Report of the Audit Committee*

The Board of Directors oversees the Company's financial reporting process in lieu of a separately standing audit committee. The Board of Directors reviewed and discussed the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 with management.

The Board of Directors has discussed with the Company's independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended, as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Board of Directors has received the written disclosures and the letter from the independent accountant required by the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Board of Directors concerning independence, and has discussed with the independent accountant the independent accountant’s independence.

The Board of Directors discussed with the Company's independent accounting firm the overall scope and plans for its audits and meets with the Company's independent accounting firm to discuss the results of its examinations and the overall quality of the Company's financial reporting. In reliance on the reviews and discussions referred to above, the Board of Directors approved that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 for filing with the Securities and Exchange Commission.

Board of Directors:

Robert Landau

Mitchell Geisler

* The material in this report is not "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

PROPOSAL II

APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION

TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF

COMMON STOCK FROM 3,000,000,000 TO 10,000,000,000

General

The Board of Directors is proposing for stockholder approval an amendment to the Company’s Articles of Incorporation (the “Charter”) to increase the number of authorized shares of Common Stock, par value $0.0000000001 per share, from 3,000,000,000 shares to 10,000,000,000 shares. The Charter also authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.001 per share, of which 300,000 shares of Series A Convertible Preferred Stock (“Series A Preferred Stock”) are currently issued and outstanding. The proposed amendment will not increase or otherwise affect the Company’s number of authorized shares of preferred stock or the outstanding Series A Preferred Stock . The Board believes that it is in the best interests of the Company and its stockholders to increase the number of authorized shares of Common Stock in order to give the Company greater flexibility in considering and planning for future potential business needs , including the issuance of convertible securities such as its currently outstanding debt obligations and the Series A Preferred Stock.

The Board is also seeking approval for a reverse split of the outstanding shares of Common Stock, which is described under Proposal III.  If the Reverse Stock Split is not approved and implemented, the Company will not be able to meet its obligations to issue shares of Common Stock under all of its outstanding convertible notes, Series A Preferred Stock and equity award plans, even with the increase in the authorized number of shares of Common Stock.  The Reverse Stock Split, if implemented, will not change the number of authorized shares of Common Stock under the Charter or the number of shares authorized to be issued under the equity award plans .

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Purpose of Amendment

The Charter currently authorizes the issuance of up to 3,000,000,000 shares of Common Stock, par value $0.001 per share. As of the close of business on June 14, 2013, there were 2,620,957,522 shares of Common Stock issued and outstanding.  In addition, as of the close of business on July 12 , 2013, there were (i) 4,274,722,384 shares of Common Stock issuable upon exercise of outstanding convertible promissory notes ,  and (ii) 3,000,000,000 shares of Common Stock issuable upon conversion of the Company’s 300,000 shares of issued and outstanding Series A Convertible Preferred Stock. If the 2013 Equity Performance Plan being proposed for shareholder approval under Proposal IV in this Proxy Statement is approved, the Company will reserve 50,000,000 shares of Common Stock for issuance under the 2013 Equity Performance Plan, which will replace the two current equity award plans under which there are approximately 5,600,000 shares available for issuance . The Company currently has no outstanding options or warrants unde r agreements or equity award plans .

Therefore, the additional shares of authorized shares of Common Stock will be used to:

●

issue up to 4,274,722,384 shares of Common Stock upon exercise of the above described outstanding convertible promissory notes;

●

issue up to 3,000,000,000 shares of Common Stock upon exercise of the above described 300,000 shares of Series A Convertible Preferred Stock;

●

if approved by the stockholders at the Annual Meeting, to issue up to 50,000,000 shares of Common Stock under the 2013 Plan; and

●

allow the Company to issue additional shares of Common Stock for any proper corporate purposes, including but not limited to, public or private financings, stock splits, stock dividends, potential strategic transactions, including mergers, acquisitions, strategic partnerships, joint ventures and other business combinations, as well as for other general corporate transactions.

The Company requires authorization from the stockholders for the additional shares of Common Stock to meet its conversion obligations of the outstanding convertible notes.  The Company believes that it will have the cash funds, from previously contracted property sales and future mineral sales to repay the principle and interest on the notes, however there is a strong likelihood that the note holders will choose to convert their notes into shares of Common Stock prior to the Company’s ability to repay the notes.  Therefore, the Company anticipates that the notes will be converted.

Other than as described above, the Company has no current plan, commitment, arrangement, understanding or agreement regarding the issuance of the additional shares of Common Stock resulting from the proposed increase in the number of authorized shares of Common Stock. The additional shares of Common Stock will be available for issuance from time to time as determined by the Board of Directors for any proper corporate purposes.

Convertible Promissory Notes

The Company currently has 11 convertible promissory notes outstanding, issued to the following persons: Jabi. Inc. (an entity controlled by Robert Landau, the Company’s Chief Executive Officer), Richard Jagodnik, Al Landau (father of Robert Landau), Asher Enterprises, Inc. (“Asher”) and Magna Group, LLC (“Magna”). The Company is not under any obligation to issue any additional promissory notes to these note holders in the future.

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The following is a table of the debt obligations described above, as of June 21, 2013, giving the indicated basic information about the notes and conversions that may happen in the future:

*Calculated as of July 12 , 2013 and subject to applicable blocker provisions.

