Face value of Convertible Debenture due January 2015

$    1,765,000

Fair value of embedded conversion feature

$    1,180,000

Relative fair value of Convertible Debenture Warrant

214,819

Discount

(1,394,819)

Proceeds attributable to the Convertible Debenture due

January 2015

$       370,181

Attributable to:

Accounting Treatment

Amount

The embedded conversion feature (derivative)

Expensed as incurred

$                55,999

The 8% Convertible Debenture Warrant

Charged to additional paid-in capital

10,194

The 8% Convertible Debenture

Recorded as deferred issuance costs and amortized under the interest method over the term of the 8% Convertible Debenture.

17,567

Total

$                83,760

As of

January 25, 2013 and January 31, 2013

Stock price on valuation date

$                      0.21

Conversion price

$                      0.15

Stock premium for liquidity

57%

Term (years)

2.00

Expected volatility

110%

Weighted average risk-free interest rate

0.3%

Trials

100,000

Aggregate fair value

$              1,180,000

As of

January 25, 2013

Stock price on valuation date

$                     0.21

Exercise price

$                     0.30

Stock premium for liquidity

38%

Term (years)

3.00

Warrant exercise trigger price

41%

Expected volatility

95%

Weighted average risk-free interest rate

0.4%

Number of warrants

5,882,745

Aggregate fair value

$               370,000