UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2011~~2012

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _________.

Commission file number 000-30587

SPARE BACKUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		23-3030650
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

990 Ironwood Drive,

Minden, NV 98423

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (~~775~~888) ~~392 2180~~525-4677

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by checkmark whether the registrant submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [X]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]

The aggregate market value of the common equity voting shares of the registrant held by non-affiliates on ~~June~~December 3031, ~~2011~~2102 was $173,~~370~~653,~~938~~199. For purposes of this calculation, an aggregate of 4249,~~123~~926,~~360~~772 shares of Common Stock were held by the directors, officers, and affiliates of the registrant on ~~June 30~~December 31, ~~2011~~2102 and have been included in the number of shares of Common Stock held by affiliates.

The number of the registrant’s shares of common stock outstanding as of ~~March~~April 315, ~~2012~~2013: ~~309~~447,~~307~~887,~~977~~403.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this annual report contain or may contain forward-looking statements that are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to raise sufficient capital to fund our ongoing operations and satisfy our obligations as they become due, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this annual report in its entirety, including the risks described in Part I. Item 1A. Risk Factors. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this annual report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

When used in this annual report, the terms "Spare Backup," "we," "our," and "us" refers to Spare Backup, Inc., a Delaware corporation formerly known as Newport International Group, Inc., and our subsidiaries.

~~2011~~SPARE ~~ANNUAL~~BACKUP, ~~REPORT ON FORM 10-K~~INC.

2012 ANNUAL REPORT ON FORM 10-K

Table of Contents

PART I
		Page
Item 1.	Business	4
Item 1A.	Risk Factors	1112
Item 1B.	Unresolved Staff Comments	1618
Item 2.	Properties	1618
Item 3.	Legal Proceedings	1618
Item 4.	(Removed and Reserved)	1619

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1619
Item 6.	Selected Financial Data	1720
Item 7.	Management ’s Discussion and Analysis of Financial Condition and Results of Operations	1820
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	2429
Item 8.	Financial Statements and Supplementary Data	2429
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2429
Item 9A(T).	Controls and Procedures	2430
Item 9B.	Other Information	2530
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	2530
Item 11.	Executive Compensation	2733
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3240
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3340
Item 14.	Principal Accountant Fees and Services	3441

	PART IV
Item 15.	Exhibits, Financial Statement Schedules	3543

PART I

Item 1. Business

We are a developer and marketer of a line of software products specifically designed for consumers as well as the business and home business users. Our products are designed and developed so that technical skills are not necessary to use or manage the software. Our Spare line of software products includes our Spare Mobile, Spare Backup for PC and tablets, Spare Switch PC data migration software, and our Parental Controls.

Our Products and Services

Our flagship products are Spare Mobile™ and Spare Backup™, a fully-automated remote backup solution designed and developed for mobile devices and small office or home environment users, allowing automatic and efficient back ups of all data on selected mobile devices, laptop and desktop computers. As a result, we believe consumers and small companies can ensure file safety of all files contained on their mobile devices, personal computers (PCs) and laptops for backup and retrieval. We launched our Spare Back-up service and software product version 1.0 in March 2005 and are currently offering version 6.0 of the product. Our ~~Spare Switch™~~ software ~~enables users to complete the transfer of personal files from one PC to another via a high speed Internet connection. Our software~~ has characteristics of additional coding that enables easy to scale infrastructure and support elements which we believe provides a competitive advantage over other providers whose products require large investments in hardware, as well as professional installation, training and support.

Spare Mobile will provide a user with the ability to backup data and content from their phone to the Spare cloud without the need to connect the mobile device to a PC via a cable.

● Backup is performed securely using the users’ mobile or Wi-Fi network; mobile network usage charges may apply. ● Backup captures data stored both on the Mobile devices onboard memory as well as any add on memory devices such as a memory card. ● Backup captures all pertinent user data and configuration if feasible. ● A user has the ability to configure the frequency that backups occur. ● The Spare Mobile software detects files that should be backed up automatically. ● Users have the ability to customize which files to back up and have the ability to recover a backed up file(s) to their mobile device. ● If a user also has a Spare Backup account, the user has the ability to retrieve mobile files from a variety of devices using our Spare Synchronization service. ● Spare Mobile will support the following Mobile device operating systems: ● Blackberry Platform v4.30 & above, some exceptions based on models and hardware/software features available on the phone, such as GPS chip; ● Android OS v1.5 & 1.6 backup and security functions; ● Android OS v2.1 & v2.3 above backup and security functions; ● WinMobile OS v6.0, v6.1 & v6.5 backup and security functions; ● iPhone OS v3.1.3 supports backup only; ● iPhone OS v4.0 & above backup and security functions; and ● Java phones with MIDP 2.0 and/or MIDP 2.1 backup only.

***NOTE: Due to differences in OS functionality the Spare Mobile application may differ slightly in appearance between each supported OS. The functionality however shall remain static.

~~Spare Backup offers:~~4

~~● An automatic program installation that requires absolutely no user interaction to configure backups, ● No complicated file selection -~~ Spare Backup ~~scans the user's computer and has a number of presets which it backs up automatically, such as~~offers: ● All contacts, email messages and attachments, address book, contacts, folders and contents, signature files from Outlook, ● Word, Excel, PowerPoint files, templates and settings from MS Office, ● My Documents, My Music, My Pictures, Quicken, QuickBooks, MS Money, Turbo Tax and Tax Cut; and ● All desktop files.

4● An automatic program installation that requires absolutely no user interaction to configure backups, ● No complicated file selection - Spare Backup scans the user's computer and has a number of presets which it backs up automatically, such as: ● All contacts, email messages and attachments, address book, contacts, folders and contents, signature files from Outlook, ● Word, Excel, PowerPoint files, templates and settings from MS Office, ● My Documents, My Music, My Pictures, Quicken, QuickBooks, MS Money, Turbo Tax and Tax Cut; and ● All desktop files.

In addition, users can manually include any files that are not in the present group.

●	Simple, fast data recovery of individual files or the complete desktop
●	Open file backup, giving the user the ability to back up while a particular program is open
●	Reports automatically available to users in Spare Backup
●	Redundant file support - select a restore from the last five backups
●	Online file retrieval from any Internet connection - using Spare Key
●	Provides files security via 256 Rijndael AES 256 block cipher with unique user encryption key
●	Decryption protected by Spare Key in the user's computer and with broker so complete loss of the computer is not a problem

The VeriSign/Starfield Technology high assurance certificates provide authenticity for web based transactions. The encryption we use for ensuring privacy is the 256 Rijndael AES, a block cypher adopted as an encryption standard by the U.S. Government. The data is protected in transit and communication via Secure Sockets Layer (SSL), a cryptographic protocol which provides secure communications over the public Internet.

An overview of customer benefits includes:

●	Ease-of-use - Spare Backup provides fast, easy and fully automated data protection. Users benefit from automated data file selection, which distinguishes user data files from operating system and application files. As a result, users do not have to remember where all of their data files are stored. Spare Backup allows users to retrieve multiple past versions of a file, not just the most recently backed-up version.
●	Impenetrable Security and Protection of Corporate Data - Spare Backup ensures that all data is encrypted with advanced 256-bit encryption on the user's machine using a user provided "key" or password. The data is encrypted a second time using SSL, or secure sockets layer, while it is being transmitted and a third time before it is stored on the RAID, or redundant array of independent disc, servers using a strong private key.
●	SSL Support - SSL based protocol enhancements to address security parameters during: registration, upgrade, backup and retrieve.

Spare Switch is used by either downloading the software from the Internet or by inserting an installation CD into the old computer. Spare Switch then scans the hard drive and inventories of personal directories, giving the user a detailed report of the documents and other files. From that inventory, the user can then select the exact files that he or she wishes to transfer to the new PC. Spare Switch avoids the need for PC-to-PC transfer cable by compacting, encrypting and then transferring the files via the Internet. Spare Switch 's data center can then hold the encrypted data for as long as a week, giving the user the flexibility to choose when to download the files to the new PC. The files are downloaded from our secure. Spare Switch uses a 256-bit encryption cipher with non-algorithmic key to ensure that the information is impervious to hackers at every step of the process. Spare Switch pricing is done on a case by case basis per partner.

~~Spare Backup software comes with the monthly service and enables users to also back up to local storage devices with or without using the online service.~~5

~~Our~~Spare ~~offers~~Backup ~~vary~~software comes ~~depending~~with onthe ~~partnerships,~~monthly inservice ~~some~~and ~~cases~~enables ~~we offer new~~ users ato ~~free~~also ~~14-day~~back ~~trial,~~up ~~other~~to ~~could~~local bestorage andevices ~~allocation~~with ofor ~~space~~without ofusing 1the ~~gigabyte.~~online ~~Spare Backup services cost between $0~~service.~~99 and $6.99 per month and certain partners offer annual plans.~~

WeOur ~~developed~~offers ~~new~~vary ~~products~~depending on ~~and~~partnerships, ~~integrated~~in ~~new~~some ~~feature~~cases ~~functionality~~we ~~into~~offer ~~our~~new ~~Spare~~users ~~Backup®~~a ~~software.~~free ~~The~~14-day ~~new~~trial, ~~offerings~~other incould ~~our~~be ~~Spare~~an ~~line~~allocation of ~~software~~space. ~~products include:~~ Spare Backup ~~Room™,~~services ~~Spare~~retail ~~Mobile™~~between ,$0.99 ~~Spare Security Suite for Mobile~~ and ~~Tablets, and Parental Controls~~$6.99 ~~The~~per ~~following~~month ~~paragraphs~~and ~~provide~~ certain ~~information~~partners ~~regarding~~offer ~~our~~annual ~~line of products and features:~~plans.

5We developed new products and integrated new feature functionality into our Spare Backup® software. The new offerings in our Spare line of software products include: Spare Room™ , Spare Mobile™ , Spare Security Suite for Mobile and Tablets, and Parental Controls. The following paragraphs provide certain information regarding our line of products and features:

Spare Room is designed to complement the Spare Backup software. We launched this product in the second quarter of fiscal 2009. This is a first step to digital contract management and cloud computing for Spare Backup users. This feature has been distributed and is available to our active Spare backup users by downloading and installing the software which is obtainable thru our distribution partners. We are currently in production with this product for Car Phone Warehouse Limited, which distributes this under the name “My Hub”.

The Spare Backup software easily and automatically backs up a user's files from the user's desktop to the Spare Backup 's cloud. Once files are stored securely in the cloud, the Spare Room application allows a user to take advantage of a wide range of sharing and social networking tools. The solution allows the user to get the most out of available tools and services on the Internet while providing the security of online backup.

In the first version of the Spare Room, the applications allow our customers to easily access and manage their backed-up photos, videos, music and documents. As well as enabling users to access other services and applications, such as for music, mobile devices and mobile banking for purchases and or convenience. Future versions of Spare Room will include additional features beyond photo sharing to include Video, Contact Management and Calendar management. These features will be displayed on the Spare Room Dashboard allowing a user to easily navigate Spare Room and manage their digital data stored in the Spare cloud from a variety of devices.

Spare Mobile works in conjunction with the users of Spare Backup and Spare Room accounts. Spare Room provides an interface for a user to manage their mobile device and the files contained on their mobile device.

Our Target Customers

We distribute our product line through four vertical channels as a “white label solution,” branding our solutions under our distribution partners’ brands. We are focusing on the insurance and warranty space where we are bundled into a warranty with retailers online, including OEM’s and Telco’s. Our partners will then resell our products to owners and executives of businesses which do not have an IT (information technology) department that use technology to support their businesses as well as small business users and consumers who desire to secure the redundancy of available files and documents vital to the continuity of their operations, business, or personal information. Since our products and services allow non-technical users too quickly, easily and thoroughly secure and backup their files or data archiving and storage, we believe that our business is uniquely relevant to enabling small companies to succeed using technology. Our products and services also support individual business professionals working in companies of all sizes, as well as individuals who use mobile devices. Other unique characteristics are additional coding that enables easy to scale infrastructure and support elements. We believe that this characteristic provides a competitive advantage over other providers whose products require large investments in hardware, as well as professional installation, training and support. Spare Backup now has a SMB product directed toward the small to mid-size business with 500 or less computers. The same ease of use that the consumer product is known for the SMB product has with an ease to use administrative dashboard for set up, grouping of departments and storage controls.

~~How We Market Our Products and Services~~6

How We ~~market~~Market ~~our~~Our ~~software~~Products ~~products through distributor’s retailers as well as a "white label" solution that will be distributed through its vertical channel, such as insurance~~ and warranty providers. We are continuing to expand our current distribution base with scheduled launches throughout the remainder of the year. We will focus our distribution efforts in four vertical channels:Services

·We ~~Insurance~~market ~~and~~our ~~warranties:~~software products ~~Assurant~~through distributor’s retailers as well as a "white label" solution that will be distributed through its vertical channel, ~~Service~~such ~~Net~~as insurance and ~~Lifestyle~~warranty ~~Group;~~providers. We are continuing to expand our current distribution base with scheduled launches throughout the remainder of the year. We will focus our distribution efforts in four vertical channels:

· ~~Retail:~~Insurance ~~Car Phone Warehouse, Best Buy Europe~~ and ~~Simplexity;~~warranties

· ~~Original Equipment Manufacturers: Sony; and~~Retailers

· ~~Carriers~~Original Equipment Manufacturers

~~Examples~~· ofTelephone our marketing partners within the four vertical distribution channels include Wirefly/Simplexity, Assurant/Federal Home Warranty, Life Styles Group (a UK warranty provider), Best Buy Europe, and Sony. We will continue to aggressively add additional partnerships. We expect our current partners will commence scheduled launches of our services during 2012. We are in various stages of negotiations with potential partners in the U.S., Brazil, India, the Middle East, South America, and the South Pacific. We are hopeful that these negotiations will result in additional partnerships in the coming quarters.Carriers

6We will continue to aggressively add additional partnerships. We expect our current partners will commence scheduled launches of our services during 2013. We are in various stages of negotiations with potential partners in the U.S., Brazil, India, the Middle East, South America, and the South Pacific. We are hopeful that these negotiations will result in additional partnerships in the coming quarters.

While, we believe the launch of our base offerings will be commercially successful, it is still too early, to determine the extent of its market penetration.

We continue to invest in our software development, particularly focusing on the smart phone market. We have added additional features, such as:

Last Known LocationPRO: View the approximate location of your registered phone(s) on an integrated map using the phone’s built-in GPS.

Lock/Unlock PhonePRO: Remotely lock your phone to prevent unauthorized use and protect your personal information.

Display MessagePRO: Send a message to your phone that locks your phone and displays a message requesting that the Good Samaritan holding your phone contact you to return it.

Set Phone AlarmPRO: Locks your phone and sends a loud, audible alert directly to your phone to immediately pinpoint its location.

Erase PhonePRO: Remotely lock your phone and erase your contacts, photos, etc. from your phone. Since Wirefly Mobile Backup also backs up your contacts, photos, and more, you can easily transfer your stored data to your replacement device in minutes.

In the third quarter of 2011 we completed the first phase of development of a new suite of parental controls to enable parents to monitor and manage numerous aspects of their children's use of smart mobile devices. The parental controls are activated through a simple set-up wizard that helps users establish boundaries for monitoring up to 5 children’s locations and times of daily activities like school, sports, and time with friends. Once specific rules are put into place by the subscriber, if the child's phone is not in the location it should be, the intelligent software automatically notifies the subscriber through email or text. Through the secure website and mobile devices a parent can view the exact movements of a monitored child to see where they have been. Additional functionalities are being developed which we anticipate will be released in the coming quarters

We believe our offerings will adapt to the customer’s day-to-day needs, as our cloud system provides smart phones with the ability to link to our cloud and connect to multiple devices, which include PC’s and tablets.7

InWe ~~addition,~~believe weour ~~are~~offerings will ~~working~~adapt onto ~~providing~~the customer’s day-to-day needs, as our ~~partners~~cloud system provides smart phones with ~~real~~the ~~time~~ability ~~data~~to ~~analytics~~link ~~which~~to ~~will~~our cloud ~~provide~~and ~~them~~connect ~~with~~to ~~behavioral~~multiple ~~pattern~~devices, ~~matching~~which ~~and~~include ~~market~~PC’s ~~research~~and tablets.

WeIn ~~began~~addition, anwe ~~initial~~are ~~small-scale~~working on ~~launch~~providing ~~with~~our ~~the~~partners ~~UK-based~~with ~~Carphone~~real ~~Warehouse~~time ~~in April~~data ofanalytics ~~2011~~which ~~and~~will inprovide ~~the~~them ~~Netherlands~~with inbehavioral ~~May~~pattern ~~2011. We~~matching ~~have now converted our product to support the local language in the Netherlands~~ and ~~Spain,~~market ~~as we anticipate a progressive ramp in their distribution efforts throughout the remainder of 2012~~research.

InWe have ~~September~~now ~~2010~~converted weour ~~reached~~product ato ~~distribution~~support ~~agreement with Simplexity, LLC., (“Simplexity”),~~ the ~~parent~~local ~~company~~language ofin ~~Wirefly.com. Simplexity, a privately held company, is~~ the ~~Internet's~~Netherlands ~~leading authorized seller of cell phones~~ and ~~wireless services~~Spain. ~~Wirefly~~We ishave ~~Simplexity's~~also ~~shopping~~begun ~~and~~translation ~~comparison site for consumers, bringing online shoppers an unprecedented selection~~ of ~~cell~~our product ~~phones~~ and ~~service~~documentation ~~plans~~into ~~from every major U.S. carrier with~~ the ~~convenience~~Turkish oflanguage ~~automated~~which ~~application~~we processing and cell phone activation. For the last six years Wirefly has been the internet's #1 authorized dealer for AT&T, Verizon Wireless, Sprint, and T-Mobile. Simplexity also operates and maintains similar online websites for a number of major retailers in North America. We believe Simplexity is uniquely positioned in the U.S. market to reach potential mobile customers across a wide variety of carriers through online mobile sales sites they own or manage within North America. We anticipate ~~the sales launch of our services through Simplexity’s distribution network to progressively grow in 2011 and beyond. The service~~ will be ~~offered~~launched ~~as an add-on or inclusive~~ in ~~the service packages such as “data protection,” currently marketed by Simplexity to its channel partners and customers~~2013.

7In September 2010 we reached a distribution agreement with Simplexity, LLC., (“Simplexity”), the parent company of Wirefly.com. Simplexity, a privately held company, is the Internet's leading authorized seller of cell phones and wireless services. Wirefly is Simplexity's shopping and comparison site for consumers, bringing online shoppers an unprecedented selection of cell phones and service plans from every major U.S. carrier with the convenience of automated application processing and cell phone activation. For the last six years Wirefly has been the internet's #1 authorized dealer for AT&T, Verizon Wireless, Sprint, and T-Mobile. Simplexity also operates and maintains similar online websites for a number of major retailers in North America. We believe Simplexity is uniquely positioned in the U.S. market to reach potential mobile customers across a wide variety of carriers through online mobile sales sites they own or manage within North America. We anticipate the sales launch of our services through Simplexity’s distribution network to progressively grow in 2012 and beyond. The service will be offered as an add-on or inclusive in the service packages such as “data protection,” currently marketed by Simplexity to its channel partners and customers.

We opened a new distribution channel for our mobile platform through mobile insurance and warrantee providers. In North America we reached an agreement with Assurant (Federal Warranty Service Corporation). Assurant, which develops, underwrites, and markets specialty insurance, extended service contracts, and other risk management solutions with leading financial institutions, retailers, and other entities, has bundled us into their services. The first of their launches is with Sprint, a US-based cellular company. Our backup solution will be bundled into all warranties associated with tablet sales. We will be expanding our offerings and are currently doing translations for ~~up to 8~~ additional languages to support additional launches throughout ~~2012~~2013.

We also have a distribution partnership with Lifestyle Services Group (LSG), provider of leading lifestyle solutions and insurance products. LSG specializes in supporting its client products brands, attracting customers, improving the customer journey, and reducing customer attrition rates. LSG’s portfolio includes Mobile Phone Insurance, Card Protection and Tech Protect®, and The Hubb TM , which allows clients to seamlessly integrate a complete suite of products and services all accessed via one number. Their customer base includes Virgin Mobile, Orange, “3”, Phone, Phones 4 U, Barclay’s and Lloyds bank. Bank of Scotland to name a few in the U.K. LSG has also amended our December 13, 2010 master services agreement in the third quarter of 2011 to include our parental controls functionality. Under the terms of the amended agreement, Spare Backup will supply the parental controls to LSG for distribution to LSG's affinity distribution channels~~, which includes most of the major retail banks and mobile networks and targets approximately 10 million customers~~. Both companies have agreed that Lifestyle Services Group will have exclusive distribution rights to the parental controls functionality in territories where it has a physical presence, provided it reaches certain minimum volumes over specified periods, including a minimum of one million registered users in the first six months of launch.

We expect to be able to work with each LSG partner, including scheduled launches which occurred in Q3 of 2012 with Lloyds and a soft launch with the Bankof Scotland in Q3 of 2012, as these rolling launches continue, we expect to add customers and revenue accordingly as these partners increase their marketing and awareness of the product to their customers. The software ~~will~~is be marketed as a way to not only protect data from loss, but to also increase the likelihood of retrieving a lost or stolen phone through the suite of security features. As mobile devices are becoming more prevalent and more powerful, we believe this channel should become a significant source of revenue to our company in the coming quarters. We anticipate that these companies will ~~begin~~continue to roll out marketing programs progressively ~~beginning~~ in ~~2012~~2013.

Through our relationship with LSG’s client companies, Spare Backup will broaden its distribution efforts with current and new partners and initiate new launches into Ireland, Poland, Turkey, the Middle East, India, Brazil and South America. In ~~2012~~2013, we anticipate expanding our marketing partnerships across our four vertical marketing channels and across additional geographic areas in order to reach the widest potential subscriber base.

~~Customer Support~~8

WeCustomer provide tier 1 and tier 2 support for our services. Our tier 1 customer support provides initial call resolution and direct linking capabilities to our tier 2 customer support. Tier 2 customer support is managed by an internal group of specialists who are co-located within our Network Operation Center and software development headquarters in Minden, Nevada. Co-location with the software development group allows for the resolution of highly specific technical issues as well as identification of potential application flaws. Our support services were initially available from during evening hours during the week and extended hours on weekends. In March 2007 we began offering 24/7/365 customer support.Support

~~Research~~We provide tier 1 and tier ~~Development~~2 support for our services. Our tier 1 customer support provides initial call resolution and direct linking capabilities to our tier 2 customer support. Tier 2 customer support is managed by an internal group of specialists who are co-located within our Network Operation Center and software development headquarters in Minden, Nevada. Co-location with the software development group allows for the resolution of highly specific technical issues as well as identification of potential application flaws. Our support services were initially available from during evening hours during the week and extended hours on weekends. In March 2007 we began offering 24/7/365 customer support.

~~Our~~Research ~~products were developed primarily by our employees assisted by contractors in certain specialty areas. We have invested approximately $1.1 million~~ and ~~approximately $2.3 million in research and development during fiscal 2011 and fiscal 2010, respectively.~~Development

~~Technology~~Our products were developed primarily by our employees assisted by contractors in certain specialty areas. We have invested approximately $0.8 million and approximately $1.1 million in research and development during fiscal 2012 and fiscal 2011, respectively.

Our products use a sophisticated combination of hardware, software, and networking to intelligently select files and settings from a customer's computer and reliably transfer these to secure redundant data centers, making the data highly available.Technology

~~The~~Our ~~networking~~products ~~systems used by us were designed to~~ use ~~outbound~~a ~~Internet~~sophisticated combination ~~connections~~of ~~for~~hardware, ~~all communications~~software, ~~thus~~and ~~allowing~~networking ~~many users who are behind a firewall access~~ to ~~the~~intelligently ~~backup~~select ~~services.~~files ~~The~~and ~~proprietary~~settings ~~software~~from ~~designed~~a bycustomer's uscomputer ~~has~~and ~~been~~reliably transfer ~~developed~~these to ~~remove~~secure ~~the~~redundant ~~technical~~data ~~knowledge~~centers, ~~required~~making tothe ~~use~~data ~~other~~highly ~~backup products by selecting files and backup settings for the user~~available.

8The networking systems used by us were designed to use outbound Internet connections for all communications, thus allowing many users who are behind a firewall access to the backup services. The proprietary software designed by us has been developed to remove the technical knowledge required to use other backup products by selecting files and backup settings for the user.