Interest of Certain Persons in Matters to be Acted Upon

Of the 4,274,722,384 shares of Common Stock issuable upon exercise of outstanding convertible promissory notes, 65,419,386 shares of Common Stock are issuable to Jabi Inc., an entity controlled by Robert Landau, the Company’s Chief Executive Officer. The principal balance of $ 1,194,106 and interest of $ 114,281.71 was due on these promissory notes as of July 12 , 2013. In addition, Jabi Inc. is also the holder of the Company’s 300,000 shares of Series A Preferred Stock, which are initially convertible into 3,000,000,000 shares of the Company’s Common Stock.

On June 4, 2013, the Company agreed with Jabi Inc. to convert $300,000 of its outstanding debt and interest into shares of Series A Preferred Stock.  The conversion to preferred stock was made due to the fact that the Company has an insufficient number of shares of Common Stock authorized to satisfy its potential obligations to issue shares of Common Stock under its outstanding note obligations.

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Terms of Series A Preferred Stock

The Series A Preferred Stock ranks senior in preference and priority to the Common Stock with respect to dividend and liquidation rights and, except as provided in the Certificate of Designation for the Series A Preferred Stock or otherwise required by law, will vote with the Common Stock on an as converted basis on all matters presented for a vote of the holders of Common Stock, including directors.  Furthermore, until the Company consummates equity financing from institutional or strategic investors of at least a $10,000,000, the approval of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a separate class, will be required for certain corporate actions, all as more fully described in the Certificate of Designation.  The Series A Preferred Stock is convertible (at a 1:10,000 ratio) into 3,000,000,000 shares of common stock, subject to adjustment for stock splits and similar events.

For a period of 6 years after issuance, shares of Series A Preferred Stock may be redeemed by the Company at a price equal to the greater of (A) 1.50 times $1.00 (the original issue price) per share, plus 10% percent per annum of the original issue price for each full year that the Series A Preferred Stock is outstanding up to and as of the date of redemption, and (B) the Fair Market Value (as determined in the manner set forth in the Certificate of Designation) of a single share of Series A Preferred Stock as of the date of the Company’s giving of the redemption notice.

Note Investors

The Company entered into a debt obligation with Asher Enterprises, Inc. (“Asher”) on September 10, 2012, in principal amount of $78,500, bearing interest at the rate of 8%, and originally due on June 12, 2013 and subsequently extended to July 12, 2013, when it was paid in full .  The note had conversion rights into Common Stock, at the holder’s option, commencing 180 days after the issuance date. The conversion rate was variable, depending on the market price of a share of Common Stock, less a 42% discount, subject to certain restrictions.  The note could not be prepaid without penalty.  The Company entered into additional notes with Asher, of like tenor for similar principal amounts and terms on November 2 , 2012, December 11 , 2012, February 5, 2013 and March 19, 2013.  As of July 12 , 2013, there was $ 124,000 in principle and accrued interest of approximately $ 5,721 outstanding, due on these four notes.  As of July 12 , 2013, 621,377,226 shares of Common Stock have been issued on conversion of outstanding principle and interest of these notes, and the Company estimates at the current price of the Common Stock that the outstanding principle and interest could be converted into 2,327,615,448 shares of Common Stock. However, pursuant to the terms of its notes, Asher is restricted from converting its promissory notes to the extent such conversion would result in it holding more than 4.99% of the Company’s outstanding Common Stock.

Other than the issuance of notes described above to Asher, the Company has no other business relations with Asher.

The Company entered into a debt obligation with Magna Group, LLC (“Magna”) on April 12, 2013, in principal amount of $175,000, bearing interest at the rate of 12%, which is due on January 12, 2014. The note has a conversion rate of a 45% discount to the daily VWAP price of the common stock based on a five day period prior to the date of conversion, which rate will be subject to certain adjustments, (ii) has an annual interest rate of 12%, due at maturity, (iii) has a maturity date of January 12, 2014, (iv) permits prepayment only with a premium of 50% of the amount being repaid, (v) has ratchet protection of the conversion anti-dilution provisions for all future issuances or potential issuances of securities by the Company at less than the then conversion rate, and (vi) has additional default provisions, including a default penalty of 50% of outstanding principal and interest at the time of default. The Company has also agreed that the note will not be subordinate to new debt, other than purchase money and similar debt, which may have the effect of limiting the Company’s access to additional debt capital while the note is outstanding. As of July 12, 2013, the Company owes $83,245 in principle and approximately $4,882 in accrued interest on this note. As of July 12, 2013 , 999,727,273 shares of Common Stock have been issued on conversion of outstanding principle and interest, and the Company estimates at the current price of the Common Stock that the outstanding principle and interest could be converted into 1,602,309,455 shares of Common Stock.  However, pursuant to the terms of its notes, Magna is restricted from converting its promissory notes to the extent such conversion would result in it holding more than 9.99% of the Company’s outstanding common stock.

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Other than the issuance of notes described above to Magna, the Company has no other business relations with Magna.

The following is a table indicating the potential percentage of the Company that each note holder could hold upon conversion, as compared to the number of total shares held by non-affiliates, based on the estimated conversion price where a function of the market price. The percentages do not take into account the potential issuance of shares issuable to any other note holder.

________

1.

Estimate based on the terms of the notes as of July 12 , 2013.

2.

Based upon 2,572,014,810 shares held by non-affiliates as of July 12 , 2013.

3.

Includes 65,419,386 shares that may be issued on conversion of outstanding notes and 3,000,000,000 shares that may be issued on conversion of the Series A Preferred Stock.

4.

