates does not accurately reflect bad debts; adjustments to these reserves may be required. At December 31, 2011 and 2010, the Company recorded an allowance for doubtful accounts of $1,500 and $0, respectively. Inventories Inventories represent packaged nutritional products and supplements which are valued at the lower of cost or market using the average cost method. Fixed Assets Property and Equipment-Property and equipment is stated at cost, net of accumulated depreciation. Maintenance costs, which do not significantly extend the useful lives of the respective assets, and repair costs are charged to operating expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from 3 to 7 years. Depreciation expense totaled $25,686 and $5,105 for the years ended December 31, 2011 and 2010, respectively. Website-Costs incurred in the planning stage of a website are expensed, while costs incurred in the development stage are capitalized and amortized over the estimated three-year life of the asset. Amortization of website development costs totaled $29,159 and $17,678 for the years ended December 31, 2011 and 2010, respectively. Intangible Assets The Company has adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification 350 Intangible-Goodwill and Other (ASC 350). Capitalized patent costs, net of accumulated amortization, include legal costs incurred for a patent application. In accordance with ASC 350, once the patent is granted, the Company will amortize the capitalized patent costs over the remaining life of the patent using the straight-line method. If the patent is not granted, the Company will write-off any capitalized patent costs at that time. Intangible assets are reviewed annually for impairment or when events or circumstances indicate that their carrying amount may not be recoverable. There was no amortization expense related to patent costs for the years ended December 31, 2011 and 2010 as patents have not yet been granted. Impairment of Long-Lived Assets Carrying values of property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values may not be recoverable. Such events or circumstances include, but are not limited to:   <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%"> </td> <td style="width: 5%; text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="width: 90%; text-align: justify; text-indent: 0pt">Significant declines in an assets market price;</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">Significant deterioration in an assets physical condition;</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">Significant changes in the nature or extent of an assets use or operation;</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">Significant adverse changes in the business climate that could impact an assets value, including adverse actions or assessments by regulators;</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">Accumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset;</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">Current-period operating or cash flow losses combined with a history of such losses or a forecast that demonstrates continuing losses associated with an assets use; and</td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-family: Symbol; text-indent: 0pt">·</td> <td style="text-align: justify; text-indent: 0pt">Expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.</td></tr> </table> If impairment indicators are present, the Company determines whether an impairment loss should be recognized by testing the applicable asset or asset groups carrying value for recoverability. This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities, the determination of which requires judgment. The Company estimates the undiscounted future cash flows expected to be generated from the use and eventual disposal of the assets and compares that estimate to the respective carrying values in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future use of and projected value to be derived from the eventual disposal of the assets to be held and used. Assessments also consider changes in asset utilization, including the temporary idling of capacity and the expected timing for placing this capacity back into production. If the carrying value of the assets is not recoverable, then a loss is recorded for the difference between the assets fair value and respective carrying value. The fair value of the assets is determined using an income approach based upon a forecast of all the expected discounted future net cash flows associated with the subject assets. Some of the more significant estimates and assumptions include: market size and growth, market share, projected selling prices, manufacturing cost and discount rate. The Companys estimates are based upon its historical experience, its commercial relationships, market conditions and available external information about future trends. The Company believes its current assumptions and estimates are reasonable and appropriate; however, unanticipated events and changes in market conditions could affect such estimates, resulting in the need for an impairment charge in future periods. Fair Value of Financial Instruments The Companys financial instruments consist primarily of receivables, accounts payable, accrued expenses and short-term debt. The carrying amount of receivables, accounts payable and accrued expenses approximates its fair value because of the short-term maturity of such instruments. Interest rates that are currently available to the Company for issuance of short-term debt with similar terms and remaining maturities are used to estimate the fair value of the Companys short-term debt.   Fair Value of Financial Instruments (continued) The Company categorizes its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy as defined by ASC 820 Fair Value Measurements and Disclosures (ASC 820). The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3). Assets and liabilities recorded in the consolidated balance sheet at fair value are categorized based on a hierarchy of inputs, as follows:   <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="vertical-align: top"> <td style="width: 5%"> </td> <td style="width: 9%; text-align: left; font-weight: bold; text-indent: 0pt">Level 1</td> <td style="width: 86%; text-align: justify; text-indent: 0pt">Unadjusted quoted prices in active markets for identical assets or liabilities;</td></tr> <tr style="vertical-align: top"> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-weight: bold; text-indent: 0pt">Level 2</td> <td style="text-align: justify; text-indent: 0pt">Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and</td></tr> <tr style="vertical-align: top"> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: top"> <td> </td> <td style="text-align: left; font-weight: bold; text-indent: 0pt">Level 3</td> <td style="text-align: justify; text-indent: 0pt">Unobservable inputs for the asset or liability.</td></tr> </table> At December 31, 2011 and 2010, the Company had no assets or liabilities that are valued at fair value on a recurring basis. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with ASC 740, Income Taxes, the Company recognizes the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgment occur. The Company recognizes both interest and penalties related to uncertain tax positions as part of the income tax provision. As of December 31, 2011 and 2010, the Company has no tax positions relating to open tax returns that were considered to be uncertain. Stock Based Compensation In December 2004, the FASB issued ASC 718, Compensation Stock Compensation (ASC 718). ASC 718 companies are required to measure the compensation costs of unit-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Unit-based compensation arrangements include unit options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company uses the Black-Scholes option pricing model which requires the input of highly complex and subjective variables including the expected life of options granted and the Companys expected stock price volatility over a period equal to or greater than the expected life of the options. Equity instruments (instruments) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by ASC 718. FASB ASC 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the ASC. The Company recognizes compensation expense for all share-based payments granted based on the grant date fair value estimated in accordance with ASC 718-10, Share Based Payments. Compensation expense is generally recognized on a straight-line basis over the employees requisite service period. Debt Discounts Costs incurred with parties who are providing long-term financing, which include warrants issued with the underlying debt, are reflected as a debt discount based on the relative fair value of the debt and warrants to the total proceeds. These discounts are generally amortized over the life of the related debt using the effective interest rate method. In connection with debt issued during the years ended December 31, 2011 and 2010, the Company recorded debt discounts totaling $28,719 and $0, respectively. Amortization expense related to debt discounts totaled $28,719 and $0 for the years ended December 31, 2011 and 2010, respectively, and is included in interest expense on the accompanying consolidated financial statements. Debt discount was fully amortized at December 31, 2011. Revenue Recognition The Company recognizes revenue on arrangements in accordance with ASC 605, Revenue Recognition (ASC 605). Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability is reasonably assured. The Company generates revenue by sales of products primarily to retail consumers. The Companys policy is to recognize revenue from product sales upon shipment, when the rights of ownership and risk of loss have passed to the consumer. Outbound shipping and handling fees are included in sales and are billed upon shipment. Shipping expenses are included in cost of sales. The majority of the Companys sales are paid with credit cards and the Company usually receives the cash settlement in two to three banking days. Credit card sales minimize accounts receivable balances relative to sales. We provide an unconditional thirty-day money-back return policy whereby we accept product returns from our retail, wholesale and eCommerce customers. Historically we have experienced returns (monitored on a daily basis) equal to approximately one percent of sales. Total returns were $20,726 and $13,734 for the years ended December 31, 2011 and 2010, respectively. We consider the potential returns to be de minimis and have not established an allowance for product returns at this time. Shipping and Handling Costs The Company expenses all shipping and handling costs as incurred. These costs are included in cost of sales on the accompanying consolidated financial statements. Advertising Costs The Company expenses advertising costs when incurred. Advertising expenses totaled $19,408 and $25,698 during the years ended December 31, 2011 and 2010, respectively. Research and Development Expenses Research and development expenditures, which are expensed as incurred, totaled $107,241 and $65,402 during the years ended December 31, 2011 and 2010, respectively. Earnings Per Share The Company calculates earnings per share (EPS) in accordance with ASC 260, Earnings Per Share, which requires the computation and disclosure of two EPS amounts, basic and diluted. Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period. Such potential dilutive common shares consist of stock options and warrants. Potential common shares totaling 96,618,626 and 165,752 (Reverse Split shares) at December 31, 2011 and 2010, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to the net loss reported by the Company. Use of Estimates The Companys financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Recently Issued Accounting Pronouncements In December 2011, FASB issued Accounting Standards Update (ASU) 2011-11, Balance Sheet - Offsetting. This guidance requires disclosures about offsetting and related arrangements for recognized financial instruments and derivative instruments. The standard is effective for us as of January 1, 2013 and will not materially impact our financial statement disclosures. In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment. This guidance provides the option to evaluate prescribed qualitative factors to determine whether a calculated goodwill impairment test is necessary. The standard is effective for us as of January 1, 2012 and will not materially impact on our financial condition, results of operations, or financial statement disclosures. In May 2011, FASB issued ASU 2011-05, Comprehensive Income: Presentation of Comprehensive Income, to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders equity. The amendments do not change the guidance regarding the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments should be applied retrospectively and is effective for fiscal years and interim periods within those years beginning after December 15, 2011. Early adoption is permitted. The adoption is not expected to have a material impact on the Companys results of operations, financial position or cash flows. In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement, and results in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term fair value. These amendments change some of the terminology used to describe many of the existing requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments should be applied prospectively, and they are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The adoption is not expected to have a material impact on the Companys results of operations, financial position or cash flows. Management does not believe there would be a material effect on the accompanying financial statements had any other recently issued but not yet effective accounting standards been adopted in the current period.