We own all of our servers and utilize hosting in geographically dispersed TIA-964 Tier-3 rated collocation facilities. Our server architecture employs multiple servers and switching equipment to provide redundancy and high availability to Spare Backup service users. The entire storage area network (SAN) storage system is replicated in near real-time to a secondary SAN to back up the primary one, which will automatically become available in the event of an outage at the primary storage array. Our servers use the latest enterprise level operating system available from Microsoft and use industry standard networking and communication protocols. This provides a highly available network that can scale rapidly using off the shelf hardware. These systems are fully redundant and we anticipate our reliability at 99.9%. We can expand our network capacity quickly and with highly predictable costs.

Our business will suffer if our systems fail or our third-party facilities become unavailable. A reduction in the performance, reliability and availability of our systems and network infrastructure may harm our ability to distribute our products and services to our customers and other users, as well as harm our reputation and ability to attract and retain customers. Our systems and operations are susceptible to, and could be damaged or interrupted by, outages caused by fire, flood, power loss, telecommunications failure, Internet breakdown, earthquake and similar events. If for some reason we should not have redundancy in our facilities, any damage or destruction to our systems would significantly harm our business. Our systems are also subject to human error, security breaches, power losses, computer viruses, break-ins, "denial of service" attacks, sabotage, intentional acts of vandalism and tampering designed to disrupt our computer systems, Web sites and network communications which are beyond our control. This could lead to slower response times or system failures.

Our computer and communications infrastructure is located in a leased facility in Arizona. While our infrastructure is fully redundant and Tier 3 rated, our insurance coverage covers lost profits and accordingly we may not have adequate business interruption insurance to compensate us for losses that may occur from a system outage. Despite our efforts, our network infrastructure and systems could be subject to service interruptions or damage and any resulting interruption of services could harm our business, operating results and reputation.9

~~Competition~~Our computer and communications infrastructure is located in a leased facility in Arizona. While our infrastructure is fully redundant and Tier 3 rated, our insurance coverage covers lost profits and accordingly we may not have adequate business interruption insurance to compensate us for losses that may occur from a system outage. Despite our efforts, our network infrastructure and systems could be subject to service interruptions or damage and any resulting interruption of services could harm our business, operating results and reputation.

WeOn ~~face~~April ~~intense~~4, ~~and~~2013, ~~increasing competition in~~ the ~~web-based~~Company ~~backup~~entered ~~solutions~~an ~~market.~~amended Ifagreement wewith doIO ~~not~~Capital ~~compete~~Princess ~~effectively~~to orreduce ifthe wemonthly ~~experience~~hosting ~~reduced~~fees ~~market share~~ from approximately ~~increased competition~~$38,000 ~~our~~to ~~business~~$14,000 ~~will~~a ~~be harmed~~month. InThis ~~addition,~~represents ~~the~~a ~~more~~63% ~~successful~~decrease wein ~~are~~this inrecurring ~~the~~monthly ~~emerging~~cash ~~market~~expenditure, ~~for~~which is ~~web-based~~one ~~storage~~of ~~solutions,~~the highest expenses the ~~more~~Company ~~competitors~~incurs ~~are~~on ~~likely~~a tomonthly ~~emerge~~basis. WeThe ~~believe~~Company ~~that~~entered ~~the~~an ~~principal~~initial ~~competitive~~Master ~~factors~~Service inAgreement with ~~our~~the ~~market~~vendor ~~include:~~on September 11, 2008.

● service functionality, quality and performance; ● ease of use, reliability and security of services; ● establishment of a significant base of customers and distribution partners; ● ability to introduce new services to the market in a timely manner by adding additional suite of products to our Backup client; ● customer service and support; and ● pricing.Competition

~~Our~~We ~~primary~~face ~~competitors~~intense ~~are~~and ~~various~~increasing competition ~~Internet~~in the web-based backup ~~providers’~~solutions ~~such as Connected~~market.~~com,~~ ~~Livevault,~~If ~~and~~we ~~backup.com,~~do ~~Carbonite~~not ~~and~~compete ~~EMC/Mozy.~~effectively ~~These~~or ~~companies~~if ~~provide~~we ~~services~~experience ~~similar~~reduced ~~to our PC backup and each have to various degrees a~~ market ~~presence.~~share from Weincreased ~~also compete with providers of traditional backup technologies~~competition, ~~such~~our asbusiness ~~Veritas~~will ~~and~~be ~~Symantec (swampdrive) (Norton 360)~~harmed. ~~With~~In ~~mobile technology~~addition, wethe ~~have~~more ~~very~~successful ~~few~~we ~~competitors~~are ~~that~~in ~~can~~the ~~compete~~emerging ~~with~~market ~~our~~for ~~service~~web-based storage ofsolutions, ~~synchronization~~the ~~between~~more ~~the~~competitors PCare ~~and~~likely ~~mobile~~to ~~devices~~emerge. ~~Competitors~~We ~~include~~believe ~~SugarSync,~~that ~~Inc.,~~the ~~Lookout,~~principal ~~Inc. and~~competitive tofactors anin ~~extent~~our ~~McAfee, Inc.~~market include:

~~Substantially~~● ~~most~~service ~~of our competitors have more capital~~functionality, ~~longer~~quality ~~operating histories, greater brand recognition, larger customer bases~~ and ~~significantly~~performance; ~~greater~~● ~~financial,~~ease ~~technical and marketing resources than we do. These competitors may also engage in more extensive development~~ of ~~their technologies~~use, ~~adopt~~reliability ~~more aggressive pricing policies~~ and ~~establish~~security ~~more~~of ~~comprehensive~~services; ~~marketing~~● ~~and~~establishment ~~advertising~~of ~~campaigns~~a ~~than~~significant webase ~~can.~~of ~~Our~~customers ~~competitors may develop products~~ and ~~service~~distribution ~~offerings~~partners; ~~that~~● weability doto ~~not~~introduce ~~offer~~new ~~or that are more sophisticated or more cost effective than our own. For these and other reasons, our competitors' products and~~ services ~~may~~to ~~achieve greater acceptance in~~ the ~~marketplace than our own, limiting our ability to gain~~ market ~~share~~in ~~and~~a ~~customer~~timely ~~loyalty~~manner ~~and~~by toadding ~~generate~~additional ~~sufficient~~suite ~~revenues to achieve a profitable level~~ of ~~operations.~~products ~~Our failure~~ to ~~adequately~~our ~~address~~Backup ~~any~~client; of● ~~the~~customer ~~above~~service ~~factors~~and ~~could~~support; ~~harm our business~~ and ~~operating~~● ~~results~~pricing.

9Our primary competitors are various Internet-based backup providers’ such as Connected.com, Livevault, and backup.com, Carbonite and EMC/Mozy. These companies provide services similar to our PC backup and each have to various degrees a market presence. We also compete with providers of traditional backup technologies, such as Veritas and Symantec (swampdrive) (Norton 360). With mobile technology, we have very few competitors that can compete with our service of synchronization between the PC and mobile devices. Competitors include SugarSync, Inc., Lookout, Inc. and to an extent McAfee, Inc.

~~Intellectual~~Substantially ~~Property~~most of our competitors have more capital, longer operating histories, greater brand recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. These competitors may also engage in more extensive development of their technologies, adopt more aggressive pricing policies and establish more comprehensive marketing and advertising campaigns than we can. Our competitors may develop products and service offerings that we do not offer or that are more sophisticated or more cost effective than our own. For these and other reasons, our competitors' products and services may achieve greater acceptance in the marketplace than our own, limiting our ability to gain market share and customer loyalty and to generate sufficient revenues to achieve a profitable level of operations. Our failure to adequately address any of the above factors could harm our business and operating results.

Our intellectual property is critical to our business, and we may seek to protect our intellectual property through copyrights, trademarks, patents, trade secrets, confidentiality provisions in our customer, supplier, potential investors, and strategic relationship agreements, nondisclosure agreements with third parties, and invention assignment agreements with our employees and contractors, although we do not execute such agreements in every case. Our protection efforts may prove to be unsuccessful, and unauthorized parties may copy or infringe upon aspects of our technology, services or other intellectual property rights. In addition, these parties may develop similar technology independently. Existing trade secret, copyright and trademark laws offer only limited protection and may not be available in every country in which we will offer our services. In the fourth quarter the company filed for patents involving its Parental Controls.10

~~Government~~Intellectual ~~Regulation~~Property

~~Although~~Our ~~there~~intellectual ~~are~~property is ~~currently~~critical ~~relatively~~to ~~few~~our ~~laws~~business, and ~~regulations~~we ~~directly~~may ~~applicable~~seek to ~~the~~protect ~~Internet,~~our itintellectual isproperty ~~likely~~through ~~that~~copyrights, ~~new~~trademarks, ~~laws~~patents, ~~and~~trade secrets, ~~regulations~~confidentiality ~~will~~provisions bein ~~adopted~~our incustomer, ~~the~~supplier, ~~United~~potential ~~States~~investors, and ~~elsewhere~~strategic ~~covering~~relationship ~~issues such as limitations on the use of mass-delivered e-mails~~agreements, ~~broadcast~~nondisclosure agreements ~~license~~with ~~fees,~~third ~~copyrights~~parties, ~~privacy,~~and ~~pricing,~~invention ~~sales~~assignment ~~taxes~~agreements ~~and~~with ~~the~~our ~~characteristics~~employees and ~~quality~~contractors, ofalthough ~~Internet~~we ~~services.~~do ~~The~~not ~~adoption~~execute such ofagreements ~~restrictive~~in ~~laws~~every orcase. ~~regulations~~Our ~~could~~protection ~~slow~~efforts ~~Internet~~may ~~growth.~~prove ~~The~~to ~~application~~be ofunsuccessful, ~~existing~~and ~~laws~~unauthorized ~~and~~parties ~~regulations~~may ~~governing~~copy ~~Internet~~or ~~issues~~infringe upon ~~such~~aspects asof ~~property~~our ~~ownership~~technology, ~~libel~~services ~~and~~or ~~personal~~other ~~privacy~~intellectual isproperty ~~also subject to substantial uncertainty~~rights. ~~There~~In ~~can~~addition, bethese noparties ~~assurance~~may ~~that~~develop ~~current~~similar technology orindependently. ~~new~~Existing ~~government~~trade ~~laws and regulations~~secret, orcopyright ~~the~~and ~~application~~trademark ~~of existing~~ laws ~~and~~offer ~~regulations~~only ~~(including~~limited ~~laws~~protection and ~~regulations~~may ~~governing~~not ~~issues~~be ~~such~~available in asevery ~~property~~country ~~ownership,~~in ~~taxation,~~which ~~defamation~~we ~~and personal injury),~~ will ~~not~~offer ~~expose~~our usservices. In tothe ~~significant~~fourth ~~liabilities,~~quarter ~~slow~~the ~~Internet~~company ~~growth~~filed orfor ~~otherwise~~patents ~~hurt~~involving its usParental ~~financially~~Controls.

~~Employees~~Government Regulation

AsAlthough ofthere ~~December~~are 31currently relatively few laws and regulations directly applicable to the Internet, ~~2011~~it weis ~~had~~likely 22that ~~full~~new laws and regulations will be adopted in the United States and elsewhere covering issues such as limitations on the use of mass-~~time~~delivered ~~employees~~e-mails, ~~including~~broadcast ~~all~~license fees, copyrights, privacy, pricing, sales taxes and the characteristics and quality of ~~our~~Internet ~~executive~~services. ~~officers~~The adoption of restrictive laws or regulations could slow Internet growth. ~~None~~The application of ~~our~~existing ~~employees~~laws ~~are~~and ~~covered~~regulations bygoverning ~~collective~~Internet ~~bargaining~~issues ~~agreements~~such as property ownership, libel and wepersonal ~~believe~~privacy ~~our~~is ~~relationships~~also ~~with~~subject ~~our~~to ~~employees~~substantial touncertainty. There can be ~~good~~no assurance that current or new government laws and regulations, or the application of existing laws and regulations (including laws and regulations governing issues such as property ownership, taxation, defamation and personal injury), will not expose us to significant liabilities, slow Internet growth or otherwise hurt us financially.

~~Our History~~Employees

WeAs ~~were~~of ~~incorporated in Delaware on~~ December 2731, 2012 ~~1999~~we ~~under~~had ~~the~~5 ~~name~~full-time ~~First~~employees, ~~Philadelphia~~including ~~Capital~~all ~~Corp.~~of toour ~~serve~~executive asofficers aand ~~vehicle~~19 toindependent ~~effect~~contractors. aWe ~~merger,~~believe ~~exchange~~this ofoperational model ~~common~~reduces ~~stock,~~our ~~asset~~fixed ~~acquisition~~costs orand ~~other~~enables ~~business~~us ~~combination~~to ~~with~~better ~~domestic~~manage orour ~~foreign~~cash ~~private business~~flow. OnAs ~~October~~of ~~30,~~December ~~2000~~31, 2011 we ~~completed~~had a22 ~~business~~full-time ~~combination~~employees, including ~~with~~all ~~Conservation~~of ~~Anglers~~our ~~Manufacturing,~~executive ~~Inc~~officers. Consequently, aour ~~real~~overall ~~estate~~head ~~holding~~count ~~and~~of ~~development~~full-time ~~company~~employees ~~that~~has ~~was~~been ~~originally~~reduced ~~organized~~by in77% ~~Florida~~during fiscal ~~on February 7~~2012, ~~2000.~~or ~~The~~15 ~~combination was a stock~~full-~~for-stock~~time ~~merger~~employees. ~~that~~We ~~was~~have ~~accounted~~also ~~for~~fully asoutsourced aour ~~"pooling-of-interests".~~customer Insupport ~~connection~~functions ~~with~~which ~~the merger,~~ we ~~issued~~anticipate ~~235,000~~will result ~~shares~~in ofa ~~our~~substantial ~~common~~reduction ~~stock~~ in ~~exchange for all the outstanding stock of Conservation Anglers Manufacturing, Inc. In January 2001 we changed~~ our ~~name~~expenses torelated ~~Newport International Group, Inc.~~ to ~~better~~that ~~reflect~~function ~~and~~in ~~describe our then current strategic direction~~2013.

OnNone ~~February 6, 2004, we closed an Agreement and Plan~~ of ~~Merger~~our ~~with~~employees are ~~Grass~~covered ~~Roots~~by ~~Communications~~collective ~~Inc.,~~bargaining ~~a Delaware corporation. Grass Roots was a development stage company incorporated in Delaware in June 2002 initially to create~~agreements, ~~produce, deliver~~ and ~~track~~we ~~targeted~~believe ~~multimedia communications over the Internet. Under the terms of this agreement, Grass Roots became~~ our ~~wholly-owned~~relationships subsidiary. At the effective time of the merger, the stockholders of Grass Roots exchanged their securities for approximately 12,300,000 shares of our common stock, representing approximately 93% of our common stock. Contemporaneous with ~~this transaction, Grass Roots' President and Chief Executive Officer, Mr. Cery B. Perle, was elected as a member of~~ our ~~Board~~employees ofto ~~Directors~~be ~~and appointed CEO~~good. Mr. Edward L. Hagan, Secretary of Grass Roots, was appointed our secretary. Mr. Perle, the principal stockholder of Grass Roots, and members of his family/household received an aggregate of 46% of our shares of common stock as a result of the exchange upon the merger.

10Our History

~~Effective~~We ~~August~~were ~~16,~~incorporated in ~~2006~~Delaware weon ~~changed~~December ~~our~~27, 1999 under the name First Philadelphia Capital Corp. to ~~Spare~~serve ~~Backup~~as a vehicle to effect a merger, exchange of common stock, asset acquisition or other business combination with domestic or foreign private business. On October 30, 2000, we completed a business combination with Conservation Anglers Manufacturing, Inc., ~~The~~a ~~corporate~~real ~~name~~estate ~~change~~holding and development company that was ~~brought~~originally ~~about~~organized byin Florida on February 7, 2000. The combination was a stock-for-stock merger ofthat was accounted for as a ~~wholly~~"pooling-~~owned~~of-interests". ~~subsidiary~~In ~~into~~connection ~~Newport~~with ~~International~~the ~~Group~~merger, we issued 235,000 shares of our common stock in exchange for all the outstanding stock of Conservation Anglers Manufacturing, Inc. ~~with~~In January 2001 we changed our name to Newport International Group, Inc. ~~surviving~~to ~~but~~better ~~renamed~~reflect ~~Spare~~and ~~Backup,~~describe ~~Inc~~our then current strategic direction.

~~Item 1A. Risk Factors~~11

AnOn ~~investment~~February in6, ~~our~~2004, we ~~common~~closed ~~stock~~an ~~involves~~Agreement aand ~~significant~~Plan ~~degree~~ of ~~risk~~Merger with Grass Roots Communications Inc., ~~You~~a ~~should~~Delaware ~~not~~corporation. ~~invest~~Grass inRoots ~~our~~was ~~common~~a ~~stock~~development stage ~~unless~~company ~~you~~incorporated ~~can~~in ~~afford~~Delaware in June 2002 initially to ~~lose~~create, ~~your~~produce, ~~entire~~deliver ~~investment~~and track targeted multimedia communications over the Internet. ~~You~~Under ~~should~~the ~~consider~~terms ~~carefully~~of this agreement, Grass Roots became our wholly-owned subsidiary. At the ~~following~~effective ~~risk~~time ~~factors~~of the ~~and~~merger, ~~other~~the ~~information~~stockholders inof ~~this~~Grass ~~annual~~Roots ~~report~~exchanged ~~before~~their ~~deciding~~securities tofor ~~invest~~approximately in12,300,000 shares of our common stock., representing Ifapproximately ~~any~~93% of ~~the~~our ~~following~~common ~~risks~~stock. Contemporaneous with this transaction, Grass Roots' President and ~~uncertainties~~Chief ~~develop~~Executive Officer, ~~into~~Mr. ~~actual~~Cery ~~events~~B. Perle, was elected as a member of our ~~business,~~Board ~~financial~~of ~~condition~~Directors orand ~~results~~appointed CEO. Mr. Edward L. Hagan, Secretary of ~~operations~~Grass ~~could~~Roots, bewas ~~materially~~appointed ~~adversely~~our ~~affected~~secretary. Mr. Perle, the principal stockholder of Grass Roots, and ~~you~~members ~~could~~of ~~lose~~his ~~your~~family/household received ~~entire~~an ~~investment~~aggregate inof 46% of our ~~company~~shares of common stock as a result of the exchange upon the merger.

IfEffective August 16, 2006 we ~~are~~changed ~~unable~~our name to ~~obtain~~Spare ~~financing~~Backup, ~~necessary~~Inc. toThe ~~support~~corporate ~~our~~name ~~operations,~~change wewas ~~may~~brought beabout ~~unable~~by toa ~~continue~~merger asof a ~~going~~wholly-owned ~~concern~~subsidiary into Newport International Group, Inc. with Newport International Group, Inc. surviving but renamed Spare Backup, Inc.

~~Our~~Item ~~net losses for the fiscal years ended December 31, 2011 and 2010 were $5,850,863 and $11,127,218, respectively~~1A. WeRisk have never generated sufficient revenues to fund our ongoing operations. Our operating losses for fiscal 2011 and fiscal 2010 were $7,552,495 and $9,966,532, respectively, and these losses are primarily attributable to our selling, general and administrative expense. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2011 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses, cash used in operations and working capital deficit. Our ability to continue as a going concern is dependent upon our ability to raise additional capital as described below. The financial statements included in this annual report do not include any adjustments to reflect future adverse effects on the recoverability and classification of assets or amounts and classification of liabilities that may result if we are not able to continue as a going concern.Factors

~~Our~~An ~~revenues~~investment ~~are~~in our common stock involves a significant degree of risk. You should not ~~sufficient~~invest in our common stock unless you can afford to ~~fund~~lose ~~our~~your entire ~~operating~~investment. ~~expenses~~You should consider carefully the following risk factors and weother ~~will~~information ~~need~~in this annual report before deciding to ~~raise~~invest ~~additional~~in ~~capital~~our common stock. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected and you could lose your entire investment in our company.

~~Our~~If ~~operating loss has decreased approximately 24% for fiscal 2011 over fiscal 2010;~~ we ~~will~~are ~~need~~unable to ~~significantly~~obtain ~~increase~~financing necessary ~~our revenues~~ to ~~fund~~support ~~these~~our ~~costs. At December 31~~operations, ~~2011~~ we ~~had~~may ~~approximately~~be ~~$71,000~~unable ~~cash overdraft and a working capital deficit of approximately $11 million. We have raised, subsequent~~ to ~~December~~continue 31, 2011, approximately $394,000 from the sale of our common stock. We intend to use the proceeds form the sale of the common stock for working capital purposes. Our current working capital is not sufficient to pay our operating expenses, our obligations as ~~they~~a ~~become~~going ~~due or certain tax liabilities nor is our working capital sufficient to fund any expansion of our company~~concern.

~~While~~Our wenet ~~are~~losses ~~constantly~~for ~~evaluating~~the fiscal ~~our~~years ~~cash~~ended ~~needs~~December 31, 2012 and ~~existing~~2011 ~~burn~~were ~~rate~~$3,529,813 inand ~~order~~$5,850,863, torespectively. ~~make~~We ~~appropriate~~have ~~adjustments~~never ingenerated ~~operating~~sufficient revenues ~~expenses,~~to wefund ~~need~~our toongoing ~~raise~~operations. ~~additional~~Our ~~debt~~operating orlosses ~~equity~~for ~~capital~~fiscal to2012 ~~provide~~and ~~funding~~fiscal ~~for~~2011 ~~ongoing~~were $3,572,914 and ~~future~~$7,552,495, ~~operations~~ respectively, and tothese ~~satisfy~~losses are primarily attributable to our ~~obligations~~selling, asgeneral ~~they~~and ~~become~~administrative ~~due~~expense. ~~While~~The wereport ~~have~~of ~~historically~~our ~~been~~independent ~~able~~registered public toaccounting ~~raise~~firm ~~capital,~~on ~~the~~our ~~current~~financial ~~capital~~statements ~~markets~~for ~~are~~the ~~very~~year ~~challenging~~ended ~~and~~December ~~there~~31, ~~are~~2012 nocontains ~~assurances~~an ~~that~~explanatory weparagraph ~~will~~regarding our beability ~~successful~~to incontinue ~~obtaining~~as ~~additional~~a ~~capital,~~going orconcern ~~that~~based ~~such~~upon ~~capital~~our ~~will~~net belosses, ~~available~~cash onused ~~terms~~in ~~acceptable~~operations toand usworking capital deficit. Our ability ~~continued~~to ~~existence~~continue isas ~~dependent~~a ~~upon,~~going ~~among~~concern ~~other~~is ~~things,~~dependent upon our ability to raise additional capital ~~and~~as todescribed ~~market~~below. ~~and~~The ~~sell~~financial statements ~~our~~included ~~products~~in ~~successfully.~~this Ifannual wereport ~~are~~do ~~unable~~not include any adjustments to ~~raise~~reflect ~~capital~~future asadverse ~~needed,~~effects iton isthe ~~possible~~recoverability and ~~that~~classification weof ~~would~~assets beor ~~required~~amounts toand ~~cease~~classification ~~operations~~of inliabilities ~~which~~that ~~event~~may ~~you~~result ~~would~~if ~~lose~~we ~~your~~are ~~entire~~not ~~investment~~able into ~~our~~continue ~~Company~~as a going concern.

WeOur ~~cannot predict our future~~ revenues orare ~~whether~~not ~~our~~sufficient ~~products~~to ~~will be accepted. If the markets for~~ fund our ~~products~~operating expenses and ~~services~~we dowill ~~not~~need ~~develop,~~to ~~our~~raise ~~future~~additional ~~results of operations will be adversely affected~~capital.