Without regard to applicable blocking provisions in the notes that limit the number of shares convertible to maximum percentages held by the note holder at any one time.

Possible Effects of the Amendment and Anti-takeover Considerations

If the amendment to the Charter is approved, the additional authorized shares would be available for issuance at the discretion of the Board and without further stockholder approval. It is not the present intention of the Board of Directors to seek stockholder approval prior to any issuance of shares of Common Stock that would become authorized by the amendment unless otherwise required by law or regulation. Frequently, opportunities arise that require prompt action, and it is the belief of the Board of Directors that the delay necessitated for stockholder approval of a specific issuance could be to the detriment of the Company and its stockholders. The additional shares of authorized Common Stock would have the same rights and privileges as the shares of Common Stock currently issued and outstanding. The adoption of the amendment would not have any immediate dilutive effect on the proportionate voting power or other rights of existing stockholders. Shares of Common Stock issued in the future, other than for a stock split, may decrease existing stockholders’ percentage equity ownership and, depending on the price at which they are issued, could have a financially dilutive effect on previously issued shares of Common Stock and have a negative effect on the market price of the Common Stock. The Company cannot provide assurances that any such transactions will be consummated on favorable terms or at all, that they will enhance stockholder value or that they will not adversely affect the Company’s business or the trading price of our stock. Current stockholders have no preemptive or similar rights.

The Company has not proposed the increase in the number of authorized shares of Common Stock with the intention of using the additional authorized shares for anti-takeover purposes, but the Company would be able to use the additional shares to oppose a hostile takeover attempt or delay or prevent changes in control or management of the Company. For example, without further stockholder approval, the Board could sell shares of Common Stock or preferred stock, including preferred stock convertible into shares of Common Stock, in a private transaction to purchasers who would oppose a takeover or favor the current Board. Although this proposal to increase the authorized number of shares of Common Stock has been prompted by other business and financial considerations, and not by the threat of any known or threatened hostile takeover attempt, stockholders should be aware that approval of this proposal could facilitate future efforts by the Company to oppose changes in control of the Company and perpetuate the Company’s management, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices.

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Effective Date

If the Company’s stockholders approve the increase in the number of authorized shares of Common Stock to 10,000,000,000 shares, we will file a Certificate of Amendment with the Nevada Secretary of State as soon as practicable in order for the amendment to become effective. Our Board of Directors reserves the right, notwithstanding stockholder approval of the amendment and without further action by our stockholders, not to proceed with the amendment at any time before the filing of the Certificate of Amendment. A copy of the Certificate of Amendment is attached to this Proxy Statement as Annex A; provided, however, that such text is subject to change or modification to include any technical changes as may be required by the office of the Secretary of State of the State of Nevada.

No Appraisal Rights

Under Nevada law, stockholders are not entitled to dissenters’ rights with respect to the proposed amendment to our Articles of Incorporation to effect this proposal, and we will not independently provide our stockholders with any such right.

Vote Required. The affirmative vote of a majority of the Company’s outstanding shares of Common Stock and Series A Preferred Stock, voting together as a single class, as of the Record Date is required to approve this proposal. Unless otherwise indicated, properly executed proxies will be voted in favor of this Proposal II.

THE BOARD OF

DIRECTORS RECOMMENDS

A VOTE "FOR" PROPOSAL II

PROPOSAL III

APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION

TO EFFECT REVERSE STOCK SPLIT OF COMMON STOCK AT A

SPECIFIC RATIO WITHIN A RANGE FROM 1-FOR-50 TO 1-FOR-200

The Board of Directors has considered, deemed advisable, adopted a resolution approving and recommends to the stockholders for their approval of a proposed amendment to our Articles of Incorporation to authorize the Board to effect a reverse stock split of the Company’s outstanding shares of Common Stock. Under this proposed amendment, a certain number of outstanding shares of Common Stock, as determined by the applicable ratio, would be combined into one share of Common Stock (the “Reverse Stock Split”). The proposed amendment to permit a Reverse Stock Split would not affect the number of shares of both the Company’s authorized Common Stock (whether increased or not as a result of approval or not of Proposal I) or Preferred Stock or the number of shares allocated to the 2013 Performance Equity Plan under Proposal IV, if approved.

If approved by the stockholders, the Board would have discretion to implement the Reverse Stock Split within a range from 1-for-50 to 1-for-200. The Board believes that stockholder approval of a range of ratios (as opposed to approval of a specified ratio) would provide the Board with maximum flexibility to achieve the purposes of the Reverse Stock Split and, therefore, is in the best interests of the Company and its stockholders. The actual timing for implementation of the Reverse Stock Split would be determined by the Board based upon its evaluation as to when such action would be most advantageous to the Company and its stockholders. However, our current intention is to effect the Reverse Stock Split within 270 days after the Annual Meeting.  Furthermore, notwithstanding stockholder approval, the Board also would have the discretion not to implement a Reverse Stock Split. If the Board were to elect to implement a Reverse Stock Split, the Board will set the exchange ratio within the range of ratios approved by the stockholders.

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The text of the form of amendment to our Articles of Incorporation that would be filed with the Secretary of State of the State of Nevada to effect the Reverse Stock Split is set forth in Annex B to this Proxy Statement; provided, however, that such text is subject to change or modification to include any technical changes as may be required by the office of the Secretary of State of the State of Nevada. If the Reverse Stock Split is approved by the stockholders and following such approval the Board determines that a Reverse Stock Split is in the best interest of the Company and its stockholders, our Articles of Incorporation would be amended accordingly.