NOTE C GOING CONCERN The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a loss from operations of approximately $5,400,000, had negative cash flow from operations of approximately $5,000,000 and had an accumulated deficit of approximately $17,000,000 at December 31, 2011. These matters raise substantial doubt about the Companys ability to continue as a going concern. Managements plans include raising additional proceeds from debt and equity transactions and to continue to increase its sales and marketing activities; however, there are no assurances that management will be successful in their efforts. The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.

NOTE E INCOME TAXES   With the advent of the Merger, Company management determined that VitaMed would become the sole focus of the Company and previous business performed by Therapeutics was discontinued. Because of these events, deferred income taxes are determined by calculating the loss from operations of the Company from October 4, 2011 to December 31, 2011. Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Companys assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Companys tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. As of December 31, 2011, there is no provision for income taxes, current or deferred. At December 31, 2011, the Company had a net operating loss carry forward of approximately $2.1 million, available to offset future taxable income through 2031. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods. The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets. The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income. At December 31, 2011, the differences between the actual income tax benefit and the amount computed by applying the statutory federal tax rate (35%) to the loss before taxes are as follows:     <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="width: 72%; text-align: left; text-indent: 0pt">Expected income tax benefit at statutory rate</td> <td style="width: 6%; text-align: right"> </td> <td style="text-align: left; width: 2%">$</td> <td style="text-align: right; width: 19%">(4,519,678</td> <td nowrap="nowrap" style="text-align: left; width: 1%">)</td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="text-align: left; padding-left: 9pt; text-indent: -9pt">Non-deductible expenses:</td> <td> </td> <td style="text-align: left"> </td> <td style="text-align: right"> </td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-left: 18pt; text-align: left; text-indent: -9pt">Debt settlement</td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">2,586,500</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="padding-left: 18pt; text-align: left; text-indent: -9pt">VitaMed pre-merger loss</td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">1,164,629</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-left: 18pt; text-align: left; text-indent: -9pt">Other non-deductible expenses</td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">22,912</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="padding-bottom: 2px; text-align: left; padding-left: 9pt; text-indent: -9pt">Change in valuation account</td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">745,637</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-bottom: 4px; text-align: left; padding-left: 9pt; text-indent: -9pt">Income tax expense (benefit)</td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">-0-</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td></tr> </table>

NOTE F OTHER CURRENT ASSETS Other current assets consist of the following:   <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 2px"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="6" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">December 31,</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 2px"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="2" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">2011</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="2" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">2010</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="width: 72%; text-align: justify; text-indent: 0pt">Deposits with vendors</td> <td style="width: 2%; text-align: right"> </td> <td style="text-align: left; width: 1%">$</td> <td style="text-align: right; width: 10%">300,503</td> <td nowrap="nowrap" style="text-align: left; width: 1%"> </td> <td style="width: 2%; text-align: right"> </td> <td style="text-align: left; width: 1%">$</td> <td style="text-align: right; width: 10%">-0-</td> <td nowrap="nowrap" style="text-align: left; width: 1%"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="text-align: justify; text-indent: 0pt">Prepaid consulting</td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">95,962</td> <td nowrap="nowrap" style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">-0-</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="text-align: justify; text-indent: 0pt">Prepaid insurance</td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">52,611</td> <td nowrap="nowrap" style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">6,292</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="padding-bottom: 2px; text-align: justify; text-indent: 0pt">Prepaid guaranty costs</td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">46,984</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">-0-</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-bottom: 4px; text-align: right; text-indent: 0pt">TOTAL OTHER CURRENT ASSETS</td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">496,060</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">6,292</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td></tr> </table>   NOTE H OTHER ASSETS Other assets consist of the following:   <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 2px"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="6" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">December 31,</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 2px"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="2" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">2011</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="2" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">2010</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="width: 72%; text-align: justify; text-indent: 0pt">Prepaid consulting</td> <td style="width: 2%; text-align: right"> </td> <td style="text-align: left; width: 1%">$</td> <td style="text-align: right; width: 10%">71,689</td> <td nowrap="nowrap" style="text-align: left; width: 1%"> </td> <td style="width: 2%; text-align: right"> </td> <td style="text-align: left; width: 1%">$</td> <td style="text-align: right; width: 10%">-0-</td> <td nowrap="nowrap" style="text-align: left; width: 1%"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="padding-bottom: 2px; text-align: justify; text-indent: 0pt">Prepaid guaranty costs</td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">8,826</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">-0-</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-bottom: 4px; text-align: right; text-indent: 0pt">TOTAL OTHER ASSETS</td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">80,515</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">-0-</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td></tr> </table>