~~Net~~Our ~~revenues~~operating ~~from~~loss ~~the~~has decreased ~~sales~~approximately of53% ~~our Spare Backup line of products have been limited and insufficient to fund our ongoing operations. We reported net revenues of $399,343 and $958,886, respectively,~~ for ~~the~~ fiscal ~~years~~2012 ~~ended~~compared ~~December~~to ~~31, 2011 and 2010. Our net revenues significantly decreased for~~ fiscal 2011; ~~over fiscal 2010 and~~ we will need to significantly increase ifour werevenues ~~are~~ to ~~provide cash to~~ fund these ~~our~~costs. ~~operating~~At ~~expenses.~~December We31, ~~cannot~~2012 ~~guarantee~~we ~~either~~had ~~that~~approximately ~~the~~$18,136 ~~demand~~cash ~~for~~overdraft ~~our~~and ~~Spare~~a ~~Backup~~working ~~line~~capital deficit of ~~software~~approximately ~~products~~$11.3 million. ~~will~~We ~~develop~~have raised, ~~that~~during ~~such~~the ~~demand~~year ~~will~~ended beDecember ~~sustainable~~31, or2012, ~~that~~approximately we$735,333 ~~will~~from ~~ever~~the ~~effectively~~sale ~~compete~~of in our ~~market~~common ~~segment~~stock. InWe intend ~~addition,~~to weuse ~~cannot~~the ~~predict~~proceeds ~~what~~from ~~impact,~~the ifsale ~~any,~~of the ~~reduction~~common instock ~~discretionary~~for ~~spending~~working ~~will~~capital ~~have~~purposes. onOur ~~future~~current ~~sales~~working ofcapital ~~our~~is ~~products.~~not ~~If we are unable~~ sufficient to ~~generate~~pay ~~any significant net revenues from~~ our ~~products~~operating ~~and services~~expenses, our ~~business,~~obligations ~~operating~~as ~~results~~they ~~and~~become ~~financial~~due ~~condition~~or incertain ~~future~~tax ~~periods~~liabilities ~~will~~nor beis ~~materially~~our ~~and~~working ~~adversely~~capital ~~affected~~sufficient to ~~and~~fund weany ~~may~~expansion ~~not~~of ~~be able to continue~~ our ~~business as presently operated, if at all~~company.

1112

WeWhile we are constantly evaluating our cash needs and existing burn rate in order to make appropriate adjustments in operating expenses, we need to raise additional debt or equity capital to provide funding for ongoing and future operations and to satisfy our obligations as they become due. While we have ~~approximately~~historically $2been able to raise capital,~~708~~ the current capital markets are very challenging and there are no assurances that we will be successful in obtaining additional capital,~~000~~ ofor ~~debt~~that ~~which~~such capital will be available on terms acceptable to us. Our continued existence is ~~presently~~dependent ~~past~~upon, ~~due~~among other things, our ability to raise capital and to market and sell our products successfully. If we doare ~~not~~unable ~~have~~to ~~the~~raise ~~funds~~capital ~~necessary~~as needed, it is possible that we would be required to ~~pay~~cease operations ~~these~~in ~~obligations~~which event you would lose your entire investment in our Company.

InWe ~~addition~~cannot topredict ~~funding~~ our ~~operating~~future ~~expenses, we need capital to pay various debt obligations totaling approximately $2,708,000 which are either currently past due~~ revenues or ~~which~~whether ~~are~~our ~~due~~products inwill ~~the~~be ~~current fiscal year~~accepted. ~~Currently,~~If ~~there are $1,593,772 principal amount of~~ the 8%markets ~~short-term~~for ~~notes~~our ~~which~~products ~~are past due, $324,963 principal of the 10% short-term notes which are past due,~~ and ~~$787,600~~services ofdo ~~notes~~not ~~payable which are past due. During 2011~~develop, weour ~~have~~future ~~been~~results ~~in contact with numerous note holders to work out either a repayment or extension~~ of ~~these notes. The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our~~ operations~~. If we are unable to restructure these notes and we are unable to raise the capital necessary to satisfy the obligations, it is possible we~~ will be ~~forced~~adversely ~~to cease operations~~affected.

Net revenues from the sales of our Spare Backup line of products have been limited and insufficient to fund our ongoing operations. We reported net revenues of $539,396 and $399,343, respectively, for the fiscal years ended December 31, 2012 and 2011. Our net revenues significantly decreased for fiscal 2012 over fiscal 2011 and we will need ~~additional~~to ~~financing~~significantly ~~which~~increase if we ~~may~~are ~~not~~to beprovide ~~able~~cash to ~~obtain~~fund our operating expenses. We cannot guarantee either that the demand for our Spare Backup line of software products will develop, that such demand will be sustainable or that we will ever effectively compete in our market segment. In addition, we cannot predict what impact, if any, the reduction in discretionary spending will have on ~~acceptable~~future ~~terms~~sales of our products. If we are unable to ~~raise~~generate ~~additional~~any ~~capital~~significant net asrevenues ~~needed~~from our products and services, our ~~continued~~business, ~~operations~~operating results and financial condition in future periods will be materially and adversely affected and ~~the~~we ~~future~~may ~~growth~~not ofbe able to continue our business ~~and~~as ~~operations~~presently ~~will~~operated, beif ~~severely~~at ~~limited~~all.

~~Historically,~~We ~~our operations~~ have ~~been~~approximately ~~financed primarily through the issuance of equity and debt. Because we have a history of losses and have never generated sufficient revenue to fund our ongoing operations~~$2,508,672 ~~we are dependent on our continued ability to raise working capital through the issuance~~ of ~~equity or~~ debt towhich ~~fund~~is ~~our~~presently past ~~present~~due ~~operations. Because our operating expenses have continued to grow~~ and we do not ~~know~~have ~~if our net revenues will grow at a pace sufficient to fund our current operations,~~ the ~~continuation~~funds ofnecessary ~~our operations and any future growth will depend upon our ability~~ to ~~raise~~pay ~~additional~~these capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions. While the actual amount of our future capital requirements, however, depend on a number of factors, including our ability to grow our net revenues and manage our business, it is likely we will need to raise a significant amount of capital during fiscal 2012 if we are to continue our current operations and satisfy our obligations ~~as they become due~~. In addition to the challenges facing the capital markets today which make raising equity capital much more difficult for a company such as ours than in prior years, the existence of a number of short term notes which are either currently past due or which will become due in 2012, together with the pending litigation facing our company and the piggy-back registration rights we have granted a number of investors serve to also make it harder to raise the capital we need. There can be no assurance that acceptable financing can be obtained on suitable terms, if at all. If we are unable to raise additional working capital as needed, our ability to continue our current business will be adversely affected and may be forced to curtail some or all of our operations.

WeIn addition to funding our operating expenses, we need capital to pay various debt obligations totaling approximately $2,508,672 which are either currently past due or which are due in the ~~payment~~current fiscal year. Currently, there are $1,593,772 principal amount of ~~payroll~~the ~~taxes~~8% short-term notes which are past due, $306,563 principal of the 10% short-term notes which are past due, and $508,000 of notes payable which are past due. During 2012, we have been in contact with numerous note holders to work out either a repayment or extension of these notes. The existence of these obligations provides additional challenges to us in our efforts to raise capital to fund our operations. If we are unable to restructure these notes and we are unable to raise the capital necessary to satisfy the obligations, it is possible we will be forced to cease operations.

AtWe ~~December~~will ~~31,~~need ~~2011~~additional financing which we ~~had~~may ~~approximately $4,315,000 of accrued but unpaid payroll taxes due to various governmental agencies. We do~~ not ~~have~~be ~~the~~able ~~funds necessary~~ to ~~satisfy~~obtain ~~this~~on ~~obligation.~~acceptable ~~During April 2011, the Company entered into an installment plan with the state of California to pay off their outstanding balance~~terms. The payment scales up and works with our cash flow, $25,000 for 3 months, $35,000 for the next 3 months and $50,000 per month there after till paid off, allowing us to still maintain our cash flow. We have made payments against our outstanding balance. If we are unable to raise ~~the~~additional ~~funds~~capital ~~necessary~~as needed, itour iscontinued ~~possible that we~~ operations will be ~~subject~~adversely toaffected ~~significant additional fines~~ and ~~penalties.~~the ~~The~~future ~~government~~growth ~~could~~of ~~file liens against~~ our ~~company~~business and ~~our~~operations ~~bank~~will ~~accounts~~be ~~until~~severely ~~such time as the amounts have been paid~~limited. ~~We are also currently working with the IRS on a payment plan for our outstanding balance with them.~~

~~Our~~Historically, ~~pricing~~our ~~model~~operations have ~~for~~been financed primarily through the issuance of equity and debt. Because we have a history of losses and have never generated sufficient revenue to fund our ~~products~~ongoing operations, we are dependent on our continued ability to raise working capital through the issuance of equity or debt to fund our present operations. Because our operating expenses have continued to grow and ~~services~~we do not know if our net revenues will grow at a pace sufficient to fund our current operations, the continuation of our operations and any future growth will depend upon our ability to raise additional capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions. While the actual amount of our future capital requirements, however, depend on a number of factors, including our ability to grow our net revenues and manage our business, it is ~~unproven~~likely we will need to raise a significant amount of capital during fiscal 2012 if we are to continue our current operations and ~~may~~satisfy beour ~~less~~obligations as they become due. In addition to the challenges facing the capital markets today which make raising equity capital much more difficult for a company such as ours than ~~anticipated~~in prior years, the existence of a number of short term notes which ~~may~~are ~~harm~~either currently past due or which will become due in 2012, together with the pending litigation facing our ~~gross~~company ~~margins~~and the piggy-back registration rights we have granted a number of investors serve to also make it harder to raise the capital we need. There can be no assurance that acceptable financing can be obtained on suitable terms, if at all. If we are unable to raise additional working capital as needed, our ability to continue our current business will be adversely affected and may be forced to curtail some or all of our operations.

The pricing model of our products and services may be lower than expected as a result of competitive pricing pressures, promotional programs and customers who negotiate price reductions in exchange for longer term purchase commitments or otherwise. Our pricing model depends on the duration of the agreement, the specific requirements of the order, purchase volumes, the sales and service support and other contractual agreements. We expect to experience pricing pressure and anticipate that the average selling prices and gross margins for our products may decrease over product life cycles. We may not be successful in developing and introducing on a timely basis new products with enhanced features and services that can be sold at higher gross margins.13

12We are past due in the payment of payroll taxes.

At December 31, 2012, we had approximately $4,445,882 of accrued but unpaid payroll taxes due to various governmental agencies. We do not have the funds necessary to satisfy this obligation. We have made payments during the current year to pay down our outstanding balance. If we are aunable ~~defendant~~to inraise the funds necessary, it is possible that we will be subject to significant additional fines and penalties. The government could file liens against our company and our bank accounts until such time as the amounts have been paid. Customers may be asked to remit payments directly to the government to satisfy our tax obligations. We are also currently working with the IRS on a ~~number~~settlement ofand ~~lawsuits~~corresponding payment plan for our outstanding balance with them. We are current with our obligations with all Federal payroll taxes incurred for the year-ended December 31, 2012.

WeOur ~~are~~pricing ~~currently~~model afor ~~defendant in two separate lawsuits. We are also incurring additional legal fees in~~ our ~~efforts~~products toand services ~~defend~~is ~~these~~unproven ~~actions.~~and ~~While~~may webe ~~believe~~less ~~our~~than ~~defenses are meritorious in each of these cases~~anticipated, ~~should we not prevail in one or more of the actions we could be forced to pay significant amounts~~ which, ~~given~~may ~~our~~harm ~~current cash position and need for working capital, could materially adversely affect~~ our ~~ability~~gross ~~to continue as a going concern~~margins.

The ~~exercise~~pricing model of our ~~outstanding~~products ~~warrants~~and services may be lower than expected as a result of competitive pricing pressures, promotional programs and customers who negotiate price reductions in exchange for longer term purchase commitments or otherwise. Our pricing model depends on the duration ~~conversion~~of the agreement, the specific requirements of ~~outstanding~~the ~~notes~~order, ~~will~~purchase bevolumes, ~~dilutive~~the sales and service support and other contractual agreements. We expect to experience pricing pressure and anticipate that the average selling prices and gross margins for our products ~~existing~~may ~~stockholders~~decrease over product life cycles. We may not be successful in developing and introducing on a timely basis new products with enhanced features and services that can be sold at higher gross margins.

AsWe ~~of March 31, 2012 the following securities which~~ are ~~convertible~~a ordefendant ~~exercisable~~in ~~into~~a ~~shares~~number of ~~our common stock were outstanding:~~lawsuits.

●We ~~common~~are ~~stock~~currently ~~purchase~~a defendant ~~warrants~~in tofour separate ~~purchase~~lawsuits. aWe ~~total~~are ofalso ~~57,080,652~~incurring ~~shares~~additional oflegal ~~our~~fees ~~common~~in ~~stock~~our atefforts ~~prices~~to ~~ranging~~defend ~~between~~these $0actions.01 While towe ~~$1.30~~believe ~~per~~our ~~share;~~defenses ●are ~~9,632,107~~meritorious ~~shares~~in each of ~~our~~these ~~common~~cases, ~~stock~~should ~~issuable~~we ~~upon~~not ~~the~~prevail ~~possible~~in ~~conversion~~one or more of the ~~outstanding~~actions ~~$1,868,735~~we could ~~principal~~be ~~amount~~forced 8%to ~~and~~pay ~~10%~~significant ~~convertible~~amounts ~~promissory~~which, ~~notes~~given ~~due~~our ~~between~~current ~~August~~cash ~~2008~~position and ~~June~~need ~~2011,~~for ~~and~~working ~~● 29~~capital,~~118,482~~ ~~shares~~could materially ofadversely affect our ~~common~~ability ~~stock~~to ~~issuable~~continue ~~upon~~as ~~exercise~~a ofgoing ~~outstanding options with exercise prices ranging from $0~~concern.~~01 to $0.93.~~

The exercise of ~~these~~outstanding warrants and the conversion of ~~the~~outstanding notes ~~may materially adversely affect the market price of our common stock and~~ will ~~have~~be a dilutive ~~effect~~to on our existing stockholders.

~~Our~~As ~~quarterly~~of ~~financial~~March ~~results~~31, ~~will~~2013 the ~~continue~~following tosecurities ~~fluctuate~~which ~~making~~are itconvertible ~~difficult~~or toexercisable ~~forecast~~into shares of our ~~operating~~common ~~results.~~stock were outstanding:

~~Our~~● ~~quarterly~~common ~~operating~~stock ~~results~~purchase ~~have~~warrants ~~fluctuated~~to inpurchase ~~the~~a ~~past~~total ~~and~~of we99,791,184 ~~expect~~shares of our ~~net~~common ~~revenues~~stock ~~and~~at ~~operating~~prices ~~results~~ranging ~~may~~between ~~vary~~$0.01 ~~significantly~~to ~~from~~$1.30 ~~quarter~~per toshare; ~~quarter~~● ~~due~~9,632,107 toshares aof ~~number~~our common stock issuable upon the possible conversion of ~~factors~~the outstanding $2,636,012 ~~many~~principal ofamount ~~which~~8% ~~are~~and ~~beyond~~10% ~~our~~convertible ~~control~~promissory notes due between August 2008 and June 2011, ~~including:~~and ● 29,118,482 shares of our common stock issuable upon exercise of outstanding options with exercise prices ranging from $0.01 to $0.93.

●The ~~the~~exercise ~~announcement or introduction~~ of ~~new~~these warrants ~~services~~ and ~~products~~the byconversion usof ~~and~~the ~~our~~notes ~~competitors;~~may ●materially ~~our~~adversely ~~ability~~affect ~~to upgrade and develop our products in a timely and effective manner; ● our ability to retain existing customers and attract new customers at a steady rate, and maintain customer satisfaction; ●~~ the ~~amount~~market ~~and~~price ~~timing~~ of ~~operating costs and capital expenditures relating to expansion of~~ our ~~business~~common ~~and~~stock ~~operations; ● government regulation;~~ and ●will ~~general~~have ~~economic~~a dilutive ~~conditions~~effect ~~and~~on ~~economic conditions specific to development and marketing of software products, the market acceptance of new products offered by us,~~ our ~~competitors~~existing ~~and potential competitors~~stockholders.

Our limited operating history and unproven business model further contribute to the difficulty of making meaningful quarterly comparisons. Our current and future levels of expenditures are based primarily on our growth plans and estimates of expected future net revenues. Such expenditures are primarily fixed in the short term and our sales cycle can be lengthy. Accordingly, we may not be able to adjust spending or generate new revenue sources timely to compensate for any shortfall in net revenues. If our operating results fall below the expectations of investors, our stock price will likely decline significantly.14

~~Because~~Our wequarterly ~~expect~~financial toresults will continue to ~~incur~~fluctuate ~~net~~making ~~losses,~~it wedifficult ~~may not be able~~ to ~~implement~~forecast our ~~business~~operating ~~strategy and the price our stock may decline~~results.

WeOur ~~have incurred net losses~~ quarterly ~~from~~operating results ~~inception~~have ~~through~~fluctuated ~~December~~in ~~31,~~the ~~2011,~~past and ~~at December 31, 2011~~ we ~~had an accumulated deficit of approximately $117 million. We~~ expect toour ~~continue to incur~~ net ~~losses for the foreseeable future absent a significant increase in our~~ revenues, ~~of which there are no assurances. Accordingly, our ability to operate our business~~ and ~~implement~~operating ~~our~~results ~~business strategy~~ may ~~be hampered by negative cash flows in the future, and the value of our stock may decline as a result. Our capital requirements may~~ vary ~~materially~~significantly from ~~those~~quarter ~~currently~~to quarter ~~planned~~due ~~if, for example, we incur unforeseen capital expenditures, unforeseen operating expenses or investments~~ to ~~maintain~~a ~~our~~number ~~competitive~~of ~~position. If this is the case~~factors, wemany ~~may have to delay or abandon some or all~~ of ~~our~~which ~~development~~are ~~plans~~beyond or otherwise forego market opportunities. We will need to generate significant additional net revenues to be profitable in the future and we may not generate sufficient net revenues to be profitable on either a quarterly or annual basis in the future. To address the risks and uncertainties facing our ~~business strategy~~control, ~~we must, among other things~~including:

● ~~Achieve~~the ~~broad~~announcement ~~customer~~or ~~adoption~~introduction of new services and ~~acceptance~~products ofby us and our competitors; ● our ability to upgrade and develop our products in a timely and ~~services~~effective manner; ● ~~Successfully~~our ~~raise~~ability ~~additional~~to ~~capital~~retain inexisting customers and attract new customers at a steady rate, and maintain customer satisfaction; ● the ~~future~~amount and timing of operating costs and capital expenditures relating to expansion of our business and operations; ● government regulation; and ● general economic conditions and economic conditions specific to development and marketing of software products, the market acceptance of new products offered by us, our competitors and potential competitors.

13Our limited operating history and unproven business model further contribute to the difficulty of making meaningful quarterly comparisons. Our current and future levels of expenditures are based primarily on our growth plans and estimates of expected future net revenues. Such expenditures are primarily fixed in the short term and our sales cycle can be lengthy. Accordingly, we may not be able to adjust spending or generate new revenue sources timely to compensate for any shortfall in net revenues. If our operating results fall below the expectations of investors, our stock price will likely decline significantly.

●Because ~~Successfully~~we ~~integrate,~~expect ~~leverage~~to ~~and~~continue ~~expand~~to ~~our~~incur net ~~product~~losses, ~~distribution;~~we ●may ~~Successfully~~not ~~scale~~be ~~our~~able ~~current~~to ~~operations;~~implement ~~● Implement and execute~~ our business ~~and~~strategy ~~marketing strategies; ● Address intellectual property rights issues that affect our business; ● Develop~~ and ~~maintain strategic relationships to enhance~~ the ~~development~~price ~~and marketing of~~ our ~~existing~~stock ~~and~~may ~~new products and services; and ● Respond to competitive developments in the software industry~~decline.

We ~~might~~have ~~not~~incurred benet ~~successful~~losses from ininception ~~achieving~~through ~~any~~December or31, ~~all~~2012, ofand ~~these~~at ~~business~~December ~~objectives~~31, in2012 awe ~~cost-effective~~had ~~manner,~~an ifaccumulated atdeficit ~~all,~~of ~~and~~approximately ~~the~~$120.3 ~~failure~~million. We expect to ~~achieve~~continue ~~these~~to ~~could~~incur ~~have~~net alosses ~~serious~~for ~~adverse~~the ~~impact~~foreseeable onfuture absent a significant increase in our ~~business~~revenues, ~~results~~ of ~~operations~~which ~~and~~there are ~~financial~~no ~~position~~assurances. ~~Each~~Accordingly, ofour ~~these~~ability ~~objectives~~to operate our business and implement our business strategy may ~~require~~be ~~significant~~hampered ~~additional~~by ~~expenditures~~negative cash onflows in the future, and the value of our ~~part~~stock may decline as a result. ~~Even~~Our capital requirements may vary materially from those currently planned if, for example, we ~~ultimately~~incur dounforeseen ~~achieve~~capital ~~profitability~~expenditures, unforeseen operating expenses or investments to maintain our competitive position. If this is the case, we may ~~not~~have beto ~~able~~delay toor ~~sustain~~abandon some or ~~increase~~all ~~profitability,~~of our development plans or otherwise forego market opportunities. We will need to generate significant additional net revenues to be profitable in the future and we may not begenerate ~~able~~sufficient tonet ~~sustain~~revenues orto ~~increase~~be ~~profitability~~profitable on either a quarterly or annual basis in the future. To address the risks and uncertainties facing our business strategy, we must, among other things:

We● ~~have~~Achieve ~~not~~broad ~~voluntarily~~customer ~~implemented~~adoption ~~various~~and ~~corporate~~acceptance ~~governance measures, in the absence~~ of ~~which,~~our ~~stockholders~~products ~~may~~and ~~have~~services; ~~more~~● ~~limited~~Successfully ~~protections~~raise ~~against~~additional ~~interested~~capital ~~director~~in ~~transactions,~~the ~~conflicts of interest and similar matters.~~future;

~~Recent~~● ~~Federal~~Successfully ~~legislation~~integrate, ~~including~~leverage ~~the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management~~ and ~~the~~expand securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. Although we have adopted a Code of Ethics, we have not yet adopted any of these other corporate governance measures and, since our ~~securities~~product ~~are~~distribution; ~~not~~● ~~yet~~Successfully ~~listed~~scale ~~on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees of~~ our ~~board~~current ofoperations; ~~directors~~● asImplement weand ~~presently~~execute ~~have only two independent directors. If we expand~~ our ~~board~~business ~~membership in future periods to include additional independent directors, we may seek to establish an audit~~ and ~~other~~marketing ~~committees~~strategies; of● ~~our~~Address ~~board~~intellectual ofproperty ~~directors.~~rights Itissues ~~is possible~~ that ifaffect weour ~~were~~business; to● ~~adopt~~Develop ~~some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors~~ and ~~that~~maintain ~~policies~~strategic ~~had~~relationships ~~been implemented~~ to ~~define~~enhance ~~responsible conduct. For example, in~~ the ~~absence~~development ~~of audit, nominating~~ and ~~compensation~~marketing ~~committees comprised~~ of ~~at least a majority of independent directors, decisions concerning matters such as compensation packages to~~ our ~~senior~~existing ~~officers~~ and ~~recommendations~~new ~~for~~products ~~director~~and ~~nominees~~services; ~~may~~and be● ~~made~~Respond byto acompetitive ~~majority~~developments ~~of directors who have an interest~~ in the ~~outcome~~software ~~of the matters being decided~~industry. ~~Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.~~

~~We cannot be certain that we will be able to protect our intellectual property, and we may be found to infringe on proprietary rights of others, which could harm our business.~~15

~~Our~~We ~~intellectual~~might ~~property~~not isbe ~~critical~~successful in toachieving ~~our~~any ~~business,~~or ~~and~~all weof ~~seek~~these tobusiness ~~protect~~objectives ~~our~~in ~~intellectual~~a ~~property~~cost-effective ~~through copyrights~~manner, ~~trademarks,~~if ~~patents~~at all, ~~trade~~and ~~secrets,~~the ~~confidentiality~~failure ~~provisions~~to inachieve ~~our~~these ~~customer,~~could have ~~supplier,~~a ~~potential~~serious ~~investors,~~adverse ~~and~~impact ~~strategic~~on ~~relationship~~our ~~agreements~~business, ~~nondisclosure~~results ~~agreements~~of ~~with~~operations ~~third parties,~~ and ~~invention~~financial ~~assignment~~position. ~~agreements~~Each ~~with~~of ~~our~~these ~~employees~~objectives ~~and~~may ~~contractors.~~require significant Weadditional ~~cannot~~expenditures ~~assure~~on ~~you~~our ~~that~~part. ~~measures~~Even if we ~~take~~ultimately todo ~~protect~~achieve ~~our~~profitability, ~~intellectual~~we ~~property~~may ~~will~~not be ~~successful~~able to sustain or ~~that~~increase ~~third~~profitability, ~~parties~~we ~~will~~may not ~~develop~~be ~~alternative~~able ~~solutions~~to ~~that~~sustain door ~~not~~increase ~~infringe~~profitability ~~upon~~on ~~our~~a ~~intellectual~~quarterly ~~property~~or annual basis.