Purpose of the Reverse Stock Split

We believe that the Reverse Stock Split will lead to an increase in the per-share price of our Common Stock which could encourage increased investor interest in our Common Stock and possibly promote greater liquidity for our stockholders. We believe that the current low per-share price of our Common Stock has had a negative effect on the marketability of our Common Stock. We believe there are several reasons for this effect. First, many institutional investors view stocks trading at low prices as unduly speculative in nature and, as a result, avoid investing in such stocks. Second, because the brokers’ commissions on lower-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current per-share price of our Common Stock can result in individual stockholders paying transaction costs (commissions, markups or markdowns) that constitute a higher percentage of their total share value than would be the case if the share price of our Common Stock were substantially higher. This factor may also limit the willingness of institutional investors to purchase our Common Stock. Third, a variety of policies and practices of brokerage firms discourage individual brokers within those firms from dealing in low-priced stocks. These policies and practices pertain to the payment of brokers’ commissions and to time-consuming procedures that make the handling of low-priced stocks unattractive to brokers from an economic standpoint. Fourth, many brokerage firms are reluctant to recommend low-priced stocks to their customers. Finally, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of low-priced stocks.

Possibility that the Reverse Stock Split Will Fail to Achieve the Desired Effects .

Stockholders should note that the effect of the Reverse Stock Split upon the market price for our Common Stock cannot be accurately predicted. In particular, we cannot assure you that the trading price per share of our Common Stock after the Reverse Stock Split would rise in proportion to the reduction in the number of pre-split shares of our Common Stock outstanding before the Reverse Stock Split. Furthermore, we cannot assure you that the market price of our Common Stock immediately after the proposed Reverse Stock Split will be maintained for any period of time. Even if an increased per-share price can be maintained, the Reverse Stock Split may not achieve the desired results that have been outlined above. Moreover, because some investors may view the Reverse Stock Split negatively, we cannot assure you that the Reverse Stock Split will not adversely impact the market price of our Common Stock or, alternatively, that the market price following the Reverse Stock Split will either exceed or remain in excess of the current market price.

Principal Effects of the Reverse Stock Split and Anti-takeover Considerations .

After the effective date of the Reverse Stock Split, each stockholder will own fewer shares of our Common Stock. However, the Reverse Stock Split will affect all of our stockholders uniformly and will not affect any stockholder's percentage ownership interests in the Company, except to the extent that the Reverse Stock Split results in any of our stockholders receiving additional shares as a result owning a fractional share that is rounded up, as described below. The number of stockholders of record will not be affected by the Reverse Stock Split. Proportionate voting rights and other rights and preferences of the holders of our Common Stock will not be affected by the Reverse Stock Split other than as a result of the rounding up of fractional shares.

With respect to any outstanding stock options to purchase shares of our Common Stock and securities convertible into our Common Stock at the time of the Reverse Stock Split , the Reverse Stock Split will effect a reduction in the number of shares subject to such outstanding stock options and convertible securities proportional to the exchange ratio of the reverse stock split and would effect a proportionate increase in the exercise price or conversion rate, as the case may be, of outstanding stock options and securities.

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The Reverse Stock Split will not change the number of authorized shares of the Common Stock as designated by our Articles of Incorporation. Because the total number of shares of authorized Common Stock is not being reduced in an amount proportionate to the Reverse Stock Split, the ability of the Board of Directors to issue authorized and unissued shares without further stockholder action will be significantly increased. However, we currently have no plans, arrangements or understandings to issue these additional authorized shares. The issuance in the future of such additional authorized shares may have the effect of diluting the earnings per share and book value per share, as well as the stock ownership and voting rights, of the currently outstanding shares of our Common Stock.

The action to authorize the Reverse Stock Split has been prompted solely by the business considerations. Nevertheless, the additional shares of Common Stock that would become available for issuance if the Reverse Stock Split is implemented could also be used by the Company to oppose a hostile takeover attempt or delay or prevent changes in control or management of the Company. For example, without further stockholder approval, the Board of Directors could sell shares of Common Stock or preferred stock, including preferred stock convertible into shares of Common Stock, in a private transaction to purchasers who would oppose a takeover or favor the current Board.

Effective Date .

Our Board of Directors, in its discretion, may elect to implement the Reverse Stock Split within the range of the stated ratios for up to 270 days after receipt of stockholder approval ; alternatively , our Board may determines in its discretion not to proceed with the Reverse Stock Split. The Reverse Stock Split would become effective on the date of filing of a Certificate of Amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada and completion of any other related regulatory requirements . On the effective date , shares of Common Stock issued and outstanding immediately prior thereto will be combined and converted, automatically and without any action on the part of the stockholders, into new shares of Common Stock in accordance with the exchange ratio contained in the Certificate of Amendment.

Round Lots.

If the proposed Reverse Stock Split is implemented, it would increase the number of our stockholders who own “odd lots” of less than 100 shares of Common Stock. Brokerage commission and other costs of transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of Common Stock.

Fractional Shares.

No fractional shares of our Common Stock will be issued as a result of the Reverse Stock Split.  In lieu of issuing fractional shares, we will round fractions up to the nearest whole share.

Implementation and Exchange of Stock Certificates.

As of the effective date of the Reverse Stock Split, if implemented by our Board of Directors, each certificate representing shares of our Common Stock before the Reverse Stock Split would be deemed, for all corporate purposes, to evidence ownership of the reduced number of shares of our Common Stock resulting from the Reverse Stock Split.