NOTE I NOTES PAYABLE During 2009, a non-affiliate business consultant (the Consultant) provided consulting services to the Company in the amount of $210,000 (the Debt). The Company issued the Consultant a demand promissory note for $210,000 dated November 9, 2010 (the November 2010 Note) which was subsequently assigned to non-affiliate entities (the Noteholders). On April 18, 2011, the Company and the Noteholders agreed that in exchange for the forbearance of the Noteholders not to make demand for repayment of the November 2010 Note for a minimum of sixty (60) days, the Company would (i) cancel the November 2010 Note and (ii) issue two convertible promissory notes to the Noteholders in the principal amount of $105,000 each bearing interest at the rate of six percent (6%) per annum (the Convertible Notes). The Convertible Notes were due on demand any time after sixty (60) days from the date of issuance (the Maturity Date). At the option of the Noteholders, the Convertible Notes could be converted into shares of the Companys Common Stock at any time after the Maturity Date at a fixed conversion price of $0.0105 per share. The Conversion Price was not subject to adjustment at any time for any future stock split, stock combination, dividend or distribution of any kind. On October 18, 2011, the Company and the Noteholders entered into Debt Conversion Agreements and converted the principal of the Convertible Notes into 20,000,000 shares of the Companys Common Stock valued at $7,600,000. The transaction was recorded as debt settlement expense on the accompanying financial statements. On March 1, 2011, the Company entered into a Demand Promissory Note with the Companys then majority shareholder wherein the Company could periodically borrow funds to satisfy its operational requirements. Interest accrued at 20% per annum. On October 4, 2011, this Demand Promissory Note plus accrued interest totaling $170,152 was forgiven. The forgiveness of this related party debt was included in additional paid in capital on the accompanying financial statements. On March 7, 2011, VitaMed entered into a Business Loan Agreement and Promissory Note for a $300,000 bank line of credit (the Bank LOC) for which the bank required a personal guarantee and cash collateral. Personal guarantees and cash collateral limited to $100,000 each were provided by Robert Finizio and John Milligan, officers of VitaMed, and by Reich Family Limited Partnership, an entity controlled by Mitchell Krassan, also an officer of VitaMed. The Bank LOC accrued interest at the rate of 3.020% per annum based on a year of 360 days and was due on March 1, 2012. The bank and VitaMed negotiated a one-year extension to the Bank LOC which was executed on March 19, 2012 (the Bank LOC Extension). The Bank LOC Extension accrues interest at the rate of 2.35% and is due on March 1, 2013. At December 31, 2011, the outstanding principle balance of the Bank LOC was $300,000. In consideration for the personal guarantees and cash collateral, VitaMed issued VitaMed Warrants for an aggregate of 499,998 Units (or Company Warrants for an aggregate of 613,713 shares pursuant to the Conversion Ratio). The ten-year Company Warrants vest at the rate of an aggregate of 76,714 shares per calendar quarter end and have an exercise price of $0.2444 per share. In the event that the Bank LOC is repaid prior to being fully vested, the Company Warrants will be reissued only for the number of shares vested through the date of repayment. At March 31, 2012, an aggregate of 306,867 shares will be vested thereunder. On June 1, 2011, VitaMed sold Promissory Notes (the VitaMed Promissory Notes) in the aggregate of $500,000 with accompanying VitaMed Warrants to purchase an aggregate of 500,000 Units (or Company Warrants to purchase an aggregate of 613,718 shares pursuant to the Conversion Ratio). The VitaMed Promissory Notes earn interest at the rate of four percent (4%) per annum and were due at the earlier of (i) the six (6) month anniversary of the date of issuance and (ii) such time as VitaMed received the proceeds of a promissory note(s) issued in an amount of not less than $1,000,000 (the Funding). Upon the closing of the Funding on July 18, 2011, as more fully described in the following paragraph, two of the VitaMed Promissory Notes in the aggregate of $200,000 were paid in full. By mutual agreement, the remaining VitaMed Promissory Notes in the aggregate of $300,000 were extended until the Closing of the Merger. On October 6, 2011, one of the VitaMed Promissory Notes for $50,000 was paid in full. By mutual agreement, VitaMed Promissory Notes in the aggregate of $100,000 were converted into 266,822 shares of the Companys Common Stock at $0.38 per share, which represents fair value of the shares on the date of conversion. Other VitaMed Promissory Notes in the aggregate of $150,000 were extended to March 1, 2012. At December 31, 2011, the outstanding principle balance of the VitaMed Promissory Notes was an aggregate of $150,000. As mentioned hereinafter in FOOTNOTE O SUBSEQUENT EVENTS, two VitaMed Promissory Notes in the aggregate of $100,000 were further extended to April 14, 2012 and one for $50,000 was further extended to June 1, 1012. The ten-year Company Warrants have an exercise price of $0.4074 per share and none have been exercised. On July 18, 2011, VitaMed sold two Senior Secured Promissory Notes (the Secured Notes) in the amount of $500,000 each and also entered into a Security Agreement under which VitaMed pledged all of its assets to secure the obligation. The Secured Notes bear interest at the rate of six percent (6%) per annum and are due on the one (1) year anniversary thereof. The Senior Secured Notes bear interest at the rate of six percent (6%) per annum and are due on the one (1) year anniversary of the date thereof. The Company may pay the Senior Secured Notes by delivering such number of shares of the Companys Common Stock as shall be determined by dividing the outstanding principal then due and owing by the Companys Share Price. For purposes of the Senior Secured Notes, the Share Price shall mean the lower of the most recent price at which the Company offered and sold shares of its Common Stock (not including any shares issued upon the exercise of options and/or warrants or upon the conversion of any convertible securities) or the five-day average closing bid price immediately preceding the date of conversion. At December 31, 2011, the outstanding principle balance of the Secured Notes was $500,000 each. In September and October 2011, VitaMed sold Convertible Promissory Notes (the VitaMed Convertible Notes) in the aggregate of $534,160. The VitaMed Convertible Notes earned interest at the rate of four percent (4%) per annum and were due December 1, 2011. On November 18, 2011, the Company and the VitaMed Convertible Noteholders entered into Debt Conversion Agreements and converted the principal and accrued interest of the VitaMed Convertible Notes into 1,415,136 shares of the Companys Common Stock at $0.38 per share which represents the fair value of the shares on the date of conversion. In November and December, 2011, the Company sold six-percent Promissory Notes for an aggregate of $800,000 with due dates of March 1, 2012. At December 31, 2011, the outstanding principle balance of the Promissory Notes was $800,000. As mentioned hereinafter in FOOTNOTE O SUBSEQUENT EVENTS, these Notes were paid in full on February 24, 2012 through the issuance of Secured Promissory Notes. In December 2011, the Company sold four-percent Promissory Notes for an aggregate of $100,000 with due dates of March 1, 2012. At December 31, 2011, the outstanding principle balance of the Promissory Notes was $100,000. As mentioned hereinafter in FOOTNOTE O SUBSEQUENT EVENTS, these Notes were further extended by mutual agreement to April 14, 2012.