InWe ~~addition,~~have wenot ~~could~~voluntarily beimplemented various ~~subject~~corporate togovernance ~~intellectual property infringement claims by others. Claims against us~~measures, ~~and any resultant litigation, should it occur~~ in regard to any of our services and applications, could subject us to significant liability for damages including treble damages for willful infringement. In addition, even if we prevail, litigation could be time-consuming and expensive to defend and could result in the ~~diversion~~absence of ~~our time and attention. Any claims from third parties may also result in limitations on our ability to use the intellectual property subject to these claims. Further~~which, westockholders ~~plan to offer our services and applications to customers worldwide including customers in foreign countries that~~ may ~~offer~~have ~~less~~more ~~protection~~limited ~~for~~protections ~~our intellectual property than the United States. Our failure to protect~~ against ~~misappropriation~~interested director ~~of our intellectual property~~transactions, orconflicts ~~claims that we are infringing the intellectual property~~ of ~~third~~interest ~~parties could have a negative effect on our business, revenues, financial condition~~ and ~~results~~similar ~~of operations~~matters.

14Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. Although we have adopted a Code of Ethics, we have not yet adopted any of these other corporate governance measures and, since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently have only two independent directors. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committees of our board of directors. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

~~Competition~~We ~~may~~cannot ~~decrease~~be certain that we will be able to protect our ~~market~~intellectual ~~share~~property, ~~net~~and ~~revenues~~we may be found to infringe on proprietary rights of others, ~~and~~which ~~gross~~could ~~margins~~harm our business.

WeOur ~~face~~intellectual ~~intense~~property is ~~and~~critical ~~increasing~~to ~~competition~~our inbusiness, ~~the~~and ~~web-base~~we ~~backup~~seek ~~solutions~~to ~~market.~~protect Ifour weintellectual doproperty ~~not~~through ~~compete~~copyrights, ~~effectively~~trademarks, orpatents, iftrade wesecrets, confidentiality ~~experience~~provisions ~~reduced~~in ~~market~~our ~~share~~customer, ~~from~~supplier, ~~increased~~potential ~~competition~~investors, ~~our~~and ~~business~~strategic ~~will~~relationship beagreements, ~~harmed.~~nondisclosure agreements Inwith ~~addition~~third parties, ~~the~~and ~~more~~invention ~~successful~~assignment weagreements ~~are~~with inour ~~the~~employees ~~emerging~~and ~~market~~contractors. ~~for~~We ~~web-based~~cannot ~~storage~~assure ~~solutions,~~you ~~the~~that measures ~~more~~we ~~competitors~~take ~~are~~to ~~likely~~protect toour ~~emerge.~~intellectual Weproperty ~~believe~~will be successful or that ~~the~~third ~~principal~~parties ~~competitive~~will ~~factors~~not indevelop alternative solutions that do not infringe upon our ~~market~~intellectual ~~include:~~property.

●In ~~Service functionality~~addition, ~~quality~~we ~~and~~could be ~~performance;~~subject ●to ~~Ease~~intellectual ofproperty ~~use,~~infringement ~~reliability~~claims by others. Claims against us, and ~~security~~any resultant litigation, should it occur in regard to any of our services; ●and ~~Establish~~applications, acould subject us to significant ~~base~~liability for damages including treble damages for willful infringement. In addition, even if we prevail, litigation could be time-consuming and expensive to defend and could result in the diversion of ~~customers~~our time and ~~distribution~~attention. ~~partners;~~Any ●claims ~~Ability~~from third parties may also result in limitations on our ability to ~~introduce~~use ~~new~~the intellectual property subject to these claims. Further, we plan to offer our services and applications to ~~the~~customers worldwide ~~market~~including customers in foreign countries that may offer less protection for our intellectual property than the United States. Our failure to protect against misappropriation of our intellectual property, or claims that we are infringing the intellectual property of third parties could have a ~~timely~~negative ~~manner;~~effect ●on ~~Customer~~our ~~service~~business, ~~and~~revenues, ~~support;~~financial condition and ●results ~~Pricing~~of operations.

Our primary competitors are various Internet-based backup providers’ broadcasters, such as Connected.com, Livevault, and backup.com, Carbonite and EMC/Mozy. These companies provide services similar to our PC backup and each have, to various degrees, a market presence. We also compete with providers of traditional backup technologies, such as Veritas and Symantec (swampdrive) (Norton 360). With mobile technology, we have very few competitors that can compete with our service of synchronization between the PC and mobile devices. Competitors include SugarSync, Inc., Lookout, Inc. and, to an extent, McAfee, Inc.16

~~Substantially~~Competition ~~all of our competitors~~ may ~~have~~decrease more capital, longer operating histories, greater brand recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. These competitors may also engage in more extensive development of their technologies, adopt more aggressive pricing policies and establish more comprehensive marketing and advertising campaigns than we can. Our competitors may develop products and service offerings that we do not offer or that are more sophisticated or more cost effective than our ~~own. For these and other reasons, our competitors' products and services may achieve greater acceptance in the marketplace than our own, limiting our ability to gain~~ market share, ~~and customer loyalty and to generate sufficient~~ net revenues ~~to achieve a profitable level of operations. Our failure to adequately address any of the above factors could harm our business~~ , and ~~operating~~gross ~~results~~margins.

~~Provisions~~We offace ~~our~~intense ~~certificate~~and ofincreasing competition ~~incorporation~~in ~~and~~the ~~bylaws~~web-base ~~may~~backup ~~delay~~solutions ormarket. ~~prevent~~If awe ~~takeover~~do ~~which~~not ~~may~~compete ~~not~~effectively beor inif ~~the~~we ~~best~~experience ~~interests~~reduced ofmarket share from increased competition, our ~~stockholders~~business will be harmed. WeIn ~~recently~~addition, ~~issued~~the ~~our~~more ~~CEO~~successful awe ~~series~~are ofin ~~super~~the ~~voting~~emerging ~~preferred~~market ~~stock~~for ~~which~~web-based storage ~~increased~~solutions, ~~his~~the ~~ability~~more competitors are likely to ~~control~~emerge. We believe that the ~~outcome~~principal ofcompetitive ~~stockholder~~factors ~~votes.~~in our market include:

~~Provisions~~● ofService ~~our~~functionality, ~~certificate~~quality ~~of incorporation~~ and ~~bylaws~~performance; ~~may~~● beEase ~~deemed~~of ~~to have anti-takeover effects~~use, ~~which~~reliability ~~include when~~ and bysecurity ~~whom special meetings~~ of ~~our~~services; ~~stockholders~~● ~~may~~Establish ~~be called, and may delay, defer or prevent~~ a ~~takeover~~significant ~~attempt.~~base ~~In addition, certain provisions~~ of ~~Delaware~~customers ~~law~~and ~~also~~distribution ~~may~~partners; be● ~~deemed~~Ability to ~~have~~introduce ~~certain~~new ~~anti-takeover~~services ~~effects~~to ~~which~~the ~~include~~market ~~that control of shares acquired~~ in ~~excess~~a oftimely ~~certain~~manner; ~~specified~~● ~~thresholds~~Customer ~~will~~service ~~not~~and ~~possess~~support; ~~any~~and ~~voting~~● ~~rights unless these voting rights are approved by a majority of a corporation's disinterested stockholders~~Pricing.

InOur ~~addition,~~primary ~~our~~competitors are ~~certificate~~various ofInternet-based ~~incorporation~~backup ~~authorizes~~providers’ ~~the~~broadcasters, ~~issuance~~such ofas upConnected.com, toLivevault, 5and backup.com,~~000,000~~ ~~shares~~Carbonite ofand EMC/Mozy. ~~preferred~~These ~~stock~~companies ~~with~~provide ~~such~~services ~~rights~~similar ~~and~~to ~~preferences~~our asPC ~~may~~backup beand ~~determined~~each byhave, ~~our~~to ~~board~~various ofdegrees, ~~directors~~a market presence. ~~Our~~We ~~board~~also compete with providers of ~~directors~~traditional ~~may~~backup technologies, ~~without~~such ~~stockholder~~as ~~approval,~~Veritas ~~issue~~and ~~preferred~~Symantec ~~stock~~(swampdrive) ~~with~~(Norton ~~dividends,~~360). ~~liquidation~~With mobile technology, ~~conversion~~we orhave ~~voting~~very ~~rights~~few competitors that ~~could~~can ~~adversely~~compete ~~affect~~with our service of synchronization between the ~~voting~~PC ~~power~~and ormobile ~~other~~devices. Competitors ~~rights~~include ofSugarSync, ~~our~~Inc., ~~common~~Lookout, ~~stockholders~~Inc. and, to an extent, McAfee, Inc.

~~Our~~Substantially ~~common~~all ~~stock~~of our iscompetitors ~~currently~~may ~~quoted~~have onmore ~~the~~capital, ~~OTCBB~~longer operating histories, ~~but~~greater ~~trading~~brand recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. These competitors may also engage in ~~our~~more ~~stock~~extensive isdevelopment of ~~limited~~their technologies, adopt more aggressive pricing policies and establish more comprehensive marketing and advertising campaigns than we can. ~~Because~~Our ~~our~~competitors ~~stock~~may ~~currently~~develop ~~trades~~products ~~below~~and $5service offerings that we do not offer or that are more sophisticated or more cost effective than our own.00 ~~per~~For ~~share~~these and other reasons, our competitors' products and isservices ~~quoted~~may onachieve greater acceptance in the ~~OTC~~marketplace ~~Bulletin~~than ~~Board~~our own, limiting our ~~stock~~ability isto ~~considered~~gain market share and customer loyalty and to generate sufficient net revenues to achieve a ~~“penny~~profitable ~~stock”~~level ~~which~~of ~~can~~operations. ~~adversely~~Our ~~affect~~failure ~~its~~to ~~liquidity~~adequately address any of the above factors could harm our business and operating results.

~~The~~Provisions ~~market for our common stock is extremely limited and there are no assurances an active market for our common stock will ever develop. Accordingly, purchasers~~ of our ~~common~~certificate ~~stock cannot be assured any liquidity in their investment. In addition, the trading price~~ of ~~our~~incorporation and ~~common~~bylaws ~~stock~~may isdelay ~~currently~~or ~~below~~prevent ~~$5.00~~a ~~per~~takeover ~~share~~which ~~and~~may ~~we do~~ not ~~anticipate that it will~~ be ~~above $5.00 per share~~ in the ~~foreseeable~~best ~~future.~~interests ~~Because the trading price~~ of our ~~common stock is less than $5~~stockholders.00 ~~per~~We ~~share,~~recently issued our CEO ~~common stock is considered~~ a ~~"penny~~series ~~stock," and trading in our common stock is subject to the requirements~~ of ~~Rule~~super ~~15g-9~~voting ~~under~~preferred the Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. SEC regulations also require additional disclosure in connection with any trades involving a "penny stock," ~~including~~which ~~the~~increased ~~delivery,~~his ~~prior~~ability to ~~any~~control ~~penny stock transaction, of a disclosure schedule explaining~~ the ~~penny~~outcome ~~stock market and its associated risks. These requirements severely limit the liquidity~~ of ~~our~~stockholder ~~securities~~votes ~~in the secondary market because few broker or dealers are likely to undertake these compliance activities~~.

15Provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of Delaware law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation's disinterested stockholders.

~~Item~~In 1Baddition, our certificate of incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. ~~Unresolved~~Our ~~Staff~~board ~~Comments~~of directors may, without stockholder approval, issue preferred stock with dividends, liquidation, conversion or voting rights that could adversely affect the voting power or other rights of our common stockholders.

~~Not applicable to a smaller reporting company.~~17

~~Item~~Our 2common stock is currently quoted on the OTCQB, but trading in our stock is limited. ~~Properties~~ Because our stock currently trades below $5.00 per share, and is quoted on the OTC Bulletin Board, our stock is considered a “penny stock” which can adversely affect its liquidity.

InThe ~~May~~market ~~2011~~for weour ~~entered~~common stock ~~into~~is aextremely ~~two~~limited ~~year~~and ~~lease~~there ~~agreement,~~are ~~commencing~~no ~~June~~assurances 1,an ~~2011,~~active ~~with~~market ~~Biofilm~~for ~~Management,~~our ~~Inc~~common stock will ever develop. Accordingly, ~~which~~purchasers of isour ~~affiliated~~common ~~with~~stock acannot ~~board~~be ~~member~~assured byany ~~means~~liquidity in their investment. In addition, the trading price of our common ~~ownership~~stock is currently below $5.00 per share and ~~management,~~we ~~which~~do ~~serves~~not asanticipate ~~our~~that ~~principal~~it ~~executive~~will ~~office~~be above $5.00 ~~Under~~per share in the ~~terms~~foreseeable offuture. Because the ~~lease~~trading ~~our~~price ~~initial~~of ~~base~~our ~~rent~~common stock is ~~approximately~~less than $35.00 per share,~~000~~ ~~and~~our wecommon ~~will~~stock beis ~~responsible~~considered ~~for~~a "penny stock," and trading in our ~~pro~~common stock is subject to the requirements of Rule 15g-~~rata~~9 ~~share~~under the Securities Exchange Act of ~~common~~1934. ~~area~~Under this ~~expenses~~rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. ~~The~~SEC ~~annual~~regulations ~~rent~~also ~~will~~require ~~escalate~~additional ~~annually~~disclosure ~~during~~in ~~the~~connection ~~term~~with ofany trades involving a "penny stock," including the ~~lease~~delivery, prior to ~~approximately~~any $3penny stock transaction,~~090~~ inof a disclosure schedule explaining the ~~second~~penny ~~year~~stock market and its associated risks. WeThese ~~believe~~requirements ~~this~~severely ~~facility~~limit ~~meets~~the ~~our~~liquidity ~~operational~~of ~~needs~~our ~~for~~securities in the ~~foreseeable~~secondary market ~~future~~because few broker or dealers are likely to undertake these compliance activities.

InItem ~~October 2011 we entered into a two year lease agreement, commencing November 15, 2011, with an unrelated third party for 3,610 square feet which serves as our secondary office~~1B. ~~Under~~Unresolved ~~the~~Staff ~~terms of the lease our initial base rent is approximately $8,664 and we will be responsible for our pro-rata share of common area expenses.~~Comments

~~Item~~Not ~~3. Legal~~applicable ~~Proceedings~~to a smaller reporting company.

InItem ~~October 2010, Exigen Services (USA), Inc~~2. filed suit against us in San Francisco Superior Court. We filed motions reducing the scope of their claims and also filed x-complaint for Exigen’s failure to perform and negligence. Exigen was asserting claims of approximately $200,000, but the matter was settled for $45,000 in October 2011. Properties

WeIn ~~have~~May ~~appealed~~2011 towe ~~the~~entered into ~~California~~a ~~Court~~two year lease agreement, commencing June 1, 2011, with Biofilm Management, Inc., which is affiliated with a board member by means of ~~Appeals~~common inownership and management, which serves as our principal executive office. Under the ~~matter~~terms of ~~Wolfe~~the ~~Axelrod~~lease ~~Weinberger~~our initial base rent is approximately $3,000 ~~LLC~~and ~~vs.~~we ~~Spare~~will ~~Backup~~be ~~Inc~~responsible for our pro-rata share of common area expenses. The ~~issue~~annual onrent ~~appeal~~will escalate isannually during the ~~California~~term ~~Superior~~of ~~Court’s~~the ~~failure~~lease to ~~disregard~~approximately a$3,090 NYin ~~state~~the ~~court~~second ~~judgment~~year. We believe this facility meets our operational needs for ~~approximately~~the ~~$100,000,~~foreseeable ~~which~~future. weThis ~~assert~~lease ~~was~~will ~~improperly~~expire ~~entered~~May ~~and~~2013, ~~therefore,~~at ~~should~~which ~~not~~time bethe ~~recognized~~Company asintends ato ~~valid~~renew ~~sister~~the ~~state~~lease ~~judgment~~on a month by month basis. ~~The~~ ~~company’s~~We ~~likelihood~~intend ofto ~~success~~decrease onthe ~~this~~space ~~appeal~~used ~~cannot~~in bean ~~determined~~effort atto ~~this~~increase ~~time~~efficiency.

In ~~November~~October 2011, ~~Gimmel~~we ~~Partners,~~entered LPinto ~~filed~~a ~~suit~~two ~~against~~year uslease inagreement, ~~Nevada~~commencing ~~State~~November ~~Court~~15, in2011, ~~Douglas~~with ~~County,~~an ~~alleging~~unrelated third ~~breach~~party offor a3,610 ~~promissory~~square ~~debenture. We~~feet ~~have~~which ~~filed~~serves ~~motions~~as toour ~~dismiss~~secondary ~~the~~office. ~~action~~Under ~~based~~the onterms of the ~~fact~~lease ~~that~~our ~~Gimmel~~initial ~~Partners~~base ~~has~~rent ~~been~~is ~~dissolved~~approximately $8,664 and we ~~have~~will ~~entered~~be ~~into~~responsible ~~individual~~for ~~agreements~~our ~~with~~pro-rata ~~its~~share ~~former~~of ~~partners. The~~common ~~case~~area ~~has~~expenses. ~~not~~This ~~been~~lease ~~set~~was ~~for~~terminated ~~trial~~early ~~and,~~during as April of ~~this~~2012, ~~date~~which ~~there~~resulted isin athe ~~low~~deposit ~~likelihood~~being ~~of an unfavorable outcome~~forfeited.

InItem ~~June 2011, FPT Software filed suit against us for breach of contract related to software services they provided~~3. ~~After~~ ~~several~~Legal ~~months of litigation, the case was settled for $60,000 to be paid over a 120 day period..~~Proceedings

InThe ~~February~~Company ~~2011,~~has ~~Darryl~~appealed ~~Adams~~to ~~filed~~the ~~suit~~California Court ~~against~~of usAppeals ~~alleging~~in ~~various~~a ~~employment~~matter ~~related~~involving ~~claims~~a consultant. We ~~conducted~~The ~~litigation~~issue ~~and~~on ~~discovery~~appeal ~~and~~is onthe ~~April~~California 4,Superior ~~2012~~Court’s ~~the~~failure ~~case~~to ~~was~~disregard a ~~settled~~NY state court judgment for approximately $60100,000, towhich the Company asserts was improperly entered and, therefore, should not be ~~paid~~recognized ~~over~~as 15a ~~months~~valid sister state judgment. The Company’s likelihood of success on this appeal cannot be determined at this time.

~~Item 4. (Removed and Reserved)~~18

~~PART~~ In IIFebruary 2012, a former employee filed suit against the Company alleging various employment related claims. The Company conducted litigation and discovery, the case is in settlement discussions and was set for trial in 2013. In June 2012, a vendor filed suit against the Company for breach of contract related to call center services they provided. The Company is currently conducting litigation and discovery, the case is not yet set for trial.

~~Item~~At December 5.31, ~~Market~~2012, ~~for~~the ~~Registrant’s~~Company ~~Common~~has ~~Equity,~~recorded ~~Related~~liabilities ~~Stockholder~~in ~~Matters~~connection ~~and~~with ~~Issuer~~such ~~Purchases~~legal ~~of Equity Securities~~proceedings.

~~Our~~Item ~~common stock is quoted on the OTCBB under the symbol SPBU~~4. ~~The~~(Removed ~~reported high~~ and low sales prices for the common stock as reported on the OTCBB are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.Reserved)

Fiscal Year Ended December 31, 2010	High	Low
First quarter ended March 31, 2010	$ 0.23	$ 0.12
Second quarter ended June 30, 2010	$ 0.22	$ 0.13
Third quarter ended September 30, 2010	$ 0.17	$ 0.09
Fourth quarter ended December 31, 2010	$ 0.15	$ 0.08

PART II

Fiscal Year Ended December 31, 2011	High	Low
First quarter ended March 31, 2011	$ 0.11	$ 0.08
Second quarter ended June 30, 2011	$ 0.09	$ 0.05
Third quarter ended September 30, 2011	$ 0.17	$ 0.05
Fourth quarter ended December 31, 2011	$ 0.13	$ 0.07

Our common stock is quoted on the OTCQB under the symbol SPBU. The reported high and low sales prices for the common stock as reported on the OTCQB are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

	High	Low
Fiscal Year Ended December 31, 2011	High	Low
First quarter ended March 31, 2012	$ 0.87	$ 0.049
First quarter ended March 31, 2011	$ 0.11	$ 0.08
Second quarter ended June 30, 2011	$ 0.09	$ 0.05
Third quarter ended September 30, 2011	$ 0.17	$ 0.05
Fourth quarter ended December 31, 2011	$ 0.13	$ 0.07

Stockholders

Fiscal Year Ended December 31, 2012	High	Low

First quarter ended March 31, 2012	$ 0.087	$ 0.049
Second quarter ended June 30, 2012	$ 0.062	$ 0.021
Third quarter ended September 30, 2012	$ 0.046	$ 0.017
Fourth quarter ended December 31, 2012	$ 0.024	$ 0.0072

On March 30, 2012, the last sale price of our common stock as reported on the OTCBB was $0.0595. As of March 31, 2012, there were approximately 472 record owners of our common stock.

	High	Low

First quarter ended March 31, 2013	$ 0.02	$ 0.004

~~Dividend Policy~~Stockholders

WeOn ~~have~~March ~~never paid cash dividends on our common stock. Under Delaware law~~28, ~~we may declare and pay dividends on our capital stock either out of our surplus~~2013, ~~as defined in~~ the last ~~relevant~~sale ~~Delaware~~price ~~statutes, or if there is no such surplus, out~~ of our ~~net~~common ~~profits~~stock ~~for~~as ~~the~~reported ~~fiscal~~on ~~year in which~~ the ~~dividend~~OTCQB iswas ~~declared and/or the preceding fiscal year~~$0.007. ~~If,~~As ~~however, the capital~~ of ~~our~~March ~~company~~31, ~~computed in accordance with the relevant Delaware statutes~~2013, ~~has~~there ~~been~~were ~~diminished~~approximately by482 ~~depreciation~~record owners ~~in the value~~ of our ~~property,~~common ~~or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding~~ stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits any dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired.

~~Unregistered Sales of Equity Securities~~19

~~During~~Dividend the three-month period ended December 31, 2011, we issued 4,640,000 shares of common stock to four investor relation providers and consultants for service performed at a fair value of $415,000 or $0.09 per share . This private transaction is exempt from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that Act.Policy

~~During~~We ~~the~~have ~~three-month~~never ~~period~~paid ~~ended~~cash dividends ~~December~~on ~~31,~~our ~~2011~~common stock. Under Delaware law, we ~~issued~~ may declare and pay dividends on our capital stock either out of our surplus, as defined in ~~aggregate~~the 9relevant Delaware statutes,~~109~~ or if there is no such surplus,~~521~~ ~~shares~~out of our ~~common~~net ~~stock~~profits tofor 13the ~~accredited~~fiscal ~~investors~~year ~~pursuant~~in towhich the adividend ~~private~~is ~~placement~~declared ~~which~~and/or ~~generated~~the ~~gross~~preceding ~~proceeds~~fiscal year. If, however, the capital of ~~approximately~~our ~~$392~~company,~~000~~ orcomputed ~~$0.04~~in ~~per~~accordance ~~share.~~with the ~~The~~relevant ~~Company~~Delaware ~~issued~~statutes, 2has been diminished by depreciation in the value of our property,~~875~~ or by losses,~~000~~ ~~warrants~~or otherwise, to ~~exercisable~~an atamount ~~$0.07~~less ~~per~~than ~~share,~~the asaggregate ~~finder’s~~amount ~~fees.~~of ~~The~~the ~~warrants~~capital ~~expire~~represented inby ~~November~~the ~~2014.~~issued ~~This~~and ~~private transaction~~outstanding isstock ~~exempt~~of ~~from~~all ~~registration~~classes ~~under~~having a preference upon the ~~Securities~~distribution ~~Act~~of assets, we are prohibited from declaring and paying out of ~~1933~~such net profits any dividends upon any shares of our capital stock until the deficiency in ~~reliance~~the onamount ~~exemptions~~of ~~provided~~capital represented by ~~Regulation~~the D,issued ~~Rule~~and ~~506~~outstanding ~~and~~stock of ~~Section~~all ~~4(2)~~classes having a preference upon the distribution of ~~that~~assets ~~act~~shall have been repaired.