Our transfer agent, Olde Monmouth Stock Transfer Co., Inc., will be available to implement the exchange of stock certificates. After the effective date, stockholders will be notified of the effectiveness of the Reverse Stock Split. Stockholders of record will receive a letter requesting them to surrender their old stock certificates for new stock certificates reflecting the adjusted number of shares as a result of the Reverse Stock Split. Persons who hold their shares in brokerage accounts or “street name” will not be required to take any further actions to exchange their shares. No new certificates will be issued to a stockholder until such stockholder has surrendered any outstanding certificates to the transfer agent. Until surrendered, each certificate representing shares before the Reverse Stock Split will continue to be valid and will represent the adjusted number of shares based on the ratio of the Reverse Stock Split. Stockholders should not destroy any stock certificate and should not submit any certificates until they receive a letter from the transfer agent.

13

No Appraisal Rights .

Under Nevada law, stockholders are not entitled to dissenters’ rights with respect to the proposed amendment to our Articles of Incorporation for the Reverse Stock Split, and we will not independently provide our stockholders with any such right.

Material U.S. Federal Income Tax Considerations .

TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE U.S. INTERNAL REVENUE SERVICE, WE INFORM YOU THAT ANY FEDERAL TAX ADVICE CONTAINED IN THIS PROXY STATEMENT IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR PURPOSES OF (I) AVOIDING PENALTIES UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (II) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TRANSACTION OR TAX-RELATED MATTER ADDRESSED HEREIN.  YOU ARE STRONGLY URGED TO CONSULT YOUR TAX ADVISOR TO DETERMINE FOR YOURSELF THE TAX EFFECTS OF THE REVERSE STOCK SPLIT, IF ANY, INCLUDING SUCH TAX EFFECTS UNDER STATE, LOCAL AND FOREIGN TAX LAWS.

The following discussion sets forth the anticipated material U.S. federal income tax consequences, if any, that management believes will apply to us and our stockholders who are U.S. holders at the effective time of the Reverse Stock Split. This discussion does not address the tax consequences of transactions effectuated prior to or after the Reverse Stock Split, including, without limitation, the tax consequences of the exercise of options, warrants or similar rights to purchase stock. Furthermore, no foreign, state or local tax considerations are addressed herein. For this purpose, a U.S. holder is a stockholder that is:  (a) a citizen or resident of the United States, (b) a domestic corporation, (c) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if a U.S. court can exercise primary supervision over the trust's administration and one or more U.S. persons are authorized to control all substantial decisions of the trust.

The following discussion is not binding on the Internal Revenue Service. The following discussion is based upon the Internal Revenue Code, laws, regulations, rulings and decisions in effect as of the date of this Proxy Statement, all of which are subject to change, possibly with retroactive effect. Each Holder of shares of our Common Stock is strongly urged to consult his, her or its tax advisor as to the specific tax consequences to such holder of the Reverse Stock Split, including the applicability and effect of federal, state, local and foreign income and other tax laws in light of such holder’s particular circumstances.

No gain or loss should generally be recognized by a stockholder upon his, her or its exchange of pre-Reverse Stock Split shares for post-Reverse Stock Split shares. The aggregate tax basis of the post-Reverse Stock Split shares received by a stockholder (including any fraction of a new share deemed to have been received) should be the same as such stockholder’s aggregate tax basis in the pre-Reverse Stock Split shares exchanged therefor. A stockholder’s holding period for the post-Reverse Stock Split shares should include the period during which the stockholder held the pre-Reverse Stock Split shares surrendered in the Reverse Stock Split.

The Company should not recognize any gain or loss as a result of the Reverse Stock Split.

Vote Required. The affirmative vote of a majority of the Company’s outstanding shares of Common Stock and Series A Preferred Stock, voting together as a single class, as of the Record Date is required to approve this proposal. Unless otherwise indicated, properly executed proxies will be voted in favor of this Proposal III.

THE BOARD OF

DIRECTORS RECOMMENDS

A VOTE "FOR" PROPOSAL III

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PROPOSAL IV

APPROVAL OF

THE COMPANY’S 2013 EQUITY PERFORMANCE PLAN

General

On May 7, 2013, the Board of Directors approved, subject to stockholder approval, the Company’s 2013 Equity Performance Plan (the “2013 Plan”). Under the 2013 Plan, we may issue various types of stock-based awards, including incentive stock options, non-qualified stock options and restricted and unrestricted awards of our Common Stock. The 2013 Plan provides for the issuance of up 50,000,000 shares of our Common Stock. Our Board of Directors believes that our growth depends significantly upon the efforts of our officers and key consultants and that such individuals are best motivated to put forth maximum effort on our behalf if they own an equity interest in the Company.

The Company currently has two equity incentive plans, the 2006 Equity Performance Plan (the “2006 Plan”) and the 2007 Equity Performance Plan (the “2007 Plan”). There are no awards currently outstanding under either plan. As of April 30, 2013, there were approximately 1.4 million shares of Common Stock available for issuance under the 2006 Plan and approximately 4.2 million shares of Common Stock available for issuance under the 2007 Plan. After considering the number of shares of Common Stock available for future grant under the 2006 Plan and 2007 Plan, the Board of Directors adopted a new equity incentive plan in the form of the 2013 Plan. If the 2013 Plan is approved by stockholders at the Annual Meeting, both the 2006 Plan and the 2007 Plan will be terminated and no additional grants will be made under those plans .