NOTE K RELATED PARTIES Loan Guaranty On March 7, 2011, VitaMed entered into a Business Loan Agreement and Promissory Note for a $300,000 bank line of credit (the Bank LOC) for which the bank required a personal guarantee and cash collateral. Personal guarantees and cash collateral limited to $100,000 each were provided by Robert Finizio and John Milligan, officers of VitaMed, and by Reich Family Limited Partnership, an entity controlled by Mitchell Krassan, also an officer of VitaMed. The Bank LOC accrued interest at the rate of 3.020% per annum based on a year of 360 days and was due on March 1, 2012. The bank and VitaMed negotiated a one-year extension to the Bank LOC which was executed on March 19, 2012 (the Bank LOC Extension). The Bank LOC Extension accrues interest at the rate of 2.35% and is due on March 1, 2013. In consideration for the personal guarantees and cash collateral, VitaMed issued VitaMed Warrants for an aggregate of 499,998 Units (or Company Warrants for an aggregate of 613,713 shares pursuant to the Conversion Ratio). The ten-year Warrants vest at the rate of an aggregate of 76,714 shares per calendar quarter end and have an exercise price of $0.2444 per share. In the event that the bank loan is repaid prior to being fully vested, the Company Warrants will be reissued only for the number of shares vested through the date of repayment. At March 31, 2012, an aggregate of 306,867 shares will be vested thereunder. Loans from Affiliates The VitaMed Promissory Notes for an aggregate of $500,000 (see NOTE I -- NOTES PAYABLE) included an aggregate of $200,000 being issued to certain officers and directors of the Company. John Milligan, President and Director, and Dr. Brian Bernick, Director, were issued VitaMed Promissory Notes for $50,000 each. Reich Family LP, an entity controlled by Mitchell Krassan, Executive Vice President, and Fourth Generation Equity Partners, LLC (Fourth Generation), an entity controlled by Nick Segal, a director of VitaMed at the time of the issuance, were issued VitaMed Promissory Notes for $50,000 each. The VitaMed Promissory Notes bear interest at the rate of four percent (4%) per annum. On October 6, 2011, (i) principal and interest of approximately $50,696 under the Note to Reich Family LP was repaid, (ii) principal and interest of approximately $50,696 under the Note to Fourth Generation was converted into 133,411 shares of the Companys Common Stock at $0.38 per share, and (iii) the due date for the VitaMed Promissory Notes to Mr. Milligan and Dr. Bernick was extended to March 1, 2012. As mentioned hereinafter in FOOTNOTE O SUBSEQUENT EVENTS, the VitaMed Promissory Notes to Mr. Milligan and Dr. Bernick were further extended by mutual agreement to April 14, 2012. The 4% Promissory Notes issued in the aggregate of $100,000 (see NOTE I -- NOTES PAYABLE) included one issued to Robert Finizio, Chief Executive Officer and Director, and one issued to John Milligan, President and Director, in the amount of $50,000 each. Lock Up Agreements As required by of the Merger Agreement, a Lock Up Agreement (Agreement) was entered into between the Company and security holders covering the aggregate of 70,000,000 shares of the Companys Common Stock issued pursuant to the Merger or reserved for issuance pursuant to Company Options and Company Warrants. Each security holder agreed that from the date of the Agreement until eighteen (18) months thereafter (the Lock-Up Period), they would not make or cause any sale of the Companys securities. After the completion of the Lock-Up Period, the security holder agreed not to sell or dispose of more than 2.5 percent (2.5%) of the aggregate Common Stock or shares reserved for issuance for Company Options and Company Warrants per quarter over the following twelve (12) month period (the Dribble Out Period). Upon the completion of the Dribble Out Period, the Agreements shall terminate. Sales to Related Parties During 2011 and 2010, the Company sold its products to Dr. Brian Bernick, a director of the Company, in the amounts of $20,669 and $25,269, respectively. At December 31, 2011 and 2010, $0 and $79, respectively, remained outstanding. Agreements with Pernix Therapeutics, LLC As previously mentioned the Company closed a Stock Purchase Agreement with Pernix on October 4, 2011. From time to time, the Company has, and will continue to, enter into agreements with Pernix in the normal course of business, which agreements are, and will be negotiated in, arms-length transactions. The President and largest shareholder of Pernix, Cooper C. Collins, was recently elected to serve on the Companys Board of Directors.

NOTE O SUBSEQUENT EVENTS Formation of New Subsidiary On January 10, 2012, the Company formed a new wholly owned subsidiary, BocagreenMD, Inc., a Nevada corporation, for the purpose of selling certain of its products to select markets in different formulations. Issuance of Promissory Notes Between January 2012 and February 10, 2012, the Company issued Promissory Notes for an aggregate of $700,000 (the Notes). The Notes bore interest at a rate of six (6%) per annum and were due on March 1, 2012. The Notes were repaid on February 24, 2012 through the issuance of Secured Promissory Notes as outlined below. Issuance of Secured Promissory Notes On February 24, 2012, TherapeuticsMD, Inc. (the Company) sold and issued Secured Promissory Notes (the Notes) to Steven G. Johnson (Johnson) and Plato & Associates, LLC (Plato) in the principal base amount of $1,358,014 and $1,357,110 respectively (the Principal Base Amount(s)) pursuant to the terms of that certain Note Purchase Agreement (the Note Purchase Agreement) of even date therewith. As consideration for the Notes, Johnson and Plato surrendered certain promissory notes previously issued by the Company in the aggregate amount of $858,014 and $857,110 respectively (which sums include principle and interest through February 24, 2011) (collectively known as the Prior Notes). As a result of the foregoing the Company received an aggregate of $1,000,000 of new funding from Johnson and Plato. On March 23, 2012, each of Johnson and Plato loaned the Company an additional $500,000 under the Notes for an aggregate of $1,000,000. The Principal Base Amount of each Note, plus any and all additional advances made to the Company thereafter (the Aggregated Principal Amount), together with accrued interest at the annual rate of six percent (6%), is due in one lump sum payment twenty-four (24) months from the date of issuance of the Notes (the Maturity Date). As security for the Companys obligations under the Note Purchase Agreement and the Notes, the Company entered into a Security Agreement of even date therewith and pledged all of its assets, tangible and intangible, as further described therein. As an inducement for the Purchasers to lend additional funds to the Company as outlined therein on Schedule I to the Note Purchase Agreement, and for the Purchasers leniency to, in essence, extend the maturity date of the Prior Notes for an additional twenty-four month period, the Purchasers, and/or assigns, received Company Warrant(s) to purchase an aggregate of 9,000,000 Shares. The Company Warrant(s) shall terminate on the date that is five (5) years from the date of the issuance of the Notes and shall have an exercise price of $0.38 per share. The Company is currently evaluating and quantifying the affect of the issuance of the Company Warrants on its financial statements. Extension and/or Payment of Promissory Notes As previously mentioned herein, on June 1, 2011, VitaMed Promissory Notes in the aggregate of $500,000. The due date for three of the VitaMed Promissory Notes in the aggregate of $150,000 had previously been extended to March 1, 2012. Two of the VitaMed Promissory Notes were further extended to April 14, 2012 and the other was further extended to June 1, 2012. In November and December, 2011, the Company sold six-percent Promissory Notes for an aggregate of $800,000 with due dates of March 1, 2012. As mentioned hereinabove, these Notes were paid in full on February 24, 2011 through the issuance of Secured Promissory Notes to Johnson and Plato. In December 2011, the Company sold four-percent Promissory Notes for an aggregate of $100,000 with due dates of March 1, 2012. These Notes were further extended by mutual agreement to April 14, 2012. As previously mentioned herein, the Bank LOC in the principle amount of $300,000 was extended until March 1, 2013. Approval of 2012 Stock Incentive Plan On February 23, 2012, the Companys Board of Directors adopted the 2012 Stock Incentive Plan, a non-qualified plan not requiring approval by the Companys shareholders (2012 SOP). There are 10,000,000 shares authorized for issuance thereunder. No shares have been issued under the 2012 SOP. Election of Additional Directors On February 29, 2012, the Companys Board of Directors elected four additional individuals to serve as members of its Board of Directors, including: Samuel A. Greco, Cooper Collins, Robert V. LaPenta, Jr. and Nicholas Segal. Issuance of Company Options On February 27, 2012, the Company issued Company Options to Robert G. Finizio and John Milligan, officers and directors of the Company. The ten-year Company Options are for 300,000 shares each and have an exercise price of $2.20 per share. The Company Options vest in full on February 27, 2013. Approval of Committee Charters and Committee Appointments On February 29, 2012, the Companys Board of Directors (i) approved charters for each of the Audit Committee, Compensation Committee and Corporate Governance Committee, (ii) appointed members to each committee and (iii) named a Chair of each committee. Members of the Audit Committee include Robert V. LaPenta, Jr., Samuel A. Greco and Nicholas Segal. Mr. LaPenta, Jr. will serve as Chair. Members of the Compensation Committee include Cooper Collins, Robert G. Finizio and Nicholas Segal. Mr. Collins will serve as Chair. Members of the Corporate Governance Committee include John C.K. Milligan, IV, Brian Bernick and Robert LaPenta, Jr. Mr. Milligan will serve as Chair. Release of First Prescription Product On March 1, 2012, the Company launched its first prescription prenatal vitamin, vitaMedMD Plus Rx, a single-dose product containing one prenatal vitamin tablet and one lifes DHA capsule. Cancelation of Options Between January 1, 2012 and March 24, 2011, Company Options for an aggregate of 5,000 shares were canceled due to expiration of the Company Option or termination of the employee.