~~During~~Unregistered ~~the~~Sales ~~three-month period ended December 31, 2011, we issued warrants to 5 accredited investors in connection with private placements aggregating 2,607,142 shares for $115,000 and the issuance~~ of aEquity short-term note payable of $100,000. The warrants are exercisable in 1,850,000 shares of our common stock at an exercise price range of $0.03-$0.10 per share. The warrants expire in November and December 2014. This private transaction is exempt from registration under the Securities ~~Act of 1933 in reliance on exemptions provided by Section 4(2) of that Act.~~

~~Item~~During the 6three-month period ended December 31, 2012, we issued in aggregate 19,888,999 shares of our common stock to 5 accredited investors pursuant to a private placement which generated gross proceeds of approximately $140,833 or $0.01 ~~Selected~~per ~~Financial~~share. ~~Data~~The Company issued 11,666,665 warrants, exercisable at $0.02 per share, as finder’s fees. The warrants expire in December 2015 . This private transaction is exempt from registration under the Securities Act of 1933 in reliance on exemptions provided by Regulation D, Rule 506 and Section 4(2) of that act.

~~Not~~During the ~~applicable~~three-month toperiod aended ~~smaller~~December ~~reporting~~31, ~~company~~2012, we issued short-term convertible notes payable of $178,750 . The number of warrants issued with convertible notes s were 28,550,000 shares of our common stock at an exercise price of $0.05 per share. The warrants expire in December 2015. This private transaction is exempt from registration under the Securities Act of 1933 in reliance on exemptions provided by Section 4(2) of that Act.

17Item 6. Selected Financial Data

~~Item~~Not 7.applicable ~~Management’s~~to ~~Discussion~~a ~~and~~smaller ~~Analysis~~reporting ~~of Financial Condition and Results of Operation~~company.

~~The~~Item ~~following~~7. ~~information~~Management’s ~~should~~Discussion beand ~~read~~Analysis inof ~~conjunction~~Financial ~~with~~Condition ~~our financial statements~~ and ~~accompanying~~Results ~~notes~~of ~~included in this Annual Report on Form 10-K.~~Operation

~~Overview~~The following information should be read in conjunction with our financial statements and accompanying notes included in this Annual Report on Form 10-K.

We are a software development company and service provider for the PC and mobile device industry. Our flagship product is Spare Backup, a fully-automated remote backup solution designed and developed especially for the small office, mobile and home environment which automatically and efficiently backs up all data on selected laptops, tablets or desktop computers, as well as smart phones. As a result, we believe individuals and businesses can ensure file safety. We launched our Spare Back-up service and software product version 1.0 in March 2005 specifically designed for the PC, and we are currently offering version 6.0 of the product which now incorporates not only the PC but tablets and smart phones which are carrier agnostic and handset agonistic .Overview

We are a software development company and service provider for the PC and mobile device industry. Our flagship products is Spare ~~Switch~~Backup, a fully-automated remote backup solution designed and developed especially for the small office, mobile and home environment which automatically and efficiently backs up all data on selected laptops, tablets or desktop computers, as well as smart phones. As a result, we believe individuals and businesses can ensure file safety. We launched our Spare Back-up service and software product version 1.0 in March 2005 specifically designed for the PC. As part of our software we offer Spare Switch which enables users to complete the transfer of personal files from one personal computer (PC) to another via a high speed Internet connection. We focus on individuals and businesses that use diverse technologies and various devices to support their businesses and lifestyles.

~~Our~~We ~~Spare~~began ~~Mobile~~to migrate the product ~~backs~~to upencompass the ~~personal~~mobile ~~content~~environment onin ~~your~~2010 ~~“smart~~and ~~phones”~~we ~~such~~are ascurrently ~~contacts,~~offering ~~emails,~~version ~~calendar~~6.0 ~~events,~~of ~~photos,~~the ~~music~~product which now incorporates PC’s, tablets and ~~videos. We~~smart ~~offer~~phones a. ~~complete~~Our ~~line~~mobile ofsoftware ~~security~~product, ~~products~~which tois ~~compliment~~carrier ~~the~~agnostic ~~user’s~~and ~~smart~~handset ~~phone~~agonistic, ~~such~~is ~~as:~~marketed under the name “Spare Mobile”.

~~Last Known LocationPRO: View the approximate location of your registered phone(s) on an integrated map using the phone’s built-in GPS.~~20

~~Lock/Unlock~~Our ~~PhonePRO: Remotely~~Spare ~~lock~~Mobile product backs up personal content on your ~~phone~~“smart tophones” ~~prevent~~such ~~unauthorized~~as ~~use~~contacts, ~~and~~emails, ~~protect~~calendar ~~your~~events, ~~personal~~photos, ~~information~~music and videos. We offer a complete line of security products to compliment the user’s smart phone, such as:

~~Display~~Last ~~MessagePRO~~Known LocationPRO: ~~Send~~View the aapproximate ~~message~~location toof your ~~phone~~registered ~~that locks your~~ phone(s) ~~and~~on ~~displays~~an aintegrated ~~message~~map ~~requesting~~using ~~that~~ the ~~Good Samaritan holding your~~ phone’s ~~contact~~built-in ~~you to return it~~GPS.

~~Set~~Lock/Unlock ~~Phone AlarmPRO~~PhonePRO: ~~Locks~~Remotely lock your phone ~~and~~to ~~sends~~prevent aunauthorized ~~loud,~~use ~~audible~~and ~~alert~~protect ~~directly to~~ your ~~phone~~personal ~~to immediately pinpoint its location~~information.

~~Erase~~Display ~~PhonePRO~~MessagePRO: ~~Remotely~~Send a ~~lock~~message to your phone ~~and~~that ~~erase~~locks your ~~contacts,~~phone ~~photos,~~and ~~etc.~~displays ~~from~~a message requesting that the Good Samaritan holding your phone contact you to return it.

WeSet ~~provide~~Phone anAlarmPRO: Locks your ~~easy~~phone ~~to use, scalable, cloud-based solution for securing business files, media,~~ and ~~personal~~sends ~~data. The total Spare Backup offerings represent~~ a ~~suite of complementary products and services which are designed for use by technical and non-technical users. Our software has unique~~loud, ~~easy,~~audible ~~scalable characteristics~~alert ~~which~~directly weto ~~believe~~your ~~provides~~phone ato ~~competitive~~immediately ~~advantage~~pinpoint ~~over~~its ~~other competitors whose products require large investments in hardware, installation, training and support~~location.

~~Beginning~~Erase inPhonePRO: Remotely lock ~~2010~~your wephone ~~have focused our development efforts~~ and, inerase ~~2011,~~your ~~our marketing efforts on our Spare Mobile product, which backs up personal content on “smart phones” and “tablets,” such as~~ contacts, ~~emails, calendar events,~~ photos, ~~music, videos and data files~~etc. It also offers a complete line of mobile security products and parental controls (developed in 2011) to compliment the users’ mobile devices, as described in our software development section. We have shifted our focus to the mobile industry to take advantage of a number of industry trends which we believe represent a tremendous growth opportunity for our company. In 2011, there were approximately six billion mobile subscribers throughout the world according to The International Telecommunications Union, representing almost 87% of the world’s population. Industry experts, including IDC and Strategy Analytics, estimate that worldwide shipments of smart phones were approximately 490 million units, up over 60% from ~~2010,~~your ~~and representing over 31% of all handsets shipped~~phone. In August of 2011, Juniper Research estimated that less than 1 in 20 smart phones and tablets have third-party security software installed in them. This is expected to change according to Canalys, which estimates the U.S. market for mobile security will grow to over $3 billion annually by 2015.

We ~~have~~provide ~~generated~~an ~~minimal~~easy ~~revenue~~to ~~since~~use, ~~our~~scalable, ~~inception~~cloud-based solution onfor ~~September~~securing 12business files, ~~2002~~media, and ~~have~~personal ~~incurred~~data ~~net~~across ~~losses~~mobile ofdevices ~~approximately~~and ~~$117~~standard ~~million~~PCs. ~~from~~The ~~cash~~total ~~and~~Spare ~~non-cash~~Backup offerings ~~activity~~represent ~~since~~a ~~inception~~suite ~~through~~of ~~December~~complementary ~~31,~~products ~~2011.~~and ~~Revenues~~services ~~generated~~which ~~from~~are ~~our~~designed ~~business~~for ~~have~~use ~~not~~by ~~been~~technical ~~sufficient~~and tonon-technical ~~fund~~users. Our ~~our~~software ~~current~~has ~~operations~~unique, ~~and~~easy, wescalable characteristics ~~have~~which ~~relied~~we onbelieve ~~funds~~provides ~~raised~~a ~~from~~competitive ~~the~~advantage ~~sale~~over other ofcompetitors ~~our~~whose ~~securities~~products torequire ~~provide~~large ~~sufficient~~investments ~~cash~~in tohardware, ~~operate~~installation, ~~our~~training ~~business~~and support.

~~Corporate~~We ~~Relocation~~have focused our more recent development and marketing efforts on our Spare Mobile product, which backs up personal content on “smart phones” and “tablets,” such as contacts, emails, calendar events, photos, music, videos and data files. It also offers a complete line of mobile security products and parental controls (developed in 2011 and 2012) to compliment the users’ mobile devices, as described in our software development section. We have shifted our focus to the mobile industry to take advantage of a number of industry trends which we believe represent a tremendous growth opportunity for our company. In 2011, there were approximately six billion mobile subscribers throughout the world according to The International Telecommunications Union, representing almost 87% of the world’s population. Industry experts, including International Data Corporation (IDC) and Strategy Analytics, estimate that worldwide shipments of smart phones in 2012 were approximately 575 million units, up over 10% from 2011, and representing over 45.5% of all handsets shipped. In June of 2012, Ericsson forecasts that mobile subscriptions will reach 9 billion in 2017, of which 5 billion will be mobile broadband connections. With recent estimates by Juniper Research that less than 1 in 20 smart phones and tablets have third-party security software installed in them, this represents a vast potential market for mobile security. According to Canalys, the U.S. market for mobile security is estimated to grow to over $3 billion annually by 2015. Additionally, according to the IDC Smart Connected Device Tracker, worldwide shipments of smart connected devices grew 29.1% year over year in 2012, crossing 1 billion units shipped with a value of $576.9 billion. The market expansion was largely driven by 78.4% year-over-year growth in tablet shipments, which surpassed 128 million in 2012. IDC expects that tablet shipments will surpass desktop PCs in 2013 and portable PCs in 2014. In 2013, worldwide desktop PC shipments are expected to drop by 4.3% and portable PCs to maintain a flat growth of 0.9%. The tablet market, on the other hand, is expected to reach a new high of 190 million shipment units with year-on-year growth of 48.7% while the smartphone market is expected to grow 27.2% to 918.5 million units. IDC predicts the worldwide smart connected device space will continue to surge with shipments surpassing 2.2 billion units and revenues reaching $814.3 billion in 2017

We ~~completed~~have ~~the~~generated ~~move~~minimal ofrevenue ~~our~~since ~~corporate headquarters, including a major portion of~~ our inception ~~software~~on ~~development~~September ~~team~~12, ~~to Minden~~2002, ~~Nevada~~and inhave ~~the~~incurred ~~third~~net ~~quarter~~losses of ~~2011~~approximately $120. We3 ~~believe~~million ~~the~~from ~~move~~cash ~~will~~and ~~enable~~non-cash usactivity since toinception ~~draw~~through ~~from~~December a31, ~~more~~2012. ~~experienced~~Revenues ~~labor~~generated ~~pool~~from ~~for~~our ~~software~~business ~~design,~~have asnot ~~well~~been assufficient ~~provide~~to usfund ~~with~~our acurrent ~~significantly~~operations and ~~more~~we ~~favorable~~have ~~corporate~~relied ~~tax~~on ~~environment. We~~funds ~~currently~~raised ~~anticipate~~from ~~that~~the wesale ~~will~~of beour ~~subject~~securities to ~~minimal~~provide ~~corporate~~sufficient ~~taxes~~cash ~~for~~to ~~the~~operate ~~remainder~~our ~~of 2011 and throughout 2012~~business.

1821

Business Development and Marketing Strategy:

We market our software products through distributor’s retailers as well as insurance and warrantee providers. We are continuing to expand our current distribution base with scheduled launches throughout the remainder of the year. We will focus our distribution efforts in four vertical channels:

· Insurance and warranties: Assurant, ~~Service Net~~ and Lifestyle Group;

Retail: Car Phone Warehouse, Best Buy Europe and Simplexity;

· Original Equipment Manufacturers: Sony; ~~and~~

Carriers

Examples of our marketing partners within the four vertical distribution channels include Wirefly/Simplexity, Assurant/Federal Home Warranty, Life Styles Group (a UK warranty provider), Best Buy Europe, and Sony. We will continue to aggressively add additional partnerships. We expect our current partners will commence scheduled launches of our services during ~~2012~~2013. We are in various stages of negotiations with potential partners in the U.S., Brazil, India, the Middle East, South America, and the South Pacific. We are hopeful that these negotiations will result in additional partnerships in the coming quarters.

While, we believe the launch of our base offerings will be commercially successful and our revenue has improved, itseveral islaunches were delayed in 2012 as a result of upgrading our software to accommodate the breadth of operating systems currently available in the mobile phone market place, and to facilitate new software design applications, making it still too early, to determine the extent of ~~its~~the market penetration capabilities of these offerings.

We continue to invest in our software development, particularly focusing on the smart phone market. We have added additional features, such as:

Last Known LocationPRO: View the approximate location of your registered phone(s) on an integrated map using the phone’s built-in GPS.

Lock/Unlock PhonePRO: Remotely lock your phone to prevent unauthorized use and protect your personal information.

Display MessagePRO: Send a message to your phone that locks your phone and displays a message requesting that the Good Samaritan holding your phone contact you to return it.

Set Phone AlarmPRO: Locks your phone and sends a loud, audible alert directly to your phone to immediately pinpoint its location.

InWe ~~addition,~~believe weour ~~are~~offerings ~~working~~will onadapt ~~providing~~to the customer’s day-to-day needs, as our ~~partners~~cloud system provides smart phones with ~~real~~the ~~time~~ability ~~data~~to ~~analytics~~link ~~which~~to ~~will~~our ~~provide~~cloud ~~them~~and ~~with~~connect to ~~behavioral~~multiple ~~pattern~~devices, ~~matching~~which ~~and~~include ~~market~~PC’s ~~research~~and tablets.

WeIn ~~began~~addition, anwe ~~initial~~are ~~small-scale~~working ~~launch~~on ~~with~~providing ~~the~~our partners ~~UK-based~~with ~~Carphone~~real ~~Warehouse~~time ~~in April~~data ofanalytics ~~2011~~which ~~and~~will inprovide ~~the~~them ~~Netherlands~~with inbehavioral ~~May~~pattern ~~2011. We~~matching ~~have now converted our product to support the local language in the Netherlands~~ and ~~Spain,~~market ~~as we anticipate a progressive ramp in their distribution efforts throughout the remainder of 2012~~research.

19We began an initial small-scale launch with the UK-based Carphone Warehouse in April of 2011 and in the Netherlands in May 2011. We have now converted our product to support the local language in the Netherlands and Spain.

In September 2010 we reached a distribution agreement with Simplexity, LLC., (“Simplexity”), the parent company of Wirefly.com. Simplexity, a privately held company, is the Internet's leading authorized seller of cell phones and wireless services. Wirefly is Simplexity's shopping and comparison site for consumers, bringing online shoppers an unprecedented selection of cell phones and service plans from every major U.S. carrier with the convenience of automated application processing and cell phone activation. For the last six years Wirefly has been the internet's #1 authorized dealer for AT&T, Verizon Wireless, Sprint, and T-Mobile. Simplexity also operates and maintains similar online websites for a number of major retailers in North America. We believe Simplexity is uniquely positioned in the U.S. market to reach potential mobile customers across a wide variety of carriers through online mobile sales sites they own or manage within North America. We ~~anticipate~~began the sales launch of our services through Simplexity’s distribution network toin ~~progressively~~2011 ~~grow~~and have experienced steady sales growth in ~~2011~~2012 ~~and~~on ~~beyond~~a small scale from this channel throughout 2012. The service will be offered as an add-on or inclusive in the service packages such as “data protection,” currently marketed by Simplexity to its channel partners and customers.

We opened a new distribution channel for our mobile platform through mobile insurance and warrantee providers. In North America we reached an agreement with Assurant (Federal Warranty Service Corporation). Assurant, which develops, underwrites, and markets specialty insurance, extended service contracts, and other risk management solutions with leading financial institutions, retailers, and other entities, has bundled us into their services. The first of their launches iswas with Sprint, a US-based cellular company~~. Our~~ ~~backup~~early in 2012, offering our backup solution will be bundled into all warranties associated with tablet sales. We have recorded minimal revenue with small incremental growth in subscribers throughout the course of 2012. We will be expanding our offerings and are currently doing translations for ~~up to 8~~ additional languages to support additional launches throughout ~~2012~~2013.

We also have a distribution partnership with Lifestyle Services Group (LSG), provider of leading lifestyle solutions and insurance products. LSG specializes in supporting its client products brands, attracting customers, improving the customer journey, and reducing customer attrition rates. LSG’s portfolio includes Mobile Phone Insurance, Card Protection and Tech Protect®, and The ~~HubbTM~~Hubb TM , which allows clients to seamlessly integrate a complete suite of products and services all accessed via one number. Their customer base includes Virgin Mobile, Orange, “3”, Phone, Phones 4 U, Barclay’s and Lloyds bank to name a few in the U.K. LSG has also amended our December 13, 2010 master services agreement in the third quarter of 2011 to include our parental controls functionality. Under the terms of the amended agreement, Spare Backup will supply the parental controls to LSG for distribution to LSG's affinity distribution channels, which includes most of the major retail banks and mobile networks and targets approximately 10 million customers. ~~Both~~ companies have agreed that Lifestyle Services Group will have exclusive distribution rights to the parental controls functionality in territories where it has a physical presence, provided it reaches certain minimum volumes over specified periods, including a minimum of one million registered users in the first six months of launch.

We expect to be able to work with each LSG partner. The software will be marketed as a way to not only protect data from loss, but to also increase the likelihood of retrieving a lost or stolen phone through the suite of security features. As mobile devices are becoming more prevalent and more powerful, we believe this channel should become a significant source of revenue to our company in the coming quarters. We anticipate that these companies will begin marketing programs beginning in 2012.23

~~Through~~We ~~our~~launched ~~relationship~~the marketing of our services with certain LSG’s ~~client~~partners ~~companies~~in the second half of 2012, ~~Spare~~including ~~Backup~~Lloyds ~~will~~in ~~broaden~~the ~~its~~third ~~distribution~~quarter ~~efforts~~of 2012 and a soft launch with ~~current~~the Bank of Scotland in the fourth quarter of 2012. These rolling launches are expected to continue in 2013 and we expect to add new customers and grow revenue accordingly as these partners increase their marketing and ~~initiate~~awareness ~~new~~campaigns ~~launches~~for ~~into~~the ~~Ireland,~~products ~~Spain,~~to their ~~Poland,~~customers. Our ~~Turkey~~software is marketed as a way to not only protect data from loss, but to also increase the ~~Middle~~likelihood of ~~East,~~retrieving ~~India,~~a ~~Brazil~~lost ~~and~~or ~~South~~stolen ~~America~~phone through the suite of security features. InAs ~~2012~~mobile wedevices ~~anticipate~~are ~~expanding~~becoming ~~our~~more ~~marketing~~prevalent and ~~partnerships~~more ~~across~~powerful, ~~our~~we ~~four~~believe ~~vertical~~this ~~marketing~~channel ~~channels~~should ~~and~~become ~~across~~a ~~additional~~significant ~~geographic~~source ~~areas~~of revenue to our company in ~~order~~the coming quarters. We anticipate that these companies will continue to ~~reach~~roll ~~the~~out ~~widest~~marketing ~~potential~~programs ~~subscriber~~progressively ~~base~~in 2013.

~~Software~~Through ~~Development~~our relationship with LSG’s client companies, Spare Backup will broaden its distribution efforts with current and new partners and initiate new launches into Ireland, Spain, Poland, Turkey, the Middle East, India, Brazil and South America. On August 30, 2012, Spare Backup and LSG executed a client addendum to make Spare Mobile available through LSG Asistans Hizmetleri Anonim Şirketi (“LSG Assistance”) a company registered in Turkey), to the leading mobile communications company in Turkey. The launch of our products in Turkey is now expected to take place in the second quarter of 2013. We believe the Turkish market represents a substantial opportunity for our company as it represents one of the largest smartphone markets in the European/Middle Eastern region. In 2013 we also anticipate expanding our marketing partnerships across our four vertical marketing channels and across additional geographic areas in order to reach the widest potential subscriber base.

~~Our~~Software decision to expand the scope of our cloud-based platform into mobile backup and security required us to make substantial changes to our software to enhance the scalability and functionality of our services across a wide array of devices and platforms. This expansion delayed our ability to launch a number of important programs in 2011. Our development team continued to test and improve the mobile platform throughout the second half of 2011 and now feel that these changes enable us to complete launches with our marketing partners into 2012.Development

InOur ~~the~~decision ~~third~~to ~~quarter~~expand ~~we began~~ the ~~full~~scope ~~migration~~of toour ~~an HTML~~cloud-based platform ~~for~~into ~~our~~mobile ~~distribution~~backup ~~partners. We~~and ~~have~~security ~~begun~~required ~~launching~~us ~~with~~to ~~our~~make ~~marketing~~substantial ~~partners~~changes ~~and~~to ~~anticipate~~our asoftware ~~progressive~~to ~~roll~~enhance ~~out system-wide by~~ the ~~end~~scalability and functionality of ~~2012. The~~our ~~sites~~services ~~will~~across ~~enable~~ a ~~full~~wide ~~touchscreen~~array ~~interface~~of todevices ~~support all tablet~~ and ~~mobile device applications including Android, Blackberry, Windows and Apple~~platforms. We ~~HTML~~completed ~~will~~the ~~also~~majority ~~enable quicker launch schedules for new customers, greater scalability, simplification~~ of ~~server~~that ~~technology,~~work in ~~and faster maintenance~~2011.

20Over the course of 2012 we completed the full migration to an HTML-based platform for our distribution partners. We developed a number of web hosting sites through our platform with our marketing partners to support current and future marketing roll outs of our software. The sites enable a full touchscreen interface to support all tablet and mobile device applications including Android, Blackberry, Windows and Apple. HTML will also enable quicker launch schedules for new customers, greater scalability, simplification of server technology, and faster maintenance. The hosting of these sites represents an additional revenue source for us as we charge monthly service fees to each distributor for hosting and maintaining the sites.

WeDuring 2012 ~~also~~we ~~began~~upgraded ~~the upgrade of~~ our ~~hardware~~software into accommodate the ~~third~~breadth ~~quarter~~ of ~~2011~~operating tosystems acurrently ~~scalable~~available ~~storage~~in ~~platform~~the ~~capable~~mobile ofphone ~~supporting~~market ~~millions~~place, and ofto ~~users~~facilitate ~~for~~new ~~our~~ software ~~products~~design applications. This ~~Through~~upgrade, ~~a unique cloud-like structure~~however, ~~this~~caused ~~new~~delays ~~platform~~in ~~can~~launching besome ~~infinitely scaled as usage increases by the combined use~~ of ~~additional~~Spare ~~network~~Backup’s marketing ~~storage~~partnerships ~~and~~during ~~virtual machine arrays (VMWARE)~~2012. ~~Upon~~While ~~completion all user backup data will be stored on state of~~ the ~~art~~core ~~NetAPP~~development ~~SAN~~work ~~storage. User~~for ~~account~~our ~~information~~current ~~and~~product ~~transactional~~offerings ~~information~~is ~~will~~largely becomplete, ~~stored~~we continue into amake ~~secure~~improvements ~~SQL-Server~~to ~~redundant~~increase ~~distributed~~the ~~database~~capabilities ~~utilizing~~of ~~special~~the ~~high-speed RAID drives. In addition~~product, ~~our~~ ~~IIS~~enhance ~~web~~the ~~servers~~user ~~each~~experience ~~can~~and support ~~thousands~~the inclusion of ~~simultaneous~~new ~~users. Combining~~operating ~~this with our new~~systems, ~~scalable~~languages ~~virtual~~and ~~machine array allows the system to be used by millions of users~~devices.