Description of the 2013 Plan

The following summary of the 2013 Plan is qualified in its entirety by reference to the full text of the 2013 Plan, which is attached hereto as Annex C.

Administration .  The plan is administered either by the Board of Directors or by a committee of the Board of Directors.  Under the plan, the Board of Directors or committee has full authority, subject to the provisions of the plan, to award any of the following, either alone or in tandem with each other: stock options; stock appreciation rights; restricted stock; deferred stock; stock reload options; and other stock-based awards.

The Board of Directors or committee determines, among other things, the persons to whom from time to time awards may be granted, the specific type of award to be granted, the number of shares subject to each award, share prices, any restrictions or limitations on the awards, and any vesting, exchange, deferral, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the awards.  The interpretation and construction by the Board of Directors or committee of any provisions of, or of any questions arising under, the plan or any rule or regulation established by the Board of Directors or committee pursuant to the plan is final and binding on all persons interested in the plan.

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Stock subject to the Plan .  The plan authorizes a total of 50,000,000 shares of Common Stock to be granted as awards under the plan.  In order to prevent the dilution or enlargement of the rights of holders under the plan, the Board of Directors or committee may determine whether or not to adjust the terms of the awards or the number of shares reserved for issuance under the plan in the event of any stock split, reverse stock split, stock dividend payable on our shares of common stock, combination or exchange of shares, or other extraordinary event occurring after the grant of an award; however, in the event stockholders approve the proposed reverse stock split (see Proposal III), the Board of Directors has determined that the number of authorized shares under the plan will remain at 50,000,000 and will not be affected by such reverse stock split. Shares of our Common Stock that are awarded under the plan may be either treasury shares or authorized but unissued shares.  If any award granted under the plan is forfeited or terminated, the shares of common stock reserved for issuance pursuant to the award will be made available for future award grants under the plan.

Eligibility .  Subject to the provisions of the plan, awards may be granted to key employees, officers, directors and consultants to us or our subsidiaries.  Notwithstanding the foregoing, an award may be granted to an individual in connection with his or her hiring or retention, or at any time on or after the date he or she reaches an agreement with us, either oral or in writing, with respect to his or her hiring, even though it may be prior to the date he or she first performs services for us or our subsidiaries.  However, no portion of any award of this nature can vest prior to the date that the individual first performs the services he or she was hired or retained to perform.

Types of awards :

Options .  Under the plan, our Board of Directors or committee may award to participants either “incentive stock options” or nonqualified stock options.

Incentive stock options may only be awarded to employees of us or our subsidiaries.  To the extent that any stock option intended to qualify as an incentive stock option does not so qualify it will constitute a non-incentive stock option.  An incentive stock option may be granted only within the ten-year period commencing from the effective date of the plan and may only be exercised within ten years from the date of grant, or five years from the date of grant in the case of a participant who at the time the stock option is granted owns more than 10% of the total combined voting power of all of our classes of voting securities.  The exercise price of an incentive stock option granted to a 10% stockholder may not be less than 110% of the fair market value of the shares on the date the stock option is granted.  The number of shares covered by incentive stock options which may be exercised by participants in any year cannot have an aggregate fair market value in excess of $100,000, measured at the date of grant.

A participant has no rights as a stockholder with respect to the shares of our Common Stock underlying a stock option granted under the plan until shares are actually issued upon exercise of the stock option.

The Board of Directors or committee may establish provisions for the termination of a stock option grant upon the cessation of employment, including retirement, disability and death and provisions for continued exercise of vested options.

Stock appreciation rights .  Under the plan, the Board of Directors or committee may grant stock appreciation rights to participants who have received stock options. A stock appreciation right entitles the holder to surrender to us all or a portion of a stock option in exchange for a number of shares of our Common Stock determined by multiplying the excess of the fair market value per share of our Common Stock on the exercise date over the exercise price per share by the number of shares subject to the stock option and then dividing it by the fair market value of the Common Stock on the date the stock appreciation right is exercised.  A stock appreciation right will terminate upon termination or exercise of the related stock option.

Restricted stock .  The Board of Directors or committee may award shares of our Common Stock which are subject to restrictions as the Board of Directors or committee may determine in addition to, or in lieu of, other awards granted to participants under the plan.  A participant will have the right to vote the restricted stock granted to him and to receive dividend payments distributed on the shares in the form of cash or cash equivalents.  However, during the time that restricted stock is subject to forfeiture and until the restricted stock is fully vested, we will retain custody of the stock certificate representing the restricted shares and will retain custody of all distributions, other than payment of dividends in cash or in cash equivalents, made or declared with respect to the restricted stock.

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Deferred stock .  The Board of Directors or committee may award shares of our Common Stock to be received at the end of a specified deferral period and upon satisfaction of any other applicable restrictions, terms and conditions provided for in the grant of the award.  A participant will not have any rights as a stockholder by virtue of the award of deferred stock until the expiration of the applicable deferral period and the issuance by of a stock certificate evidencing the award of the deferred stock.

Stock reload options . The Board of Directors or committee may grant to a participant, concurrently with the grant of an incentive stock option, and at or after the time of grant in the case of a non-incentive stock option, an option covering a number of shares up to the amount of shares of Common Stock held by the participant for at least six months and used to pay all or part of the exercise price of an option, and any shares withheld by us as payment for withholding taxes.