42509 84608826

1500

15198241

4988637

2150000

3150579

232842

2088177

1241921

6406197

3464810

200000

5551589

15970871

1707000

3170643

5552

15971

1701448

3154672

183355

177601

183355

177601

190280

45362 45362 9338 9338 93969 93969 7158 7158 8239137 21682 8217455 21681958

17250

17158

92057

165879

54845

22783

7600000

22630

7390000

2484160

100696 300000 148668 190280

849137

NOTE N RESTATEMENT OF 2010 AUDITED FINANCIALS   Subsequent to the filing of the Companys Current Report on Form 8-K, Amendment 3 filed on December 9, 2011, the Company determined that an error was made in certain assumptions used in the Black-Scholes calculation to determine the fair value of options issued from inception through December 31, 2010.   For the year ended December 31, 2010, $363,750 was recorded as non-cash compensation on the audited financial statements of VitaMed.  The Company determined that the fair value should have been $177,601, an overstatement of $186,149.  The Company is restating sales, general and administration for the year ended December 31, 2010 to include the $186,149 reduction in non-cash compensation expense.   For the period from inception through December 31, 2010, $559,917 was recorded as non-cash compensation on the audited financial statements of VitaMed, of which $196,167 pertains to the period from May 13, 2008 (Inception) through December 31, 2009.  The Company determined that the fair value should have been $283,530, of which $105,929 pertains to the period from Inception through December 31, 2009, an overstatement of $276,387, of which $90,238 pertains to the period from Inception through December 31, 2009.  The Company is restating accumulated deficit for the year ended December 31, 2010 to include the $276,387 reduction for the year ended December 31, 2010 and the $90,238 reduction for the period from Inception through December 31, 2009.   The tables below summarize the impact of the restatements.   <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="6" style="text-align: center">As of</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center">December 31, 2010</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">As Reported</td> <td nowrap="nowrap"> </td> <td> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">As Restated</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td nowrap="nowrap"> </td> <td> </td> <td colspan="2"> </td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 76%">Additional paid in capital</td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">537,561</td> <td nowrap="nowrap" style="width: 1%"> </td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">261,174</td> <td nowrap="nowrap" style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Accumulated deficit</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">(4,356,100</td> <td nowrap="nowrap">)</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">(4,079,713</td> <td nowrap="nowrap">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td colspan="6" style="border-bottom: black 1.5pt solid"> For the Year Ended December 31, 2010</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">As Reported</td> <td nowrap="nowrap"> </td> <td> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">As Restated</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td nowrap="nowrap"> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Sales, general and administration</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">3,650,959</td> <td nowrap="nowrap"> </td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">3,464,810</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="font-weight: bold">Total operating expense</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">3,739,144</td> <td nowrap="nowrap"> </td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">3,552,994</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="font-weight: bold">Operating loss</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">(3,053,613</td> <td nowrap="nowrap">)</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">(2,867,464</td> <td nowrap="nowrap">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="font-weight: bold">Net loss</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">(3,053,613</td> <td nowrap="nowrap">)</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">(2,867,464</td> <td nowrap="nowrap">)</td></tr> </table>

NOTE G FIXED ASSETS Fixed assets consist of the following:   <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; font-size: 10pt; font-family: times new roman; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 2px"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="6" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">December 31,</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 2px"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="2" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">2011</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td> <td style="padding-bottom: 2px"> </td> <td colspan="2" style="border-bottom: black 2px solid; text-align: center; text-indent: 0pt">2010</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="width: 72%; text-align: justify; text-indent: 0pt">Website</td> <td style="width: 2%; text-align: right"> </td> <td style="text-align: left; width: 1%">$</td> <td style="text-align: right; width: 10%">91,743</td> <td nowrap="nowrap" style="text-align: left; width: 1%"> </td> <td style="width: 2%; text-align: right"> </td> <td style="text-align: left; width: 1%">$</td> <td style="text-align: right; width: 10%">65,791</td> <td nowrap="nowrap" style="text-align: left; width: 1%"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="text-align: justify; text-indent: 0pt">Equipment</td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">33,651</td> <td nowrap="nowrap" style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">30,837</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-bottom: 2px; text-align: justify; text-indent: 0pt">Furniture and fixtures</td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">26,219</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">26,219</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left"> </td></tr> <tr style="background-color: white; vertical-align: bottom"> <td> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">151,613</td> <td nowrap="nowrap" style="text-align: left"> </td> <td style="text-align: right"> </td> <td style="text-align: left"> </td> <td style="text-align: right">122,847</td> <td nowrap="nowrap" style="text-align: left"> </td></tr> <tr style="background-color: #cceeff; vertical-align: bottom"> <td style="padding-bottom: 2px; text-align: justify; text-indent: 0pt">Accumulated depreciation</td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">(81,500</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left">)</td> <td style="padding-bottom: 2px; text-align: right"> </td> <td style="border-bottom: black 2px solid; text-align: left"> </td> <td style="border-bottom: black 2px solid; text-align: right">(26,655</td> <td nowrap="nowrap" style="padding-bottom: 2px; text-align: left">)</td></tr> <tr style="background-color: white; vertical-align: bottom"> <td style="padding-bottom: 4px; text-align: right; text-indent: 0pt">TOTAL FIXED ASSETS</td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">70,113</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td> <td style="padding-bottom: 4px; text-align: right"> </td> <td style="border-bottom: black 4px double; text-align: left">$</td> <td style="border-bottom: black 4px double; text-align: right">96,192</td> <td nowrap="nowrap" style="padding-bottom: 4px; text-align: left"> </td></tr> </table> Depreciation expense for the years ended December 31, 2011 and 2010 was $54,845 and $22,783, respectively.

NOTE L - BUSINESS CONCENTRATIONS The Company purchases its products from several suppliers with approximately 95% and 93% coming from one supplier for the years ended December 31, 2011 and 2010, respectively.

4707714

3170645

<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">NOTE M – COMMITMENTS AND CONTINGENCIES</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The Company leases administrative and distribution facilities in Boca Raton, Florida pursuant to a forty-five month non-cancelable operating lease expiring in 2013. The lease stipulates, among other things, base monthly rents of $5,443 plus the Company’s share of monthly estimated operating expenses of $3,500 and sales tax. The lease contains one renewal option for an additional two-year period.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The rental expense related to this lease totaled $106,315 and $116,175 for the years ended December 31, 2011 and 2010.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">As of December 31, 2011, future minimum rental payments are as follows:</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-align: center"> <table cellpadding="0" cellspacing="0" style="width: 50%; font: 10pt times new roman; font-size: 10pt; font-family: times new roman"> <tr> <td style="vertical-align: bottom; width: 47%; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Years Ending December 31,</div> </td> <td style="vertical-align: bottom; width: 28%; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; width: 24%; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: #cceeff"> <td style="vertical-align: bottom; width: 47%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2012</div> </td> <td style="text-align: right; vertical-align: bottom; width: 28%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left">$</td> <td style="vertical-align: bottom; width: 22%; text-align: right">111,725</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="vertical-align: bottom; width: 47%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2013</div> </td> <td style="text-align: right; vertical-align: bottom; width: 28%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 22%; text-align: right">56,601</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="vertical-align: bottom; width: 47%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2014</div> </td> <td style="text-align: right; vertical-align: bottom; width: 28%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 22%; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="vertical-align: bottom; width: 47%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2015</div> </td> <td style="text-align: right; vertical-align: bottom; width: 28%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 22%; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="vertical-align: bottom; width: 47%; padding-bottom: 2px"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Thereafter</div> </td> <td style="text-align: right; vertical-align: bottom; width: 28%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; border-bottom: black 2px solid; text-align: left"> </td> <td style="vertical-align: bottom; width: 22%; border-bottom: black 2px solid; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: white"> <td style="vertical-align: bottom; width: 47%; padding-bottom: 4px"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Total</div> </td> <td style="text-align: right; vertical-align: bottom; width: 28%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 2%; border-bottom: black 4px double; text-align: left">$</td> <td style="vertical-align: bottom; width: 22%; border-bottom: black 4px double; text-align: right">168,326</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> </tr></table> </div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">In December 2011, the Company paid approximately $245,000 to a non-affiliated third party for fees related to research and development of new products. The Company believes that it could incur additional related fees up to $950,000 in 2012.</div> <div style="text-indent: 0pt; display: block"> </div>