We believe that through our software and hardware improvements we are now better positioned to begin the launches of Assurant, Simplexity, LSG and other potential partners in 2012. The above partnerships represent multiple opportunities, as each of the companies has different distributors and strategic alliances marketing their products. We will continue to enhance our platform nonetheless. We believe the backbone for our service platform has been substantially developed. We have added new features to our existing services that will continue rolling out throughout 2012 that will accelerate revenue from our distribution.Expense Reductions

~~Results~~In an effort to reduce our overall expenses, we have made a number of ~~Operations~~changes to our corporate structure. We completed the move of our corporate headquarters, including a major portion of our software development team, to Minden, Nevada in the third quarter of 2011. The move has enabled the company to significantly reduce its corporate taxes due to a significantly more favorable corporate tax environment as well as less expensive rent and labor costs.

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~24

	For the Year Ended						Increase/			Increase/
	December 31,						(Decrease)			(Decrease)
	2011			2010			in $ 2011			in % 2011
							vs 2010			vs 2010
Net Revenues	$	399,343		$	958,886		$	(559,543	)		-58.4	%
Operating expenses:
Research and development		1,088,689			2,341,738			(1,253,049	)		-53.5	%
Selling, general and administrative		6,863,149			8,583,680			(1,720,531	)		-20.0	%
Total operating expenses		7,951,838			10,925,418			(2,973,580	)		-27.2	%
Operating loss		(7,552,495	)		(9,966,532	)		2,414,037			-24.2	%
Other income (expense):
Change in fair value of derivative liabilities		2,296,519			446,027			1,850,492			414.9	%
Gain from debt settlement		171,624			442,250			(270,626	)		-61.2	%
Realized gain on foreign currency		(2,736	)		-			(2,736	)	NM
Interest expense		(763,775	)		(2,048,963	)		1,285,188			-62.7	%
Total other income (expense)		1,701,632			(1,160,686	)		2,862,318			-246.6	%
Net loss		(5,850,863	)		(11,127,218	)		5,276,355			-47.4	%

We also have largely completed an outsourcing plan to reduce our employment costs. At December 31, 2012 we had 5 full-time employees, including executive officers. We now utilize approximately 19 independent contractors on a project basis. We believe this operational model reduces our fixed costs and enables us to better manage our cash flow. We have also fully outsourced our customer support functions which we anticipate will result in a substantial reduction in our expenses related to that function in 2013.

~~NM:~~We ~~Not~~also ~~Meaningful~~began the upgrade of our hardware in the third quarter of 2011 to a scalable storage platform capable of supporting millions of users for our software products. Through a unique cloud-like structure, this new platform can be infinitely scaled as usage increases by the combined use of additional network storage and virtual machine arrays (VMWARE). Upon completion all user backup data will be stored on state of the art NetAPP SAN storage. User account information and transactional information will be stored in a secure SQL-Server redundant distributed database utilizing special high-speed RAID drives. In addition, our IIS web servers each can support thousands of simultaneous users. Combining this with our new, scalable virtual machine array allows the system to be used by millions of users.

~~Revenues~~We believe that through our software and hardware improvements we are now better positioned to begin the launches of Assurant, Simplexity, LSG and other potential partners in 2012. The above partnerships represent multiple opportunities, as each of the companies has different distributors and strategic alliances marketing their products. We will continue to enhance our platform nonetheless. We believe the backbone for our service platform has been substantially developed. We have added new features to our existing services that will continue rolling out throughout 2012 that will accelerate revenue from our distribution.

~~Our~~Results ~~net revenues primarily consist~~ of subscription fees charged for online back-up services. Our net revenues decreased during fiscal 2011, when compared to fiscal 2010, due to a decrease in the base over which deferred revenue is amortized during 2011, offset by an increase in revenues from our new distributors who launched our products during the latter part of 2010. The amortization of deferred revenue, which amounted to approximately $621,000 during fiscal 2010, resulted from our previous partnership with DSG International, which terminated in 2009. We expect that our revenues during 2012 will increase sequentially from 2011.Operations

~~During~~SPARE ~~2011~~BACKUP, ~~Spare Backup spent a considerable amount of money and effort converting to its new HTML based software platform~~INC. ~~This~~ ~~conversion~~AND was necessary to accommodate the breadth of operating systems currently available in the mobile phone market place, and to facilitate new software design applications. This conversion, however, caused delays in launching some of Spare Backup’s marketing partnerships during 2011.SUBSIDIARY

~~Research~~CONSOLIDATED ~~and~~STATEMENTS ~~Development~~OF OPERATIONS

Research and development expenses consist primarily of compensation expenses paid to our software engineers, employees and consultants in conjunction with the development or enhancement of our products. Our research and development expenses fiscal 2011 include costs associated with continued development of user interfaces and enhancements of existing products.

	For the Year Ended						Increase/			Increase/
	December 31,						(Decrease)			(Decrease)
	2012			2011			in $ 2012			in % 2012
							vs 2011			vs 2011

Net Revenues	$	539,396		$	399,343		$	140,053			35.1	%

Operating expenses:
Research and development		817,369			1,088,689			(271,320	)		-24.9	%
Selling, general and administrative		3,294,941			6,863,149			(3,568,208	)		-52.0	%
Total operating expenses		4,112,310			7,951,838			(3,839,528	)		-48.3	%

Operating loss		(3,572,914	)		(7,552,495	)		3,979,581			-52.7	%

Other income (expense):
Change in fair value of derivative liabilities		251,414			2,296,519			(2,045,105	)		-89.1	%
Gain from debt settlement		329,721			171,624			158,097	)		92.1	%
Realized gain on foreign currency		(1,828	)		(2,736	)		908			NM
Interest expense		(536,206	)		(763,775	)		227.569			-29.8	%
Total other income (expense)		43,101			1,701,632			(1,658,531	)		-97.5	%

Net loss		(3, 529,813	)		(5,850,863	)		2,321,050			-39.7	%

~~The~~NM: ~~decrease~~Not in our research and development expenses during fiscal 2011, when compared to the prior year periods, is primarily attributable to the completion of our Spare back-Up offering as a cloud solution during the first half of 2010, while our research and development expenses during fiscal 2011 consisted mostly of enhancements to our existing solutions.Meaningful

2125

~~Selling, General and Administrative Expenses~~Revenues

~~Selling,~~Our ~~general,~~net ~~and~~revenues ~~administrative expenses~~ primarily consist of ~~consultant~~subscription fees ~~related~~charged tofor ~~the~~online ~~marketing~~back-up ~~and~~services. ~~enhancement~~Our ofnet ~~our~~revenues ~~products,~~increased ~~advertising~~during fiscal 2012, aswhen ~~well~~compared to asfiscal ~~other~~2011, ~~general~~due ~~and~~to ~~administrative~~an ~~expenses,~~increase ~~such~~in asrevenues ~~payroll~~from ~~expenses,~~our ~~necessary~~new todistributors ~~support~~who launched our ~~existing~~products and ~~anticipated~~ growth inwith our existing customers. We expect that our revenues ~~and~~during ~~legal~~2013 ~~and~~will ~~professional~~continue ~~fees~~to increase sequentially from 2012.

~~The~~During ~~decrease~~2012, inSpare ~~selling,~~Backup spent ~~general~~a considerable amount of money and ~~administrative~~effort ~~expenses~~to inupgrade ~~2011,~~its assoftware. This ~~compared~~upgrade was necessary to ~~2010~~accommodate the breadth of $1operating systems currently available in the mobile phone market place,~~720~~ and to facilitate new software design applications. This upgrade,~~531~~ orhowever, ~~20%~~caused isdelays ~~primarily~~in ~~due~~launching tosome ~~the~~of ~~following:~~Spare Backup’s marketing partnerships during 2012.

●Research ~~a decrease in non-recurring fair value of options, warrants,~~ and our shares of common stock issued to employees and consultants, including the fair value of modification of terms of such options and warrants. Otherwise, selling, general, and administrative expenses during fiscal 2011 are at comparable levels to the prior year period.Development

~~Change~~Research and development expenses consist primarily of compensation expenses paid to our software engineers, employees and consultants in ~~Fair~~conjunction ~~Value~~with the development or enhancement of ~~Derivative~~our ~~Liabilities~~products. Our research and development expenses fiscal 2012 include costs associated with continued development of user interfaces and enhancements of existing products.

~~Change~~The decrease in ~~fair~~our ~~value~~research and ofdevelopment ~~derivative~~expenses ~~liabilities~~during ~~results~~fiscal ~~from~~2012, ~~the~~when ~~changes~~compared into the ~~fair~~prior ~~value~~year ofperiods, ~~the~~is ~~derivative~~primarily ~~liability~~attributable ~~due~~ to the ~~application~~ completion of ~~ASC~~our ~~815,~~Spare ~~resulting~~back-Up inoffering ~~either~~as ~~income~~a orcloud ~~expense,~~solution ~~depending~~during on the ~~difference~~first inhalf ~~fair value~~ of ~~the~~2010, ~~derivative~~while ~~liabilities~~our ~~between~~research ~~their~~and ~~measurement~~development ~~dates. The~~expenses ~~decrease or increase in fair value of derivative liabilities recognized~~ during fiscal ~~2011~~2012 ~~and~~consisted ~~2010~~mostly isof ~~primarily~~upgrades ~~due~~necessary to aaccommodate ~~decrease~~the orbreadth ~~increase~~ of ~~our~~operating ~~common~~systems ~~stock~~currently ~~quoted~~available ~~price~~in ~~between~~the ~~measurement~~mobile phone ~~dates~~market ~~and during such periods~~place, ~~respectively. Our~~and ~~common~~to ~~stock~~facilitate ~~quoted~~new ~~price~~software isdesign ~~one~~applications offor ~~the~~enhancements ~~primary~~to ~~assumptions used in the computation of~~ our ~~derivative~~existing ~~liabilities~~solutions.

~~Gain~~Selling, ~~from~~General ~~Debt~~and ~~Settlement~~Administrative Expenses

~~During~~Selling, ~~fiscal~~general, ~~2011~~and administrative expenses primarily consist of consultant fees related to the marketing and ~~2010~~enhancement of our products, weadvertising, as ~~settled~~well ~~numerous~~as ~~court~~other ~~cases~~general and ~~disputes~~administrative ~~with~~expenses, ~~vendors~~such as payroll expenses, ~~which~~necessary ~~resulted~~to insupport ~~gains~~our ~~from~~existing ~~debt~~and ~~settlements~~anticipated growth ~~amounting~~in toour ~~approximately~~revenues ~~$172,000~~and legal and ~~$442,000,~~professional ~~respectively~~fees.

~~Interest~~The ~~Expense~~decrease in selling, general and administrative expenses in 2012, as compared to 2011 of $3,568,208 or 52% is primarily due to the following:

~~Interest~~● ~~expense~~a ~~consists~~decrease ~~primarily of interest recognized~~ in ~~connection~~non-recurring ~~with the excess of the~~ fair value of ~~the shares issued to satisfy such obligations~~options, ~~over their carrying value~~warrants, ~~the amortization of debt discount~~ and ~~interest on~~ our ~~convertible~~shares ~~promissory~~of ~~notes.~~common ~~The~~stock ~~decrease~~issued into ~~interest~~employees ~~expense~~and ~~during~~consultants, ~~fiscal~~including ~~2011~~the isfair ~~primarily~~value ~~due~~of ~~lower~~modification ~~amortization~~ of ~~debt~~terms ~~discount~~of ~~than~~such inoptions ~~fiscal~~and ~~2010~~warrants. WeOtherwise, ~~recognized~~selling, ~~the amortization of debt discount over the terms of their respective promissory notes~~general, ~~which~~and ~~matured~~administrative expenses during ~~the~~fiscal ~~latter~~2012 ~~part~~are ofat ~~the~~comparable ~~fiscal~~levels ~~2010~~to ~~and~~ the ~~first~~prior ~~half~~year ~~of 2011~~period.

~~Liquidity~~· ~~and~~a ~~Capital~~reduction ~~Resources~~of our overall head count of full-time employees of 77% during fiscal 2012, or 15 full-time employees.

At· ~~December~~reduced ~~31,~~rent ~~2011,~~due ~~our cash overdraft amounted~~ to ~~$70,750 and our working deficit amounted to approximately $10,909,000 as compared with~~ the ~~cash~~early ~~overdraft~~termination of ~~$127,321~~the ~~and~~lease ain ~~working~~Los ~~deficit~~Angeles ofduring ~~approximately~~the ~~$9,513,000~~fiscal at2012 ~~December 31, 2010~~year.

~~During~~Change ~~the year ended December 31, 2011, we used cash~~ in ~~our~~Fair ~~operating~~Value ~~activities amounting to approximately $3,812,000. Our cash used in operating activities was comprised~~ of ~~our~~Derivative ~~net loss of approximately $5,851,000 adjusted for the following:~~Liabilities

● Change in fair value of ~~our~~ derivative liabilities ofresults ~~approximately~~from ~~$2,297,000;~~the ●changes ~~Fair~~in the fair value of ~~stock-based~~the ~~payments~~derivative ~~issued~~liability due to ~~employees~~the ~~and~~application ~~consultants~~ of ~~approximately~~ASC 815, ~~$851~~resulting in either income or expense,~~000;~~ ●depending ~~Fair~~on the difference in fair value of ~~shares~~the derivative liabilities between their measurement dates. The decrease or increase in fair value of derivative liabilities recognized during fiscal 2012 and 2011 is primarily due to a decrease or increase of our common stock ~~issued~~quoted inprice ~~connection~~between ~~with~~measurement ~~services~~dates ~~rendered~~and ofduring ~~approximately~~such $1periods,~~018,000;~~ respectively. Our ●common ~~Fair~~stock ~~value~~quoted price is one of ~~equity~~the ~~transactions~~primary ~~related~~assumptions toused ~~financing~~in the computation of ~~approximately~~our ~~$343,000;~~derivative liabilities.

Additionally, the following variations in operating assets and liabilities impacted our cash used in operating activities: ● Increase in accounts payable, accrued expenses and accrued payroll taxes of approximately $1.6 million, resulting from delays in payments to satisfy our obligations due to our liquidity issues.26

~~During~~Gain ~~the year ended December 31, 2011, we generated cash~~ from ~~financing~~Debt activities of approximately $4 million, which consisted of the proceeds from notes payable and convertible promissory notes of $1.3 million, and the net proceeds from the issuance of common stock for cash of $2.2 million offset principal repayments of certain notes payable aggregating $173,000 and the funding of our overdraft of approximately $57,000. Additionally, we generated proceeds from exercise of options and warrants aggregating approximately $496,000.Settlement

During fiscal ~~the~~2012 ~~year~~and ~~ended December 31~~2011, ~~2010,~~ we ~~used~~settled ~~cash~~numerous incourt ~~our~~cases ~~operating~~and ~~activities~~disputes ~~amounting~~with ~~to approximately $4~~vendors,~~588,000.~~ ~~Our~~which ~~cash~~resulted ~~used~~ in ~~operating~~gains ~~activities~~from ~~was~~debt ~~comprised~~settlements amounting ofto ~~our net loss of~~ approximately $10446,~~636~~387 and $172,000, ~~adjusted for the following:~~respectively.

●Interest Change in fair value of derivative liabilities of approximately $446,000; ● Fair value of options and warrants granted to employees of approximately $1,025,000; ● Depreciation or property and equipment, amortization of prepaid expenses, amortization of debt discount and amortization of deferred financing costs of approximately $1,904,000; ● Gain from debt settlement of approximately $442,000; ● Fair value of convertible promissory notes modifications of approximately $175,000;Expense

22Interest expense consists primarily of interest recognized in connection with the excess of the fair value of the shares issued to satisfy such obligations, over their carrying value, the amortization of debt discount and interest on our convertible promissory notes. The decrease in interest expense during fiscal 2012 is primarily due to lower amortization of debt discount than in fiscal 2011. We recognized the amortization of debt discount over the terms of their respective promissory notes, which matured during the latter part of the fiscal 2010 and the first half of 2011.

●Liquidity ~~Fair value of common stock issued in connection with convertible promissory notes modifications~~ and ~~conversions~~Capital of approximately $79,000; ● Fair value of common stock issued in connection with note payable issuance of approximately $177,000; ● Fair value of option and warrant modifications of approximately $726,000; ● Fair value of warrants issued to convertible promissory note holders and note holders of approximately $25,000; ● Fair value of common stock issued in connection with debt settlement of $20,000; ● Fair value of shares, warrants or options issued for services of approximately $1,831,000; and ● Fair value of shares issued for interest payment of approximately $30,000.Resources

~~Additionally~~At December 31, ~~the~~2012, ~~following~~our ~~variations~~cash inoverdraft ~~operating~~amounted to ~~assets~~$18,136 and ~~liabilities~~our ~~impacted~~working ~~our~~deficit amounted to approximately $11,362,337 as compared with the cash ~~used~~overdraft inof ~~operating~~$70,750 ~~activities:~~and a working deficit of approximately $10,909,000 at December 31, 2011.

●During ~~Increase~~the inyear ~~prepaid~~ended ~~expense~~December ~~and~~31, ~~other current assets of approximately $843~~2012,~~000,~~ ~~resulting~~we used ~~from~~cash ~~an increase~~ in ~~the prepaid commissions and marketing fees associated with~~ our ~~DSG~~operating ~~International~~activities ~~agreement;~~amounting ●to ~~Decrease in deferred revenue of~~ approximately $~~519~~1,~~000~~678,581. ~~resulting~~Our ~~from~~cash ~~the~~used ~~mutual release of our agreement with DSG International; offset by ● Decrease~~ in ~~accounts~~operating ~~receivable~~activities ofwas ~~approximately $26,000, resulting from a decrease in the amount~~ comprised of ~~time it takes~~ our ~~customers~~net toloss ~~pay us; ● Increase in accounts payable, accrued expenses and accrued payroll taxes~~ of approximately $23,~~001~~529,~~000,~~813 ~~resulting~~adjusted ~~from~~for anthe increase of unpaid payroll taxes; and ● Increase in accrued interest on convertible promissory notes of approximately $280,000, resulting from the8% convertible promissory notes issued in later fiscal 2009.following:

~~During~~● ~~the~~Change ~~year~~in ~~ended~~fair ~~December~~value 31of our derivative liabilities of approximately $600,770; ~~2010~~● Fair value of shares of common stock issued in connection with services rendered of approximately $844,730; we● ~~incurred~~Fair ~~capital~~value ~~expenditures~~of options and warrants issued for services of approximately $58350,~~000.~~377;

~~During~~Additionally, the ~~year~~following ~~ended~~variations ~~December~~in ~~31,~~operating ~~2010,~~assets weand ~~generated~~liabilities ~~cash~~impacted ~~from~~our ~~financing~~cash ~~activities~~used ofin ~~approximately~~operating ~~$4,646,000,~~activities: ~~which~~● ~~primarily~~Decrease ~~consisted~~in ofaccounts ~~the proceeds from convertible promissory notes of $197,500, proceeds from notes~~ payable ~~of $1~~,~~310,500,~~ ~~net~~accrued ~~proceeds~~expenses ~~from~~and ~~the~~accrued ~~issuance~~payroll oftaxes ~~common stock for cash~~ of ~~$2,864,794,~~approximately ~~proceeds from the exercise of stock options of~~ $22730 thousand,~~392,~~ ~~proceeds~~resulting from ~~the~~delays ~~exercise~~in ofpayments ~~warrants~~to ofsatisfy ~~$585,359~~our ~~and~~obligations ~~cash~~due ~~overdraft~~to ofour ~~approximately~~liquidity ~~$89,000, offset by the repayment of notes payable of $418,000~~issues.

~~Off~~During ~~Balance~~the ~~Sheet~~year ~~Arrangements~~ended December 31, 2012, we generated cash from financing activities of approximately $1.7 million, which consisted of the proceeds from notes payable and convertible promissory notes of $871 thousand, and the net proceeds from the issuance of common stock for cash of $735 thousand offset the funding of our overdraft of approximately $53,000. Additionally, we generated proceeds from exercise of options and warrants aggregating approximately $125,900.

~~We have no off-balance sheet arrangements.~~27

~~Critical~~During ~~Accounting~~the ~~Policies~~year ended December 31, 2011, we used cash in our operating activities amounting to approximately $3,812,000. Our cash used in operating activities was comprised of our net loss of approximately $5,851,000 adjusted for the following:

A● ~~summary~~Change ofin ~~significant~~fair ~~accounting~~value ~~policies~~of isour ~~included~~derivative inliabilities ~~Note~~of approximately $2,297,000; to● ~~the~~Fair ~~audited~~value ~~consolidated~~of ~~financial~~stock-based ~~statements~~payments ~~included~~issued ~~elsewhere~~to inemployees ~~this~~and ~~annual~~consultants ~~report.~~of Weapproximately ~~believe~~$851,000; ~~that~~● ~~the~~Fair ~~application~~value of ~~these~~shares ~~policies~~of oncommon astock ~~consistent~~issued ~~basis~~in ~~enables~~connection ~~our~~with ~~company~~services torendered ~~provide~~of ~~useful~~approximately ~~and~~$1,018,000; ~~reliable~~● ~~financial~~Fair ~~information~~value ~~about~~of ~~the~~equity ~~company's~~transactions ~~operating~~related ~~results~~to ~~and~~financing ~~financial~~of ~~condition.~~approximately $343,000;

~~The~~Additionally, ~~preparation~~the offollowing ~~financial~~variations ~~statements~~ in ~~conformity~~operating ~~with~~assets ~~generally accepted accounting principles requires management to make estimates~~ and ~~assumptions~~liabilities ~~that~~impacted ~~affect~~our ~~the~~cash ~~reported~~used ~~amounts~~in ofoperating ~~assets~~activities: ~~and~~● ~~liabilities~~Increase ~~and~~in ~~disclosure~~accounts ofpayable, ~~contingent~~accrued ~~assets~~expenses and ~~liabilities~~accrued atpayroll ~~the~~taxes ~~date~~ of ~~the~~approximately ~~financial~~$1.6 ~~statements~~million, ~~and~~resulting ~~the~~from ~~reported~~delays ~~amounts~~in ofpayments ~~revenues~~to ~~and~~satisfy ~~expenses~~our ~~during~~obligations ~~the~~due ~~reporting~~to ~~period.~~our ~~Actual~~liquidity ~~results may differ from those estimates~~issues.

~~Effective~~During ~~January 1, 2006, we adopted~~ the ~~provisions~~year ofended ~~ASC~~December ~~Topic~~31, ~~718~~2011, ~~"Compensation-Stock~~we generated ~~Compensation"~~cash ~~under~~from ~~the~~financing ~~modified~~activities ~~prospective~~of ~~method.~~approximately ~~ASC~~$4 ~~718 eliminates~~million, ~~accounting~~which ~~for~~consisted ~~share-based~~of ~~compensation transactions using~~ the ~~intrinsic~~proceeds ~~value~~from ~~method~~notes ~~prescribed~~payable ~~under~~and ~~APB~~convertible promissory ~~Opinion~~notes Noof $1.3 25million, ~~"Accounting for Stock Issued to Employees,"~~ and ~~requires instead that such transactions be accounted for using a fair-value-based method. Under~~ the ~~modified~~net ~~prospective~~proceeds ~~method, we are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value~~ from the ~~beginning~~issuance of ~~the~~common ~~fiscal~~stock ~~period~~for incash ~~which~~of ~~the recognition provisions are first applied~~$2.2 ~~For~~million ~~periods~~offset ~~prior~~principal repayments toof ~~adoption,~~certain ~~the~~notes ~~financial~~payable ~~statements~~aggregating ~~are unchanged~~$173,000 and the ~~pro~~funding ~~forma~~of ~~disclosures~~our ~~previously~~overdraft ~~required~~of byapproximately ~~ASC~~$57,000. ~~718~~Additionally, we ~~will~~generated ~~continue~~proceeds ~~to be required under ASC 718 to the extent those amounts differ~~ from ~~those~~exercise inof ~~the~~options ~~Consolidated~~and ~~Statement~~warrants ofaggregating ~~Operations~~approximately $496,000.