Other stock-based awards .  The Board of Directors or committee may award other stock-based awards, subject to limitations under applicable law, in addition to, or in lieu of, other awards granted to participants under the plan.  These other stock-based awards may be payable in, valued in, or otherwise based on, or related to, our shares of Common Stock.  These other stock-based awards may be in the form of the right to purchase shares of our Common Stock which are not subject to any restrictions or conditions, convertible or exchangeable debentures or other rights convertible into shares of our Common Stock, as well as awards valued by reference to the value of securities of, or the performance of, one of our subsidiaries.

Accelerated Vesting and Exercisability .  Unless otherwise provided in the grant of an award, if any “person,” as is defined in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended (“Exchange Act”), is or becomes the “beneficial owner,” as referred in Rule 13d-3 under the Exchange Act, directly or indirectly, of our securities representing 50% or more of the combined voting power of our then outstanding voting securities in one or more transactions, and our Board of Directors does not authorize or approve the acquisition, then the vesting periods with respect to options and awards granted and outstanding under the plan will be accelerated and will immediately vest, and each participant of an option and award will have the immediate right to purchase and receive all shares of our Common Stock subject to the option and award in accordance with the terms set forth in the plan and in the corresponding award agreements.

Unless otherwise provided in the grant of an award, the Board of Directors or committee may, in the event of an acquisition of substantially all of our assets or at least 50% of the combined voting power of our then outstanding securities in one or more transactions, including by way of merger or reorganization, which has been approved by our Board of Directors, accelerate the vesting of any and all stock options and other awards granted and outstanding under the plan.

Repurchases .  Unless otherwise provided in the grant of an award, the Board of Directors or committee may, in the event of an acquisition of substantially all of our assets or at least 50% of the combined voting power of our then outstanding securities in one or more transactions, including by way of merger or reorganization, which has been approved by our Board of Directors, require a holder of any award granted under the plan to relinquish the award to us upon payment by us to the holder of cash in an amount equal to the repurchase value (as that term is defined in the plan) of the award or such amount as may be determined by the Board of Directors or committee for awards that are out-of-the money.

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Forfeitures .  Unless otherwise provided in the grant of an award, if a participant’s employment with us or a subsidiary of ours is terminated for any reason and within 12 months of the termination, the person either: (i) accepts employment with any competitor of, or otherwise engages in competition with, our business; (ii) solicits any of our or our subsidiaries’ customers or employees to do business with or render services to the person or any business with which the person becomes affiliated or to which the person renders services; or (iii) discloses to anyone outside our company or uses any of our or our subsidiaries’ confidential information or material in violation of our policies or any agreement between the person and us or any of our subsidiaries, the Board of Directors or committee may require the participant to return to us the economic value of any award which was obtained by the participant during the period beginning six months prior to the date the participant’s employment with us was terminated.  Unless otherwise provided in the grant of an award, if a participant is terminated for cause, the Board of Directors or committee may require that the participant return to us the economic value of any award which was obtained by the participant during the six month period.

Withholding taxes .  We may withhold, or require participants to remit to us, an amount sufficient to satisfy any federal, state or local withholding tax requirements associated with awards under the plan.

Agreements; Transferability .  Awards granted under the plan will be evidenced by agreements consistent with the plan in a form as prescribed by the Board of Directors or committee.  Neither the plan nor agreements confer any right to continued employment upon any holder.  Further, except as provided in the plan or an agreement or provided by law, awards cannot be transferred.

Term and amendments .  The plan will terminate when there are no awards outstanding and when no further awards may be granted, provided that incentive options may only be granted until May 7, 2023.  The Board of Directors has the right to amend, suspend or discontinue any provision of the plan, provided that the action may not adversely affect awards previously granted between a participant and us without the participant’s consent.

Federal income tax consequences

The following discussion of the federal income tax consequences of participation in the plan is only a summary of the general rules applicable to the grant and exercise of stock options and other awards and does not give specific details or cover, among other things, state, local and foreign tax treatment of participation in the plan.  The information contained in this section is based on present law and regulations, which are subject to being changed prospectively or retroactively.

Incentive stock options .  Incentive stock options and the plans under which they are granted must satisfy certain restrictive requirements under the Internal Revenue Code.  Such restrictions include that the exercise price not be less than the fair market value of the shares at the date of grant, that the term of the option not exceed ten years and that an incentive stock option may not be granted to an individual who owns more than ten percent of the total combined voting power of the company.  Participants will recognize no taxable income upon the grant or exercise of an incentive stock option.  The participant is not required to recognize income (either as ordinary income or capital gain) upon the exercise of the incentive stock option.  In addition the exercise will not be subject to income tax withholding or to employee taxes.  However if the incentive stock option is exercised more than three months after the employee has left the employ of the company granting the option, the option will generally cease to be eligible for favorable tax treatment.  As a result, upon the exercise of the option, the former employee will be required to recognize ordinary income equal to the difference between the fair market value of the stock and any consideration paid by the former employee upon such option exercise.  The excess, if any, of the fair market value of the shares on the date of exercise of an incentive stock option over the exercise price will be treated as an item of adjustment for a participant’s taxable year in which the exercise occurs and may result in an alternative minimum tax liability for the participant.  The Company will not qualify for any deduction in connection with the grant or exercise of incentive stock options.  Upon a disposition of the shares after the later of two years from the date of grant or one year after the transfer of the shares to a participant, the participant will recognize the difference, if any, between the amount realized and the exercise price as long-term capital gain or long-term capital loss, as the case may be.