<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">NOTE D – STOCKHOLDERS’ EQUITY</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">As previously mentioned herein, on October 4, 2011, all Units were exchanged for shares of the Company’s Common Stock. In addition, all VitaMed Options and VitaMed Warrants were exchanged and converted into Company Options and Company Warrants. All Units , VitaMed Options and VitaMed Warrants were exchanged on a pro-rata basis for shares of the Company’s Common Stock which in the aggregate totaled 70,000,000 shares, resulting in a conversion ratio calculated by the sum of all Units, VitaMed Options and VitaMed Warrants divided by 70,000,000 (the “Conversion Ratio”). Pursuant to the Conversion Ratio, the Company issued 58,407,331 shares of the Company’s Common Stock in exchange for the Units, reserved for issuance an aggregate of 10,119,796 shares issuable upon the exercise of the Company Options and reserved for issuance an aggregate of 1,472,916 shares issued upon the exercise of the Company Warrants.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Preferred Stock</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">At December 31, 2011, the Company had 10,000,000 shares of Preferred Stock, par value $0.001 authorized and none outstanding, which shares can be designated by the Company’s Board of Directors.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Common Stock</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -0.9pt; text-align: justify">At December 31, 2011, the Company had 250,000,000 shares of Common Stock, $0.001 par value authorized, with 82,978,781 shares of Common Stock issued and outstanding.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block">Between February and May 2011, VitaMed sold 2,892,630 Units for an aggregate purchase price of $707,000.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block">On October 3, 2011, the Company effected a reverse split of its 16,575,209 issued and outstanding shares of Common Stock on a ratio of 1 for 100 resulting in 165,856 shares issued and outstanding thereafter.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -0.9pt; text-align: justify">On October 5, 2011, the Company closed a Stock Purchase Agreement with Pernix Therapeutics, LLC, a Louisiana limited liability company (“Pernix”). Pursuant to the terms of the Stock Purchase Agreement dated September 8, 2011, Pernix agreed to purchase 2,631,579 shares of the Company’s Common Stock (the “Shares”) at a purchase price of $0.38 per share for a total purchase price of $1,000,000 (“Purchase Price”). In connection with the Stock Purchase Agreement, the Company and Pernix entered into a Lock-Up Agreement which, among other things, restricts the sale, assignment, transfer, encumbrance and other disposition of the Shares issued to Pernix. Pursuant to the terms of the Lock-Up Agreement, Pernix agreed that for a period of twelve (12) months from the date of the Lock-Up Agreement, it would not make or cause any sale of the Shares (the “Lock-Up Period”). After the completion of the Lock-Up Period, Pernix agreed not to sell or dispose of more than five percent (5%) of the Shares per quarter for the following twelve (12) month period.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -0.9pt; text-align: justify">In October and November 2011, the Company converted principle and accrued interest in the aggregate of $849,137 into shares of Common Stock of the Company totaling 20,000,000 and 1,681,958, respectively, as more fully described in NOTE I – NOTES PAYABLE.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: -0.9pt; text-align: justify">In December 2011, a former director of VitaMed, exercised Company Options to purchase 92,057 shares of the Company’s Common Stock at an aggregate exercise price of $17,250.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Warrants</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The valuation methodology used to determine the fair value of Common Stock purchase warrants is the Black-Scholes-Merton option-pricing model (“Black-Scholes Model”), an acceptable model in accordance with ASC 718-10. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the risk-free interest rate and the term of the Common Stock purchase warrant.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">As of December 31, 2011, the Company had Company Warrants outstanding for an aggregate of 3,057,627 shares of the Company’s Common Stock (including the conversion of VitaMed Warrants as described above) with a weighted average contractual life of 8.0 years and exercise prices ranging from $0.24 to $1.50 per share resulting in a weighted average exercise price of $0.39 per share.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">As of December 31, 2011, unamortized costs associated with Company Warrants totaled approximately $349,000.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">During the year ended December 31, 2011, the Company issued the following:</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-align: left"> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt times new roman; font-size: 10pt; font-family: times new roman"> <tr> <td style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Purpose</div> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Number of Shares Under Company Warrants</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Exercise Price</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Exercise Term in Years</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Fair Value</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: #cceeff"> <td style="vertical-align: bottom; width: 44%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">Loan guaranty</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">613,713</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">$0.24</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">10</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right">93,969</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Loan consideration</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">613,718</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">$0.41</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">5</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">30,993</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Product consulting</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">1,045,485</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">$0.38-$0.41</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">5-10</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">189,942</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 2px"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Services</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 2px solid; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 2px solid; text-align: right">784,711</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px">$0.38-$1.50</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px">5-10</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 2px solid; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 2px solid; text-align: right">159,363</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: #cceeff"> <td style="vertical-align: bottom; width: 44%; padding-bottom: 4px">  </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 4px double; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 4px double; text-align: right">3,057,627</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 4px double; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 4px double; text-align: right">474,267</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> </tr></table> </div> <div style="text-indent: 0pt; display: block"></div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">On March 7, 2011, VitaMed entered into a Business Loan Agreement and Promissory Note for a $300,000 bank line of credit (the “Bank LOC”) for which the bank required a personal guarantee and cash collateral. Personal guarantees and cash collateral limited to $100,000 each were provided by Robert Finizio and John Milligan, officers of VitaMed, and by Reich Family Limited Partnership, an entity controlled by Mitchell Krassan, also an officer of VitaMed. The Bank LOC accrued interest at the rate of 3.020% per annum based on a year of 360 days and was due on March 1, 2012. The bank and VitaMed negotiated a one-year extension to the Bank LOC which was executed on March 19, 2012 (the “Bank LOC Extension”). The Bank LOC Extension accrues interest at the rate of 2.35% and is due on March 1, 2013. In consideration for the personal guarantees and cash collateral, VitaMed issued VitaMed Warrants for an aggregate of 499,998 Units (or Company Warrants for an aggregate of 613,713 shares pursuant to the Conversion Ratio). The ten-year Warrants vest at the rate of an aggregate of 76,714 shares per calendar quarter end and have an exercise price of $0.2444 per share. In the event that the bank loan is repaid prior to being fully vested, the Company Warrants will be reissued only for the number of shares vested through the date of repayment. At March 31, 2012, an aggregate of 306,867 shares will be vested thereunder. The VitaMed Warrants were valued on the date of the grant using a term of 10 years; a volatility of 47.89%; risk free rate of 3.48%; and a dividend yield of 0%. Of the $93,969 fair value, $38,159 was recorded as loan guaranty costs in other income and expense and $55,810 was recorded as prepaid expense on the accompanying consolidated financial statements.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">In June 2011, VitaMed sold Promissory Notes (the “VitaMed Promissory Notes”) in the aggregate of $500,000 with accompanying VitaMed Warrants for an aggregate of 500,000 shares (or Company Warrants for an aggregate of 613,718 shares pursuant to the Conversion Ratio). The VitaMed Warrants were valued on the date of the grant using a term of five (5) years; a range of volatility from 39.13% to 39.15%; risk free rate ranging from 1.38-1.65%; and a dividend yield of 0%. The Company Warrants vested immediately. Although the fair value was $30,993, using the appropriate accounting treatment, $28,719 was recorded as debt discount and fully amortized during 2011 with the amortized amount recorded as interest expense on the accompanying consolidated financial statements.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">On July 21, 2011,VitaMed entered into a one-year consulting agreement with Lang Naturals, Inc. (“Lang”), wherein Lang would assist in the design, development and distribution efforts of VitaMed’s initial product offering. As compensation, Lang received a VitaMed Warrant for 200,000 shares (or a Company Warrant for 245,485 shares pursuant to the Conversion Ratio). The VitaMed Warrant was valued on the date of the grant using a term of five (5) years; a volatility of 39.44%; risk free rate of 1.56%; and a dividend yield of 0%. The Company Warrant vested immediately. Of the $12,548 fair value, $5,612 was recorded as non-cash compensation and $6,936 was recorded as prepaid expense on the accompanying consolidated financial statements.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">On October 21, 2011, the Company granted a Company Warrant to Daniel A. Cartwright, the Company's Chief Financial Officer, for 600,000 shares with a fair value of $133,045 for services performed. The Company Warrant was valued on the date of the grant using a term of 10 years; volatility of 45.94%; risk free rate of 2.23%; and a dividend yield of 0%. The Company Warrant vests over a 44-month period beginning on November 21, 2011 (or 13,636 shares for months 1-43 and 13,652 shares for month 44). Of the $133,045 fair value, $7,158 was recorded as non-cash compensation on the accompanying consolidated financial statements. The remaining $125,887 will be expense to non-cash compensation equitably over the remaining 42 months.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">Also on October 21, 2011, the Company granted a Company Warrant for 184,211 shares with a fair value of $25,980 to an unrelated entity for consulting services covered under a two (2) month agreement. The Company Warrant was valued on the date of the grant using a term of five (5) years; volatility of 41.04%; risk free rate of 1.08%; and a dividend yield of 0%. The $25,980 fair value was recorded as financing expense on the accompanying consolidated financial statements.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">On October 23, 2011, VitaMed entered into a two-year consulting agreement with Lang wherein a Lang representative will help evaluate improvements to existing products and new products as well as services including but not limited to research, design, compliance, scientific and regulatory affairs and commercialization of products. As compensation, Lang received a Company Warrant for 800,000 shares. The Company Warrant was valued on the date of the grant using a term of 10 years; a volatility of 45.94%; risk free rate of 2.23%; and a dividend yield of 0%. The Company Warrant vested immediately. Of the $177,394 fair value, $17,010 was recorded as non-cash compensation and $160,384 was recorded as prepaid expense on the accompanying consolidated financial statements.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">On December 28, 2011, the Company granted a Company Warrant for 500 shares with a fair value of $338 to an unrelated individual for consulting services covered under a three (3) month agreement. The Company Warrant was valued on the date of the grant using a term of 10 years; volatility of 51.83%; risk free rate of 0.91%; and a dividend yield of 0%. The Company Warrant vested immediately. Of the $338 fair value, $15 was recorded as non-cash compensation and $323 was recorded as prepaid expense on the accompanying consolidated financial statements.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The weighted average fair value per share of Company Warrants granted and the assumptions used in the Black-Scholes Model during the years ended December 31, 2011 are set forth in the table below.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-align: center"> <table cellpadding="0" cellspacing="0" style="width: 50%; font: 10pt times new roman; font-size: 10pt; font-family: times new roman"> <tr> <td style="vertical-align: bottom; width: 68%; padding-bottom: 2px">  </td> <td style="vertical-align: bottom; width: 3%; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; width: 28%; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2011</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 2%; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 68%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Weighted average fair value</div> </td> <td style="text-align: right; vertical-align: bottom; width: 3%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 26%; text-align: right">$0.36</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 2%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 68%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Risk-free interest rate</div> </td> <td style="text-align: right; vertical-align: bottom; width: 3%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 26%; text-align: right">0.91-3.48</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 2%; text-align: left">%</td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 68%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Volatility</div> </td> <td style="text-align: right; vertical-align: bottom; width: 3%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 26%; text-align: right">39.13-51.83</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 2%; text-align: left">%</td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 68%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Term (in years)</div> </td> <td style="text-align: right; vertical-align: bottom; width: 3%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 26%; text-align: right">5-10</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 2%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 68%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Dividend yield</div> </td> <td style="text-align: right; vertical-align: bottom; width: 3%"> </td> <td style="vertical-align: bottom; width: 2%; text-align: left"> </td> <td style="vertical-align: bottom; width: 26%; text-align: right">0.00</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 2%; text-align: left">%</td> </tr></table> </div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term.  Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the term of the award. The Company’s estimated volatility is an average of the historical volatility of the stock prices of its peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices over a period equal to the term of the awards. The Company used the historical volatility of peer entities due to the lack of sufficient historical data of its stock price during 2001-2011.</div> <div style="text-indent: 0pt; display: block"></div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The Company issued no Common Stock purchase warrants during the year ended December 31, 2010.</div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">A summary of the Company’s Common Stock purchase warrant activity and related information for 2011 follows:</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-align: left"> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt times new roman; font-size: 10pt; font-family: times new roman"> <tr> <td style="vertical-align: bottom; padding-bottom: 2px">  </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Number of Shares Under Company Warrant</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Weighted Average Exercise Price</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Weighted Average Remaining Contractual Life</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Aggregate Intrinsic Value</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom"> <div style="text-indent: -9pt; display: block; margin-left: 9pt; margin-right: 0pt; text-align: left">Balance at December 31, 2010</div> </td> <td style="text-align: right; vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom"> </td> <td colspan="2" style="vertical-align: bottom"> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom"> </td> <td colspan="2" style="vertical-align: bottom"> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom"> </td> <td colspan="2" style="vertical-align: bottom"> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Granted</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">3,057,627</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right">0.36</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">8.7</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right">3,483,691</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Exercised</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Expired</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 2px; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Cancelled</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 2px solid; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 2px solid; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 4px"> <div style="text-indent: -9pt; display: block; margin-left: 9pt; margin-right: 0pt; text-align: left">Balance at December 31, 2011</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 4px double; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 4px double; text-align: right">3,057,627</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">0.36</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">8.7</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">3,483,691</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 4px"> <div style="text-indent: -9pt; display: block; margin-left: 9pt; margin-right: 0pt; text-align: left">Vested and Exercisable at December 31, 2011</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 4px double; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 4px double; text-align: right">2,254,758</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">0.37</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">5.6</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">2,361,339</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> </tr></table> </div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Stock Options</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">In 2009, the Company adopted the 2009 Long Term Incentive Compensation Plan (the “LTIP”) to provide financial incentives to employees, members of the Board, and advisers and consultants of the Company who are able to contribute towards the creation of or who have created stockholder value by providing them stock options and other stock and cash incentives (the “Awards”). The Awards available under the LTIP consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, EVA awards, and other stock or cash awards as described in the LTIP. There are 25,000,000 shares authorized for issuance thereunder. Prior to the Merger, no awards had been issued under the LTIP.</div> <div style="text-indent: 0pt; display: block"></div> <div style="text-indent: 0pt; display: block"></div> <div> </div> <div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">A summary of activity under the LTIP and related information follows:</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-align: left"> <table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt times new roman; font-size: 10pt; font-family: times new roman"> <tr> <td style="vertical-align: bottom; padding-bottom: 2px">  </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Number of Shares Under Company Option</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Weighted Average Exercise Price</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Weighted Average Remaining Contractual Life</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; padding-bottom: 2px"> </td> <td colspan="2" style="vertical-align: bottom; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">Aggregate Intrinsic Value</div> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom"> <div style="text-indent: -9pt; display: block; margin-left: 9pt; margin-right: 0pt; text-align: left">Balance at December 31, 2010</div> </td> <td style="text-align: right; vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom"> </td> <td colspan="2" style="vertical-align: bottom"> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom"> </td> <td colspan="2" style="vertical-align: bottom"> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> <td style="vertical-align: bottom"> </td> <td colspan="2" style="vertical-align: bottom"> </td> <td nowrap="nowrap" style="vertical-align: bottom; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Granted (1)</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">10,682,218</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right">0.16</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">7.6</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right">14,188,484</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Exercised</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">(92,057</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left">)</td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right">0.19</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Expired</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 2%"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 2px; padding-left: 0pt; margin-left: 9pt"> <div style="text-indent: -9pt; display: block; margin-left: 18pt; margin-right: 0pt; text-align: left">Cancelled</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 2px solid; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 2px solid; text-align: right">-0-</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 2%; padding-bottom: 2px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 2px"> </td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 2px"> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 4px"> <div style="text-indent: -9pt; display: block; margin-left: 9pt; margin-right: 0pt; text-align: left">Balance at December 31, 2011</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 4px double; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 4px double; text-align: right">10,590,161</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">0.16</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">7.6</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">14,067,649</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: bottom; width: 44%; padding-bottom: 4px"> <div style="text-indent: -9pt; display: block; margin-left: 9pt; margin-right: 0pt; text-align: left">Vested and Exercisable at December 31, 2011</div> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; border-bottom: black 4px double; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; border-bottom: black 4px double; text-align: right">6,581,049</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">0.13</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left"> </td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">7.5</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> <td style="text-align: right; vertical-align: bottom; width: 2%; padding-bottom: 4px"> </td> <td style="vertical-align: bottom; width: 1%; text-align: left">$</td> <td style="vertical-align: bottom; width: 10%; text-align: right; padding-bottom: 4px">9,038,719</td> <td nowrap="nowrap" style="vertical-align: bottom; width: 1%; text-align: left; padding-bottom: 4px"> </td> </tr></table> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify"> <div> <hr align="left" noshade="noshade" size="1" style="color: black; width: 20%" /> </div> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">(1) This includes: (i) VitaMed Options granted between October 2008 and December 31, 2010 for an aggregate of 7,639,722 Units of which 16,000 were canceled prior to conversion (or Company Options for 9,357,561 shares per the Conversion Ratio), (ii) VitaMed Options granted between January 1, 2011 and October 3, 2011 for an aggregate of 621,000 Units (or Company Options for 762,235 shares per the Conversion Ratio) and (iii) Company Options granted between October 4, 2011 and December 31, 2011 for an aggregate of 562,422 shares. The terms and conditions of the VitaMed Options were reflected in the replacement Company Options including the number of shares vested.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The weighted-average grant date fair value of Company Options granted during the years ended December 31, 2011 and 2010 was $0.19 and $0.09, respectively.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">As of December 31, 2011, Company Options outstanding covered an aggregate of 10,590,161 shares with a weighted average contractual life of 7.6 years and exercise prices ranging from $0.10 to $1.22 per share resulting in a weighted average exercise price of $0.16 per share.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The valuation methodology used to determine the fair value of Company Options is the Black-Scholes-Merton option-pricing model (“Black-Scholes Model”), an acceptable model in accordance with ASC 718-10. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the risk-free interest rate, and the expected life.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The assumptions used in the Black-Scholes Model during the years ended December 31, 2011 and 2010 and are set forth in the table below.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-align: center"> <table cellpadding="0" cellspacing="0" style="width: 80%; font: 10pt times new roman; font-size: 10pt; font-family: times new roman"> <tr> <td style="vertical-align: top; width: 60%">  </td> <td style="vertical-align: top; width: 3%">  </td> <td style="vertical-align: top; width: 18%; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2011</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="vertical-align: top; width: 16%; border-bottom: black 2px solid"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: center">2010</div> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: top; width: 60%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Risk-free interest rate</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 18%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">0.91-2.54%</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 16%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">1.27-3.12%</div> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: top; width: 60%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Volatility</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 18%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">37.92-40.48%</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 16%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">36.34-42.46%</div> </td> </tr><tr style="background-color: #cceeff"> <td style="text-align: left; vertical-align: top; width: 60%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Expected life (in years)</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 18%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">5.5-6.25</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 16%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">5-6.25</div> </td> </tr><tr style="background-color: white"> <td style="text-align: left; vertical-align: top; width: 60%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: left">Dividend yield</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 18%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">0.00%</div> </td> <td style="vertical-align: top; width: 3%">  </td> <td style="text-align: right; vertical-align: top; width: 16%"> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: right">0.00%</div> </td> </tr></table> </div> <div style="text-align: center"> <div> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected life.  Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the term of the award. The Company’s estimated volatility is an average of the historical volatility of the stock prices of its peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices over a period equal to the term of the awards. The Company used the historical volatility of peer entities due to the lack of sufficient historical data of its stock price during 2001-2011. The average expected life is based on the contractual term of the option using the simplified method.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">Share-based compensation expense for Company Options recognized in our results for the years ended December 31, 2011 and 2010 ($180,087 and $177,601 respectively) is based on awards vested and we estimated no forfeitures. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates.</div> <div style="text-indent: 0pt; display: block"> </div> <div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt; text-align: justify">At December 31, 2011 and 2010, total unrecognized estimated compensation expense related to non-vested Company Options granted prior to that date was approximately $244,000 and $206,000, respectively, which is expected to be recognized over a weighted-average period of 3.3 years. No tax benefit was realized due to a continued pattern of operating losses.</div> <div style="text-indent: 0pt; display: block"></div></div></div>