23Off Balance Sheet Arrangements

~~The~~We Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements". The Company records revenue when persuasive evidence of an arrangement exists, on-line back-up services have ~~been~~no rendered, the sales price to the customer is fixed or determinable, and collectability is reasonably assured. Online back up service fees received in advance are reflected as deferred revenue on the accompanying off-balance sheet. ~~Deferred revenue as of December 31, 2008 amounted to $240,436 and will be recognized as revenue over the respective service period~~arrangements.

~~Revenue~~Critical ~~consists~~Accounting of the gross value of billings to clients. The Company reports this revenue gross in accordance with EITF 99-19 because it is responsible for fulfillment of the service, has substantial latitude in setting price and assumes the credit risk for the entire amount of the sale, and it is responsible for the payment of all obligations incurred for sales marketing and commissions.Policies

~~Going~~A ~~Concern~~summary of significant accounting policies is included in Note 2 to the audited consolidated financial statements included elsewhere in this annual report. We believe that the application of these policies on a consistent basis enables our company to provide useful and reliable financial information about the company's operating results and financial condition.

We have generated minimal revenue since our inception on September 12, 2002, and have incurred net losses of approximately $117 million from cash and non-cash activity since inception through December 31, 2011. Our current operations are not an adequate source of cash to fund our current operations and we have relied on funds raised from the sale of our securities to provide sufficient cash to operate our business. The ~~report~~preparation of ~~our independent registered public accounting firm on our~~ financial statements ~~for~~in ~~the~~conformity ~~year~~with ~~ended~~generally ~~December~~accepted ~~31,~~accounting ~~2011~~principles ~~contains~~requires anmanagement ~~explanatory paragraph regarding our ability~~ to ~~continue~~make asestimates ~~a going concern based upon our net losses~~ and ~~cash~~assumptions ~~used~~that affect ~~in operations. Our ability to continue as a going concern is dependent upon our ability to obtain~~ the ~~necessary~~reported ~~financing~~amounts toof ~~meet~~assets ~~our obligations~~ and ~~repay our~~ liabilities ~~when~~and ~~they~~disclosure ~~become~~of ~~due~~contingent assets and toliabilities ~~generate~~at ~~profitable~~the ~~operations~~date inof the ~~future. If we are unable to raise capital as needed, it is possible that we would be required to cease operations. The~~ financial statements ~~included~~and ~~in this report do not include any adjustments to reflect future adverse effects on~~ the ~~recoverability~~reported ~~and~~amounts ~~classification~~ of ~~assets~~revenues ~~or amounts~~ and ~~classification~~expenses ofduring ~~liabilities~~the ~~that~~reporting ~~may~~period. ~~result~~Actual ifresults wemay ~~are~~differ ~~not~~from ~~successful~~those estimates.

~~Item~~Effective 7AJanuary 1, 2006, we adopted the provisions of ASC Topic 718 "Compensation-Stock Compensation" under the modified prospective method. ASC ~~Quantitative~~718 eliminates accounting for share-based compensation transactions using the intrinsic value method prescribed under APB Opinion No. 25, "Accounting for Stock Issued to Employees," and ~~Qualitative~~requires ~~Disclosures~~instead ~~About~~that ~~Market~~such ~~Risk~~transactions be accounted for using a fair-value-based method. Under the modified prospective method, we are required to recognize compensation cost for share-based payments to employees based on their grant-date fair value from the beginning of the fiscal period in which the recognition provisions are first applied. For periods prior to adoption, the financial statements are unchanged, and the pro forma disclosures previously required by ASC 718, will continue to be required under ASC 718 to the extent those amounts differ from those in the Consolidated Statement of Operations.

~~Not applicable to smaller reporting companies.~~28

~~Item~~The 8Company follows the guidance of the Securities and Exchange Commission's Staff Accounting Bulletin No. ~~Financial~~104, "Revenue Recognition in Financial Statements". The Company records revenue when persuasive evidence of an arrangement exists, on-line back-up services have been rendered, the sales price to the customer is fixed or determinable, and ~~Supplementary~~collectability ~~Data~~is reasonably assured. Online backup service fees received in advance are reflected as deferred revenue on the accompanying balance sheet. Deferred revenue as of December 31, 2008 amounted to $240,436 and will be recognized as revenue over the respective service period.

~~Our~~Revenue ~~financial~~consists ~~statements~~of ~~are~~the gross ~~contained~~value of billings to clients. The Company reports this revenue gross in ~~pages~~accordance ~~F-1~~with ~~through~~EITF F99-2219 because it is responsible for fulfillment of the service, ~~which~~has ~~appear~~substantial atlatitude in setting price and assumes the ~~end~~credit risk for the entire amount of the ~~this~~sale, ~~annual~~and ~~report~~it is responsible for the payment of all obligations incurred for sales marketing and commissions.

~~Item~~Going ~~9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~Concern

~~None~~We have generated minimal revenue since our inception on September 12, 2002, and have incurred net losses of approximately $120.3 million from cash and non-cash activity since inception through December 31, 2012. Our current operations are not an adequate source of cash to fund our current operations and we have relied on funds raised from the sale of our securities to provide sufficient cash to operate our business. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2012 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and cash used in operations. Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our liabilities when they become due and to generate profitable operations in the future. If we are unable to raise capital as needed, it is possible that we would be required to cease operations. The financial statements included in this report do not include any adjustments to reflect future adverse effects on the recoverability and classification of assets or amounts and classification of liabilities that may result if we are not successful.

Item ~~9A(T)~~7A. ~~Controls~~Quantitative and ~~Procedures~~ Qualitative Disclosures About Market Risk

~~Evaluation~~Not ofapplicable ~~Disclosure~~to ~~Controls~~smaller ~~and~~reporting ~~Procedures~~companies.

WeItem ~~do not maintain proper “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934~~8. InFinancial ~~designing~~Statements and ~~evaluating~~Supplementary our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this report, our President who also serves as our principal financial and accounting officer, has concluded that our disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is not accumulated and communicated to our management, including our President to allow timely decisions regarding required disclosure.Data

24Our financial statements are contained in pages F-1 through F-22, which appear at the end of this annual report.

Item 9. Changes in ~~Internal~~and ~~Control~~Disagreements ~~over~~with Accountants on Accounting and Financial ~~Reporting~~Disclosure

There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reportingNone.

~~Item 9B. Other Information~~29

~~None~~Item 9A(T). Controls and Procedures

~~PART~~Evaluation ~~III~~of Disclosure Controls and Procedures

~~Item~~We 10do not maintain proper “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. ~~Directors~~In designing and evaluating our disclosure controls and procedures, ~~Executive~~our ~~Officers~~management recognized that disclosure controls and procedures, ~~Corporate~~no ~~Governance~~matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this report, our President who also serves as our principal financial and accounting officer, has concluded that our disclosure controls and procedures were not effective in providing reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods prescribed by SEC rules and regulations, and that such information is not accumulated and communicated to our management, including our President to allow timely decisions regarding required disclosure.

~~Directors~~Changes ~~and~~in ~~Executive~~Internal ~~Officers~~Control over Financial Reporting

~~The~~There ~~following~~have ~~individuals~~been ~~serve~~no aschanges in our ~~executive~~internal ~~officers~~control ~~and~~over ~~members~~financial ofreporting during our ~~Board~~last offiscal ~~Directors:~~quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Name	Age	Position
Cery B. Perle	49	Chief Executive Officer, President and Chairman of the Board
Ivor Newman	47	Chief Operating Officer and Director
Andy Zeinfeld	51	Director

Item 9B. Other Information

~~Cery B~~None. Perle. Mr. Perle has served as our President, CEO and Chairman since February 2004. Mr. Perle co-founded Grass Roots in June of 2002. Mr. Perle has experience in numerous start-up ventures. A primary focus of Mr. Perle's experience has been on the sales and marketing of innovative ideas and products. Prior to Grass Roots, from 2001 to 2002, he was director of Crystal Consulting Group, a business-consulting firm. From 2000 to 2001, he was engaged as a consultant to Rxalternative.com, an alternative healthcare web site. From 1994 to 1998, he was President and Chief Executive Officer of Waldron & Co., a California-based registered broker-dealer, where he established four branch offices in addition to the West Coast based corporate office of the investment firm.

WePART ~~believe that Mr. Perle is qualified to serve on our board of directors due to his experience with numerous start-up ventures and his sales and marketing skills. Mr. Perle is also our founder.~~III

~~Ivor~~Item ~~Newman~~10. ~~Mr. Newman has over 19 years of program management and product marketing experience. Prior to joining Spare Backup in 2007~~Directors, ~~Mr.~~Executive ~~Newman~~Officers ~~was the Worldwide cross line of business (X-Lob) Program Manager for Dell Inc. where he was responsible for the successful creation~~ and ~~implementation~~Corporate of global services programs. Mr. Newman joined Dell in 1999 and was intimately involved with the global services division. Prior to working for Dell, Mr. Newman was the District Director for a professional services corporation in New York City.Governance

WeDirectors ~~believe that Mr. Newman is qualified to serve on our board of directors due to his extensive program management~~ and ~~product~~Executive ~~marketing experience with large companies.~~Officers

~~Andy~~The ~~Zeinfeld.~~following ~~Mr.~~individuals ~~Zeinfeld~~serve isas ~~the~~our ~~Chief~~executive officers ~~Executive Officer for Simplexity LLC since December 2007. From October to December 2007, he was the Chief Executive Officer for InPhonic, Inc~~ and ~~from~~members ~~April~~of ~~2006~~our toBoard ~~October 2007, he served as the President, E-Commerce for InPhonic Inc. During November 2007, he also served as Director~~ of InPhonic, Inc. Prior to April 2006, Inc., Mr. Zeinfeld was Senior Vice President and Chief Retail Services Officer for RadioShack Corporation. On September 9, 2010, Simplexity LLC and Spare Backup entered into a certain Digital Platform Agreement, wherein the parties are marketing the Company’s digital platform services to consumers.Directors:

We believe that Mr. Zeinfeld is qualified to serve on our board of directors due to his extensive cell phone industry experience.

Name	Age	Position
Cery B. Perle	50	Chief Executive Officer, President and Chairman of the Board
Daniel X. Wray	58	Director

~~There~~Cery ~~are~~B. noPerle. Mr. ~~family~~Perle ~~relationships~~has ~~between~~served ~~any~~as our President, CEO and Chairman since February 2004. Mr. Perle co-founded Grass Roots in June of 2002. Mr. Perle has experience in numerous start-up ventures. A primary focus of Mr. Perle's experience has been on the ~~executive~~sales ~~officers~~and marketing of innovative ideas and ~~directors~~products. Prior to Grass Roots, ~~except~~from 2001 to 2002, he was director of Crystal Consulting Group, a business-consulting firm. From 2000 to 2001, he was engaged as ~~set~~a ~~forth~~consultant ~~above~~to Rxalternative.com, ~~Each~~an ~~director~~alternative ishealthcare ~~elected~~web atsite. ~~our~~From ~~annual~~1994 ~~meeting~~to 1998, ofhe ~~stockholders~~was President and ~~holds~~Chief ~~office~~Executive ~~until~~Officer ~~the~~of ~~next~~Waldron ~~annual~~& ~~meeting~~Co., ofa ~~stockholders~~California-based registered broker-dealer, orwhere ~~until~~he established ~~his~~four ~~successor~~branch isoffices ~~elected~~in ~~and~~addition ~~qualified~~to the West Coast based corporate office of the investment firm.

2530

~~Key~~We ~~Employees~~believe that Mr. Perle is qualified to serve on our board of directors due to his experience with numerous start-up ventures and his sales and marketing skills. Mr. Perle is also our founder.

~~Following~~Daniel isX. ~~biographical~~Wray. ~~information~~Mr. Wray was appointed to the Company’s board of directors on ~~those~~January ~~persons~~14, ~~whom~~2012. weMr. ~~consider~~Wray ~~key~~is ~~employees~~currently the Chairman of ~~our~~Biofilm, Inc. (“Biofilm”), a privately held company: based in Vista, California, that manufactures and distributes healthcare products. Prior to becoming Chairman of Biofilm in 2011, Mr. Wray served as CEO of Biofilm, since founding the company in 1991. Prior to founding BioFilm, Mr. Wray has held various positions in the Aerospace industry and holds six patents for technologies he developed during that time. Mr. Wray has a Bachelor’s of Science degree in Chemistry from the University of Arizona.

Name	Age	Position
Cery Perle	49	Chief Executive Officer, President and Chairman of the Board
Ivor Newman	47	Chief Operating Officer and Director

Mr. Wray was appointed to the board of directors to replace Ivor Newman, whose resignation as a board member and from the position of COO became effective as of January 14, 2012.

~~Compliance~~Key ~~with Section 16(A) of the Exchange Act~~Employees

~~Section~~Following ~~16(a)~~is ofbiographical ~~the~~information ~~Securities Exchange Act of 1934 requires that our executive officers, directors and persons who own more than ten percent of a registered class of our equity securities file reports of ownership~~ on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Such executive officers, directors and ten percent stockholders are also required by the SEC rules to furnish to us copies of all Section 16(a) reports that they file. Based solely on its review of the copies of such forms received by us, or written representations from certain reporting those persons ~~that~~whom ~~they were not required to file a Form 5,~~ we ~~believe~~consider ~~that~~key ~~during~~employees ~~the~~of ~~fiscal year ended December 31, 2011,~~ our ~~executive officers, directors and ten percent stockholders complied with all Section 16(a) filing requirements applicable to such persons.~~company:

Code of Business Conduct and Ethics

Name	Age	Position
Cery Perle	50	Chief Executive Officer, President and Chairman of the Board

WeCompliance ~~have~~with ~~adopted~~Section a16(A) ~~Code~~ of Business Conduct and Ethics to provide guiding principles to all of our employees. Our Code of Business Conduct and Ethics does not cover every issue that may arise, but it sets out basic principles to guide our employees and provides that all of our employees must conduct themselves accordingly and seek to avoid even the ~~appearance~~Exchange of improper behavior. Any employee who violates our Code of Business Conduct and Ethics will be subject to disciplinary action, up to an including termination of his or her employment. Generally, our Code of Business Conduct and Ethics provides guidelines regarding:Act

●Section ~~compliance~~16(a) ~~with~~of ~~laws~~the Securities Exchange Act of 1934 requires that our executive officers, ~~rules~~directors and ~~regulations,~~persons ●who ~~conflicts~~own more than ten percent of ~~interest,~~a registered ●class ~~insider~~of ~~trading,~~our ●equity ~~corporate~~securities ~~opportunities,~~file ●reports ~~competition~~of ownership on Form 3 and ~~fair~~changes ~~dealing,~~in ●ownership ~~discrimination~~on ~~and~~Form ~~harassment,~~4 ●or ~~health~~5 ~~and~~with ~~safety,~~the SEC. ●Such ~~record~~executive ~~keeping~~officers, ●directors ~~confidentiality,~~and ●ten ~~protection~~percent ~~and~~stockholders ~~proper~~are ~~use~~also ofrequired ~~company~~by ~~assets,~~the ●SEC ~~payments~~rules to ~~government~~furnish ~~personnel,~~to ●us ~~waivers~~copies of all Section 16(a) reports that they file. Based solely on its review of the ~~Code~~copies of ~~Business~~such ~~Conduct~~forms ~~and~~received ~~Ethics~~by us, ●or written representations from certain reporting ~~any~~persons ~~illegal~~that orthey ~~unethical~~were ~~behavior~~not required to file a Form 5, we believe that during the fiscal year ended December 31, 2012, our executive officers, directors and ●ten ~~compliance~~percent ~~procedures~~stockholders complied with all Section 16(a) filing requirements applicable to such persons.

~~In addition, we have also adopted a~~ Code of ~~Ethics for our Chief Executive Officer and Senior Financial Officers. In addition to our Code of~~ Business Conduct and Ethics~~, our CEO and senior financial officers are also subject to specific policies regarding:~~

●We ~~disclosures~~have ~~made~~adopted ina Code of Business Conduct and Ethics to provide guiding principles to all of our ~~filings~~employees. ~~with~~Our ~~the~~Code ~~SEC~~of Business Conduct and Ethics does not cover every issue that may arise,. ●but ~~deficiencies~~it insets ~~internal~~out ~~controls~~basic orprinciples ~~fraud~~to ~~involving~~guide ~~management~~our oremployees ~~other~~and provides that all of our employees ~~who~~must ~~have~~conduct athemselves ~~significant~~accordingly ~~role~~and inseek ~~our~~to ~~financial~~avoid ~~reporting,~~even ~~disclosure~~the orappearance ~~internal~~of ~~controls,~~improper ●behavior. ~~conflicts~~Any employee who violates our Code of ~~interests,~~Business Conduct and ●Ethics ~~knowledge~~will ofbe ~~material~~subject ~~violations~~to disciplinary action, up to an including termination of ~~securities~~his or ~~other~~her ~~laws~~employment. Generally, ~~rules~~our orCode ~~regulations~~of toBusiness ~~which~~Conduct weand ~~are~~Ethics ~~subject.~~provides guidelines regarding:

A copy of our Code of Business Conduct and Ethics has been filed with the Securities and Exchange Commission as an exhibit to this annual report. We will provide a copy, without charge, to any person desiring a copy of the Code of Business Conduct and Ethics, by written request to, 990 Ironwood Drive, Minden, NV 89423, Attention: Corporate Secretary.31

26● compliance with laws, rules and regulations, ● conflicts of interest, ● insider trading, ● corporate opportunities, ● competition and fair dealing, ● discrimination and harassment, ● health and safety, ● record keeping, ● confidentiality, ● protection and proper use of company assets, ● payments to government personnel, ● waivers of the Code of Business Conduct and Ethics, ● reporting any illegal or unethical behavior, and ● compliance procedures.

~~Committees~~In addition, we have also adopted a Code of ~~the~~Ethics ~~Board~~for our Chief Executive Officer and Senior Financial Officers. In addition to our Code of ~~Directors~~Business Conduct and Ethics, our CEO and senior financial officers are also subject to specific policies regarding:

~~Our~~● ~~Board~~disclosures ofmade ~~Directors~~in ~~has~~our ~~not~~filings ~~established~~with ~~any~~the ~~committees~~SEC,. ~~including~~● andeficiencies ~~Audit~~in ~~Committee,~~internal acontrols ~~Compensation Committee~~ or afraud ~~Nominating~~involving ~~Committee,~~management ~~any~~or ~~committee~~other ~~performing~~employees awho ~~similar~~have ~~function. The functions of those committees are being undertaken by the entire board as~~ a ~~whole.~~significant ~~Because~~role ofin ~~the small size of~~ our ~~company~~financial ~~and~~reporting, ~~the~~disclosure ~~even~~or ~~number~~internal ~~of independent directors~~controls, ~~our~~● ~~Board~~conflicts of ~~Directors~~interests, ~~believes~~and ~~that~~● ~~the~~knowledge ~~establishment~~ of ~~committees~~material violations of ~~the~~securities ~~Board~~or ~~would~~other ~~not~~laws, ~~provide~~rules ~~any~~or ~~benefits~~regulations to ~~our~~which ~~company~~we ~~and~~are ~~could be considered more form than substance~~subject.

WeA docopy ~~not~~of ~~have~~our aCode ~~policy regarding the consideration~~ of Business ~~any~~Conduct ~~director~~and ~~candidates~~Ethics ~~which~~has ~~may~~been befiled ~~recommended~~with ~~by our stockholders, including~~ the ~~minimum~~Securities ~~qualifications~~and ~~for~~Exchange ~~director~~Commission ~~candidates,~~as ~~nor~~an ~~has~~exhibit ~~our~~to ~~Board~~this ofannual ~~Directors established a process for identifying and evaluating director nominees~~report. We will ~~have~~provide ~~not adopted~~ a ~~policy~~copy, ~~regarding~~without ~~the handling of any potential recommendation of director candidates by our stockholders~~charge, ~~including the procedures~~ to ~~be followed. Our Board has not considered or adopted~~ any ofperson ~~these~~desiring ~~policies as we have never received~~ a ~~recommendation~~copy ~~from~~of ~~any~~the ~~stockholder~~Code ~~for any candidate to serve on our Board~~ of ~~Directors.~~Business ~~Given~~Conduct ~~our relative size~~ and ~~lack~~Ethics, ofby ~~directors~~written ~~and~~request to, ~~officers~~990 ~~insurance~~Ironwood ~~coverage~~Drive, ~~we do not anticipate that any of our stockholders will make such a recommendation in the near future. While there have been no nominations of additional directors proposed~~Minden, inNV ~~the event such a proposal is made~~89423, ~~all~~Attention: ~~members~~Corporate ~~of our Board will participate in the consideration of director nominees~~Secretary.

~~None~~Committees of ~~our directors is an "audit committee financial expert" within~~ the ~~meaning of Item 401(e) of Regulation S-B. In general, an "audit committee financial expert" is an individual member of the audit committee or~~ Board of Directors ~~who:~~

●Our ~~understands~~Board ~~generally~~of ~~accepted~~Directors has ~~accounting~~not ~~principles~~established ~~and~~any ~~financial statements~~committees, ●including isan ~~able~~Audit toCommittee, ~~assess~~a ~~the~~Compensation ~~general~~Committee ~~application~~or ofa ~~such~~Nominating ~~principles~~Committee, inany ~~connection~~committee performing ~~with~~a ~~accounting~~similar ~~for~~function. ~~estimates,~~The ~~accruals~~functions ~~and~~of ~~reserves,~~those ●committees ~~has~~are ~~experience~~being ~~preparing,~~undertaken ~~auditing,~~by ~~analyzing~~the orentire ~~evaluating~~board ~~financial~~as ~~statements~~a ~~comparable~~whole. toBecause of the ~~breadth~~small size of our company and ~~complexity~~the toeven ~~our~~number ~~financial~~of ~~statements~~independent directors, ●our ~~understands~~Board ~~internal~~of ~~controls~~Directors ~~over~~believes ~~financial~~that ~~reporting,~~the establishment of committees of the Board would not provide any benefits to our company and ●could ~~understands~~be ~~audit~~considered ~~committee~~more ~~functions~~form than substance.

~~Since~~We ~~our~~do ~~formation~~not we have ~~relied~~a ~~upon~~policy regarding the ~~personal~~consideration ~~relationships~~ of ~~our~~any ~~CEO~~director tocandidates ~~attract~~which ~~individuals~~may tobe ~~our~~recommended ~~Board~~by ~~of Directors. While we would prefer that one or more of~~ our ~~directors~~stockholders, beincluding anthe ~~audit~~minimum ~~committee~~qualifications for ~~financial~~director ~~expert~~candidates, ~~the~~nor ~~individuals~~has ~~whom we have been able to attract to~~ our Board doof ~~not~~Directors ~~have~~established ~~the~~a ~~requisite~~process ~~professional~~for ~~backgrounds.~~identifying Asand ~~with~~evaluating ~~most~~director ~~small~~nominees. We ~~companies~~have ~~until~~not ~~such~~adopted ~~time our company further develops its business, achieves~~ a ~~stronger~~policy ~~revenue~~regarding ~~base~~the ~~and~~handling ~~has~~of ~~sufficient~~any ~~working~~potential ~~capital~~recommendation toof ~~purchase~~director ~~directors~~candidates ~~and~~by ~~officers~~our ~~insurance~~stockholders, including wethe doprocedures ~~not have any immediate prospects~~ to ~~attract~~be ~~independent directors~~followed. ~~When~~Our weBoard ~~are~~has ~~able~~not toconsidered ~~expand~~or ~~our~~adopted ~~Board~~any of ~~Directors~~these topolicies ~~include~~as ~~one~~we orhave ~~more~~never ~~additional~~received a ~~independent~~recommendation ~~directors,~~from weany ~~intend~~stockholder tofor ~~establish~~any ancandidate ~~Audit~~to ~~Committee~~serve ofon our Board of Directors. ItGiven is our ~~intention~~relative ~~that~~size, ~~one~~we ordo ~~more~~not ofanticipate ~~these~~that ~~additional~~any ~~independent~~of ~~directors~~our stockholders will ~~also~~make ~~qualify~~such asa anrecommendation ~~audit~~in the ~~committee~~near ~~financial expert~~future. ~~Our~~While ~~securities~~there ~~are~~have ~~not~~been ~~quoted~~no onnominations ~~an exchange that has requirements that a majority~~ of ~~our~~additional ~~Board~~directors ~~members~~proposed, bein ~~independent~~the ~~and~~event wesuch ~~are~~a ~~not~~proposal ~~currently~~is ~~otherwise subject to any law~~made, ~~rule or regulation requiring that~~ all ormembers ~~any portion~~ of our Board ofwill ~~Directors~~participate ~~include~~in ~~"independent"~~the ~~directors,~~consideration ~~nor are we required to establish or maintain an Audit Committee or other committee~~ of ~~our~~director ~~Board of Directors~~nominees.