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If Common Stock acquired upon the exercise of an incentive stock option is disposed of prior to the expiration of the holding periods described above:

(i) the participant will recognize ordinary income in the taxable year of disposition in an amount equal to the excess, if any, of the lesser of the fair market value of the shares on the date of exercise or the amount realized on the disposition of the shares, over the exercise price paid for the shares; and

(ii) the Company will qualify for a deduction equal to any amount recognized, subject to the limitation that the compensation be reasonable.

Non-Incentive stock options .  With respect to non-incentive stock options:

(i) upon grant of the stock option, the participant will recognize no taxable income provided that the exercise price was not less than the fair market value of the Company’s Common Stock on the date of grant;

(ii) upon exercise of the stock option, if the shares of Common Stock are not subject to a substantial risk of forfeiture, the participant will recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the shares on the date of exercise over the exercise price, and the Company will qualify for a deduction in the same amount; and

(iii) the Company will be required to comply with applicable federal income tax withholding requirements with respect to the amount of ordinary income recognized by the participant.

On a disposition of the shares, the participant will recognize gain or loss equal to the difference between the amount realized and the sum of the exercise price and the ordinary income recognized. The gain or loss will be treated as short-term or long-term capital gain or loss, depending upon the length of time that the participant held the shares.

Stock appreciation rights .  Upon the grant of a stock appreciation right, the participant recognizes no taxable income and the Company receives no deduction.  The participant recognizes ordinary income and the Company receives a deduction at the time of exercise equal to the cash and fair market value of Common Stock payable upon the exercise.

Restricted stock .  A participant who receives restricted stock will recognize no income on the grant of the restricted stock and the Company will not qualify for any deduction.  At the time the restricted stock is no longer subject to a substantial risk of forfeiture, a participant will recognize ordinary income in an amount equal to the excess, if any, of the fair market value of the restricted stock at the time the restriction lapses over the consideration paid for the restricted stock.  A participant’s shares are treated as being subject to a substantial risk of forfeiture so long as his or her sale of the shares at a profit could subject him or her to a suit under Section 16(b) of the Exchange Act.  The holding period to determine whether the participant has long-term or short-term capital gain or loss begins when the restriction period expires, and the tax basis for the shares will generally be the fair market value of the shares on this date.

A participant may elect under Section 83(b) of the Code, within 30 days of the transfer of the restricted stock, to recognize ordinary income on the date of transfer in an amount equal to the excess, if any, of the fair market value on the date of transfer of the shares of restricted stock, as determined without regard to the restrictions, over the consideration paid for the restricted stock.  If a participant makes an election and thereafter forfeits the shares, no ordinary loss deduction will be allowed.  The forfeiture will be treated as a sale or exchange upon which there is realized loss equal to the excess, if any, of the consideration paid for the shares over the amount realized on such forfeiture.  The loss will be a capital loss.  If a participant makes an election under Section 83(b), the holding period will commence on the day after the date of transfer and the tax basis will equal the fair market value of shares, as determined without regard to the restrictions, on the date of transfer.

On a disposition of the shares, a participant will recognize gain or loss equal to the difference between the amount realized and the tax basis for the shares.

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The Company will generally will qualify for a deduction, equal to the amount that is taxable as ordinary income to the participant, in its taxable year in which the income is included in the participant’s gross income.

Deferred stock .  A participant who receives an award of deferred stock will recognize no income on the grant of the award.  However, he or she will recognize ordinary income on the transfer of the deferred stock, or the later lapse of a substantial risk of forfeiture to which the deferred stock is subject, if the participant does not make a Section 83(b) election, in accordance with the same rules as discussed above under the caption “Restricted stock.”

Other stock-based awards .  The federal income tax treatment of other stock-based awards will depend on the nature and restrictions applicable to the award.

Internal Revenue Code Sections 409A and 280G

Section 409A of the Internal Revenue Code provides that deferred compensation that is not structured to satisfy Section 409A and that is not subject to a substantial risk of forfeiture may result in current federal income taxation, an additional tax of 20% of the compensation required to be included in income and interest for any underpayment of tax at the ordinary underpayment rate plus one percentage point for any period during which taxation of the compensation has been deferred. Stock options granted with an exercise price equal to the fair market value of the underlying Common Stock on the date of grant are generally exempt from the application of Section 409A. In addition, Section 280G of the Internal Revenue Code provides that to the extent that payments which are contingent on a change in control are determined to exceed certain Internal Revenue Code limitations, they may be subject to a 20% nondeductible excise tax on the employee and the Company’s deduction with respect to the associated compensation expense may be disallowed in whole or in part.

Because of the complexity of the tax law and because tax law consequences to any particular taxpayer may be affected by matters not discussed herein, each taxpayer is urged to consult with his or her tax advisor with respect to the specific tax consequences of the 2013 Plan.

New Plan Benefits

The amount, if any, of grants to be awarded to officers,  directors, employees and consultants under the 2013 Plan in the future will be determined in the discretion of the Board of Directors and is not currently determinable.

Vote Required . The affirmative vote of a majority of the shares of Common Stock present, whether in person or represented by proxy, and voted at the Annual Meeting is required to approve this proposal. Unless otherwise indicated, properly executed proxies will be voted in favor of this Proposal IV.

THE BOARD OF

DIRECTORS RECOMMENDS

A VOTE "FOR" PROPOSAL IV

PROPOSAL V