NOTE J OTHER CURRENT LIABILITIES   Other current liabilities consist of the following:   <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; text-align: center">December 31,</td> <td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2011</td> <td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center">2010</td> <td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 72%">Accrued payroll</td> <td style="width: 2%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 10%; text-align: right">227.477</td> <td nowrap="nowrap" style="width: 1%"> </td> <td style="width: 2%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 10%; text-align: right">-0-</td> <td nowrap="nowrap" style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Accrued vacation</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">68,438</td> <td nowrap="nowrap"> </td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">24,208</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Other accrued expenses</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">128,473</td> <td nowrap="nowrap"> </td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">90,998</td> <td nowrap="nowrap"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Dividends payable(1)</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">41,359</td> <td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">-0-</td> <td nowrap="nowrap" style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 3pt; text-align: right">TOTAL OTHER CURRENT LIABILITIES</td> <td style="padding-bottom: 3pt; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">465,747</td> <td nowrap="nowrap" style="padding-bottom: 3pt"> </td> <td style="padding-bottom: 3pt; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">115,206</td> <td nowrap="nowrap" style="padding-bottom: 3pt"> </td></tr> </table> (1) In June 2008, the Company declared and paid a special dividend of $0.40 per share of common stock to all shareholders of record as of June 10, 2008. This amount reflects moneys remaining unclaimed by the certain shareholders.