~~Item 11. Executive Compensation~~32

~~The~~None ~~following~~of ~~table~~our ~~summarizes~~directors is ~~all~~an ~~compensation~~"audit ~~recorded~~committee byfinancial usexpert" inwithin the ~~last~~meaning ~~completed~~of ~~fiscal~~Item ~~year~~401(e) ~~for~~of Regulation S-B. In general, an "audit committee financial expert" is an individual member of the audit committee or Board of Directors who:

● ~~our~~understands ~~principal~~generally ~~executive~~accepted ~~officer~~accounting orprinciples ~~other~~and ~~individual~~financial ~~serving in a similar capacity~~statements, ● ~~our~~is ~~two~~able ~~most~~to ~~highly~~assess ~~compensated~~the ~~executive~~general ~~officers~~application ~~other~~of ~~than~~such ~~our~~principles ~~principal~~in ~~executive~~connection ~~officer~~with ~~who~~accounting ~~were~~for ~~serving~~estimates, asaccruals ~~executive~~and ~~officers~~reserves, at● ~~December~~has 31experience preparing, ~~2011~~auditing, asanalyzing ~~that~~or ~~term~~evaluating isfinancial ~~defined~~statements ~~under~~comparable ~~Rule~~to ~~3b-7 of~~ the ~~Securities~~breadth ~~Exchange~~and ~~Act~~complexity ofto ~~1934. In the case of~~ our ~~company~~financial ~~this~~statements, ~~includes~~● ~~two~~understands ~~key~~internal ~~employees~~controls ofover ~~our~~financial ~~company~~reporting, and ● upunderstands toaudit ~~two~~committee ~~additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2011~~functions.

27Since our formation we have relied upon the personal relationships of our CEO to attract individuals to our Board of Directors. While we would prefer that one or more of our directors be an audit committee financial expert, the individuals whom we have been able to attract to our Board do not have the requisite professional backgrounds. As with most small companies until such time our company further develops its business, achieves a stronger revenue base and has sufficient working capital to purchase directors and officers insurance, we do not have any immediate prospects to attract independent directors. When we are able to expand our Board of Directors to include one or more additional independent directors, we intend to establish an Audit Committee of our Board of Directors. It is our intention that one or more of these additional independent directors will also qualify as an audit committee financial expert. Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include "independent" directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.

~~For~~Item ~~definitional purposes in this annual report these individuals are sometimes referred to as the "named executive officers~~11." ~~The~~Executive ~~value attributable to any option awards is computed in accordance with ASC 718.~~Compensation

Summary Compensation Table
Name and Principal Position	Year	Salary ($)		Stock Awards ($)		Option Awards ($) (1)			All Other Compensation		Total ($)
Cery Perle, President and	2010		366,337		-		372,950	(4)		66,624		805,911
Chief Executive Officer (2)	2011		399,300				25,000	(5)		99,237		505,069
Ivor Newman, Vice President	2010		206,250		-		101,800	(8)		6,624		304,549
of Operations (6)	2011		127,500				25,000	(9)		18,468		170,968
Terry Bahr (10)	2011		132,917		-		-			-		132,917
Prakash Phalke (11)	2011		106,874		-		-			-		106,874

The following table summarizes all compensation recorded by us in the last completed fiscal year for

~~(1) The~~● ~~dollar~~our ~~value~~principal ~~recognized~~executive ~~for~~officer ~~the~~or ~~stock~~other ~~option~~individual ~~awards~~serving in a similar capacity, ● our one most highly compensated executive officers other than our principal executive officer who was ~~determined~~serving inas ~~accordance~~executive ~~with~~officers ~~ASC~~at ~~718.~~December ~~For~~31, a2012 ~~disclosure~~as that term is defined under Rule 3b-7 of the ~~assumptions~~Securities ~~made~~Exchange inAct of 1934. In the ~~valuation~~case ~~please~~of ~~refer~~our tocompany ~~footnote~~this 10includes inone key employee of our ~~consolidated~~company, ~~financial~~and ~~statements~~● ~~filed~~up ~~under~~to ~~Item~~one 8additional ofindividuals ~~this~~for ~~Annual~~whom ~~Report~~disclosure onwould ~~Form~~have ~~10-K~~been required but for the fact that the individual was not serving as an executive officer at December 31, 2011.

(2) All other compensation consists of $60,000 in car allowance during 2010 and 2011, respectively, vacation pay of $20,769 during 2011, and health insurance of $6,624 and $18,468 during 2010 and 2011, respectively.33

~~(3) Options~~For todefinitional ~~purchase~~purposes in ~~3,100,000~~this ~~shares~~annual ofreport ~~our~~these ~~common~~individuals ~~stock~~are atsometimes anreferred ~~exercise~~to ~~price~~as ~~ranging~~the ~~from~~"named ~~$0.01~~executive ~~to $0~~officers.18" ~~per~~The ~~share,~~value ~~vesting~~attributable to atany aoption ~~range~~awards ~~from~~is atcomputed ~~the~~in ~~date~~accordance ofwith ~~grant~~ASC ~~to over 24 months~~718.

(4) Options to purchase 500,000 shares of our common stock at an exercise price of $0.08, vesting immediately.

Summary Compensation Table
Name and Principal Position	Year	Salary ($)		Stock Awards ($)		Option Awards ($) (1)		All Other Compensation		Total ($)
Cery Perle, President and	2011		399,300		-		25,000		99,237		505,069
Chief Executive Officer	2012		298,526				42,000		0		340,526

(51) ~~All~~The dollar ~~other~~value ~~compensation~~recognized ~~consists~~for the stock option awards was determined in accordance with ASC 718. For a disclosure of ~~health~~the ~~insurance~~assumptions made ~~during~~in ~~2010~~the ~~and~~valuation ~~2011~~please refer to footnote 10 in our consolidated financial statements filed under Item 8 of this Annual Report on Form 10-K.

~~(6) Options~~Employment toAgreements ~~purchase~~and ~~1,850,000~~Narrative ~~shares~~Regarding ofExecutive ~~our common stock at an exercise price ranging from $0.15 to $0.20 per share, vesting at the date of grant.~~Compensation

~~(7) Options~~Employment toAgreement ~~purchase~~with ~~500,000~~Cery ~~shares of our common stock at an exercise price of $0.08, vesting immediately.~~Perle

~~(8)~~ On January 1, 2012, Cery Perle’s employment agreement automatically renewed for an additional year. Under the terms of this agreement, we currently pay Mr. ~~Bahr~~Perle ~~did~~an ~~not~~annual ~~serve~~base salary of $363,000. We initially granted him an option to purchase 1,000,000 shares of our common stock at an exercise price of $0.01 per share as additional compensation, which vest immediately. During 2010, the Board Approved granted him options to purchase a total of 3,100,000 shares of our common stock at an ~~executive~~exercise ~~officer~~prices ranging from $0.01 to $0.18 per share which were valued at $372,950. In addition, during fiscal ~~2011~~2008, 2009 and 2010 we paid him certain additional compensation set forth in the above table which was approved by our Board of Directors. The agreement also provides for an automobile allowance which is presently $5,000 per month, paid vacation, fringe benefits commensurate with his duties and responsibilities and benefits in the event of disability, as well as containing certain non-disclosure and non-competition provisions. Under the terms of the agreement, we may terminate Mr. Perle's employment either with or without cause. If the agreement is terminated by us without good cause, or by Mr. Perle with cause, we would be obligated to pay him his base salary though the end of the term of the agreement, continue his benefits through the end of the term and all options would continue to vest during the remaining period of the term. To the extent that Mr. Perle is terminated for cause, or he voluntarily resigns, no severance benefits will be paid.

~~(9) Mr. Phalke did not serve as an executive officer during fiscal 2011.~~34

~~Employment~~Outstanding ~~Agreements~~Equity ~~and~~Awards ~~Narrative~~at ~~Regarding~~Fiscal ~~Executive Compensation~~Year End

~~Employment~~The ~~Agreement~~following ~~with~~table ~~Cery~~provides information ~~Perle~~concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2012:

On January 1, 2010, Cery Perle’s employment agreement automatically renewed for an additional year. Under the terms of this agreement, we currently pay Mr. Perle an annual base salary of $363,000. We initially granted him an option to purchase 1,000,000 shares of our common stock at an exercise price of $0.01 per share as additional compensation, which vest immediately. During 2010, the Board Approved granted him options to purchase a total of 3,100,000 shares of our common stock at an exercise prices ranging from $0.01 to $0.18 per share which were valued at $372,950. In addition, during fiscal 2008, 2009 and 2010 we paid him certain additional compensation set forth in the above table which was approved by our Board of Directors. The agreement also provides for an automobile allowance which is presently $5,000 per month, paid vacation, fringe benefits commensurate with his duties and responsibilities and benefits in the event of disability, as well as containing certain non-disclosure and non-competition provisions. Under the terms of the agreement, we may terminate Mr. Perle's employment either with or without cause. If the agreement is terminated by us without good cause, or by Mr. Perle with cause, we would be obligated to pay him his base salary though the end of the term of the agreement, continue his benefits through the end of the term and all options would continue to vest during the remaining period of the term. To the extent that Mr. Perle is terminated for cause, or he voluntarily resigns, no severance benefits will be paid.

Option Awards									Stock Awards
Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable	Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)	Option exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)		Market value of shares or units of stock that have not vested ($)	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
Cery B. Perle		2,000,000				0.18	1/15/2016
		500,000				0.18	5/31/2016
		118,000				0.18	7/26/2016
		50,000				0.18	10/12/2016
		100,000				0.18	1/9/2012
		500,000				0.18	4/5/2012
		100,000				0.18	9/26/2012
		2,000,000				0.18	1/16/2013
		500,000				0.18	3/26/2013
		100,000				0.11	10/15/2013
		150,000				0.18	1/23/2014
		500,000				0.18	2/11/2014
		100,000				0.15	6/18/2014
		1,500,000	500,000			0.18	7/13/2014
		500,000				0.165	2/12/2015
		427,397	572,603			0.14	2/22/2015
		100,000				0.18	3/22/2015
		500,000				0.14	7/1/2015
		1,000,000				0.01	10/20/2015
		500,000				0.08	4/19/2016

2835

~~How~~2002 ~~Mr.~~Stock ~~Newman's~~Option ~~compensation~~and ~~was~~Stock ~~determined~~Award Plan

On October 20, 2010, we entered into an employment agreement with Mr. Newman to serve as our Chief Operating Officer and Director. Under the terms of this agreement, Mr. Newman's base salary was increased to $250,000. We granted him an option to purchase 500,000 shares of our common stock at an exercise price of $0.12 per share as additional compensation. This option vested immediately. Mr. Newman's employment with the company is "at will" basis.Overview

~~Outstanding~~On ~~Equity~~August ~~Awards~~9, at2002, ~~Fiscal~~our board ~~Year~~of ~~End~~directors authorized, and holders of a majority of our outstanding common stock approved and adopted, our 2002 Stock Option and Stock Award Plan covering 1,000,000 shares of common stock. On April 20, 2004, the plan was amended to increase the number of shares covered by the plan to 12,000,000 shares to accommodate grants previously provided under the Grass Roots Communications, Inc. compensation program, and on May 31, 2006 the plan was again amended to further increase the number of shares covered by the plan to 27,000,000 shares.

The ~~following~~purpose ~~table~~of ~~provides~~the ~~information~~plan is ~~concerning~~to ~~unexercised~~encourage ~~options~~stock ownership by our officers, ~~stock~~directors, ~~that~~key ~~has~~employees ~~not~~and ~~vested~~consultants, and ~~equity~~to give such persons a greater personal interest in the success of our business and an added incentive ~~plan~~to ~~awards~~continue ~~for~~to ~~each~~advance ~~named~~and ~~executive~~contribute ~~officer~~to ~~outstanding~~us. asOur board of ~~December~~directors, 31or a committee of the board, ~~2011:~~will administer the Plan including, without limitation, the selection of the persons who will be awarded stock grants and granted options, the type of options to be granted, the number of shares subject to each option and the exercise price.

Option Awards									Stock Awards
Name	Number of securities underlying unexercised options (#) exercisable		Number of securities underlying unexercised options (#) unexercisable		Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)	Option exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)	Market value of shares or units of stock that have not vested ($)	Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)	Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested (#)
Cery B. Perle		2,000,000					0.18	01/15/16
		500,000					0.18	05/31/16
		118,000					0.18	07/26/16
		50,000					0.18	10/12/16
		100,000					0.18	01/09/12
		500,000					0.18	04/05/12
		100,000					0.18	09/26/12
		2,000,000					0.18	01/16/13
		500,000					0.18	03/26/13
		100,000					0.11	10/15/13
		150,000					0.18	01/23/14
		500,000					0.18	02/11/14
		100,000					0.15	06/18/14
		1,500,000		500,000			0.18	07/13/14
		500,000					0.165	2/12/15
		427,397		572,603			0.14	2/22/15
		100,000					0.18	3/22/15
		500,000					0.14	7/1/15
		1,000,000					0.01	10/20/15
		500,000					0.08	04/19/16
Ivor Newman		100,000					0.30	07/27/16
		350,000					0.30	08/01/16
		200,000					0.30	08/23/16
		50,000					0.30	10/13/16
		100,000					0.30	01/09/12
		100,000					0.30	05/04/12
		100,000					0.30	06/21/12
		100,000					0.30	09/13/12
		100,000					0.30	10/19/12
		100,000					0.30	01/18/13
		100,000					0.11	10/15/13
		150,000					0.18	01/23/14
		200,000					0.15	06/18/14
		1,500,000					0.20	11/10/14
		1,000,000					0.01	10/20/15
		500,000					0.12	10/20/13
		500,000					0.08	04/19/16

Plan options may either be options qualifying as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, or non-qualified options. In addition, the plan allows for the inclusion of a reload option provision, which permits an eligible person to pay the exercise price of the option with shares of common stock owned by the eligible person and receive a new option to purchase shares of common stock equal in number to the tendered shares. Furthermore, compensatory stock amounts may also be issued. Any incentive option granted under the plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, but the exercise price of any incentive option granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The term of each plan option and the manner in which it may be exercised is determined by the board of directors or the committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant.

29On January 14, 2010, the board approved the repricing of all options granted to our employees and directors. The new exercise price for all options is $0.18.

~~2002 Stock Option and Stock Award Plan~~Eligibility

~~Overview~~Our officers, directors, key employees and consultants are eligible to receive stock grants and non-qualified options under the plan. Only our employees are eligible to receive incentive options.

On August 9, 2002, our board of directors authorized, and holders of a majority of our outstanding common stock approved and adopted, our 2002 Stock Option and Stock Award Plan covering 1,000,000 shares of common stock. On April 20, 2004, the plan was amended to increase the number of shares covered by the plan to 12,000,000 shares to accommodate grants previously provided under the Grass Roots Communications, Inc. compensation program, and on May 31, 2006 the plan was again amended to further increase the number of shares covered by the plan to 27,000,000 shares.Administration

The ~~purpose~~plan will be administered by our board of directors or an underlying committee. The board of directors or the ~~plan~~committee isdetermines tofrom ~~encourage~~time ~~stock~~to ~~ownership~~time bythose of our officers, directors, key employees and consultants, ~~and~~ to ~~give~~whom ~~such~~stock ~~persons~~grants aor ~~greater~~plan ~~personal~~options ~~interest~~are into be granted, the ~~success~~terms and provisions of ~~our~~the ~~business~~respective ~~and~~option anagreements, ~~added~~the ~~incentive~~time toor ~~continue~~times toat ~~advance~~which ~~and~~such ~~contribute~~options toshall ~~us.~~be ~~Our~~granted, ~~board~~the type of ~~directors~~options to be granted, orthe adates ~~committee~~such ofplan ~~the~~options ~~board~~become exercisable, ~~will~~the ~~administer~~number ~~the~~of ~~Plan~~shares ~~including,~~subject ~~without~~to ~~limitation~~each option, the ~~selection~~purchase price of ~~the~~such ~~persons~~shares ~~who~~and ~~will~~the beform ~~awarded~~of ~~stock~~payment ~~grants~~of ~~and~~such ~~granted~~purchase ~~options,~~price. ~~the~~All ~~type~~other ofquestions ~~options~~relating to bethe ~~granted~~administration of the plan, and the ~~number~~interpretation of ~~shares~~the ~~subject~~provisions tothereof ~~each~~and of the related option ~~and~~agreements, are resolved by the ~~exercise~~board ~~price~~of directors or committee.

OnShares ~~January~~Subject ~~14, 2010, the board approved the repricing of all options granted~~ to ~~our employees and directors. The new exercise price for all options is $0.18.~~Awards

~~Eligibility~~We have currently reserved 27,000,000 of our authorized but unissued shares of common stock for issuance under the plan, and a maximum of 27,000,000 shares may be issued, unless the plan is subsequently amended, subject to adjustment in the event of certain changes in our capitalization, without further action by our board of directors and stockholders, as required. Subject to the limitation on the aggregate number of shares issuable under the plan, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Shares used for stock grants and plan options may be authorized and unissued shares or shares reacquired by us, including shares purchased in the open market. Shares covered by plan options which terminate unexercised will again become available for grant as additional options, without decreasing the maximum number of shares issuable under the plan, although such shares may also be used by us for other purposes.

~~Our~~The ~~officers~~plan provides that, if ~~directors~~our outstanding shares are increased, ~~key~~decreased, ~~employees~~exchanged ~~and~~or ~~consultants~~otherwise ~~are~~adjusted ~~eligible~~due to ~~receive~~a ~~stock~~share ~~grants~~dividend, forward or reverse share split, recapitalization, reorganization, merger, consolidation, combination or exchange of shares, an appropriate and ~~non-qualified~~proportionate adjustment will be made in the number or kind of shares subject to the plan or subject to unexercised options and in the purchase price per share under such options. Any adjustment, however, does not change the ~~plan~~total purchase price payable for the shares subject to outstanding options. ~~Only~~In the event of our ~~employees~~proposed ~~are~~dissolution ~~eligible~~or liquidation, a proposed sale of all or substantially all of our assets, a merger or tender offer for our shares of common stock, the board of directors may declare that each option granted under the Plan terminates as of a date to ~~receive~~be ~~incentive~~fixed by the board of directors; provided that not less than 30 days written notice of the date so fixed shall be given to each participant holding an option, and each such participant shall have the right, during the period of 30 days preceding such termination, to exercise the participant's option, in whole or in part, including as to options not otherwise exercisable.

~~Administration~~Terms of Exercise

The plan ~~will~~provides ~~be administered by our board of directors or an underlying committee. The board of directors or~~ that the ~~committee determines from time to time those of our officers, directors, key employees and consultants to whom stock grants or plan~~ options ~~are to be~~ granted, ~~the~~there ~~terms~~under ~~and provisions of the respective option agreements, the time or times at which such options~~ shall be ~~granted, the type of options to be granted, the dates such plan options become~~ exercisable, ~~the~~from ~~number~~time ~~of shares subject~~ to ~~each~~time ~~option,~~in ~~the~~whole ~~purchase~~or ~~price~~in ~~of such shares and the form of payment of such purchase price. All other questions relating to the administration of the plan~~part, ~~and~~unless ~~the~~otherwise ~~interpretation~~specified ofby the committee ~~provisions~~or ~~thereof and of the related option agreements, are resolved~~ by the board of directors ~~or committee~~.

~~Shares~~The ~~Subject~~plan provides that, with respect to ~~Awards~~incentive stock options, the aggregate fair market value (determined as of the time the option is granted) of the shares of common stock, with respect to which incentive stock options are first exercisable by any option holder during any calendar year shall not exceed $100,000.

WeExercise have currently reserved 27,000,000 of our authorized but unissued shares of common stock for issuance under the plan, and a maximum of 27,000,000 shares may be issued, unless the plan is subsequently amended, subject to adjustment in the event of certain changes in our capitalization, without further action by our board of directors and stockholders, as required. Subject to the limitation on the aggregate number of shares issuable under the plan, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Shares used for stock grants and plan options may be authorized and unissued shares or shares reacquired by us, including shares purchased in the open market. Shares covered by plan options which terminate unexercised will again become available for grant as additional options, without decreasing the maximum number of shares issuable under the plan, although such shares may also be used by us for other purposes.Price

The ~~plan~~purchase ~~provides~~price ~~that, if our outstanding~~ for shares ~~are~~subject ~~increased,~~to ~~decreased,~~incentive ~~exchanged~~stock oroptions ~~otherwise~~must ~~adjusted~~be ~~due~~at toleast a100% ~~share~~of ~~dividend,~~the ~~forward~~fair ormarket ~~reverse~~value ~~share~~of ~~split,~~our ~~recapitalization,~~common ~~reorganization,~~stock ~~merger,~~on ~~consolidation,~~the ~~combination~~date orthe ~~exchange~~option is ~~of shares~~granted, anexcept ~~appropriate~~that ~~and~~the ~~proportionate~~purchase ~~adjustment~~price ~~will~~must be ~~made~~at inleast ~~the~~110% ~~number or kind~~ of ~~shares subject to~~ the ~~plan~~fair ormarket ~~subject~~value ~~to unexercised options and~~ in the ~~purchase~~case ~~price~~of ~~per~~an ~~share~~incentive ~~under~~option ~~such~~granted to ~~options.~~a ~~Any~~person ~~adjustment,~~who ~~however,~~is ~~does~~a ~~not~~"10% ~~change~~stockholder." ~~the~~A ~~total~~"10% ~~purchase~~stockholder" ~~price~~is ~~payable~~a ~~for~~person ~~the~~who ~~shares~~owns, ~~subject~~within ~~to outstanding options. In~~ the ~~event~~meaning of ~~our~~Section 422(b)(6) ~~proposed~~of ~~dissolution~~the orInternal ~~liquidation,~~Revenue aCode ~~proposed~~of ~~sale~~1986, ofat ~~all~~the ortime ~~substantially~~the ~~all~~incentive ofoption ~~our~~is ~~assets~~granted, ashares ~~merger~~possessing ormore ~~tender~~than ~~offer~~10% ~~for our shares~~ of the ~~common~~total ~~stock,~~combined ~~the~~voting ~~board~~power of ~~directors~~all ~~may~~classes ~~declare~~of ~~that~~our ~~each~~outstanding ~~option~~shares. ~~granted~~The ~~under~~plan ~~the~~provides ~~Plan~~that ~~terminates~~fair asmarket ofvalue ashall ~~date to~~ be ~~fixed~~ determined by the board of directors; ~~provided~~or ~~that~~the ~~not~~committee ~~less~~in ~~than~~accordance 30with ~~days~~procedures ~~written~~which ~~notice~~it ofmay ~~the~~from ~~date~~time ~~so fixed shall be given~~ to ~~each~~time ~~participant~~establish. ~~holding~~If anthe ~~option,~~purchase price ~~and~~is ~~each~~paid ~~such~~with ~~participant~~consideration ~~shall~~other ~~have~~than ~~the right~~cash, ~~during~~ the ~~period~~Board ofor 30the ~~days~~Committee ~~preceding~~shall ~~such~~determine ~~termination, to exercise~~ the ~~participant's~~fair ~~option,~~value inof ~~whole~~such ~~or in part, including as~~ consideration to ~~options~~us ~~not~~in ~~otherwise~~monetary ~~exercisable~~terms.

~~Terms~~The exercise price of non-qualified ~~Exercise~~options shall be determined by the board of directors or the committee, but shall not be less than the par value of our common stock on the date the option is granted.

The ~~plan~~per ~~provides~~share ~~that~~purchase price ~~the~~of ~~options~~shares ~~granted~~issuable ~~there~~upon ~~under~~exercise ~~shall~~of bea ~~exercisable~~plan ~~from~~option ~~time~~may tobe ~~time~~adjusted in ~~whole~~the orevent of certain changes in ~~part~~our capitalization, but ~~unless~~no ~~otherwise~~such ~~specified~~adjustment byshall change the ~~committee~~total orpurchase byprice payable upon the ~~board~~exercise in full of ~~directors~~options granted under the plan.

3037

~~The~~Manner ~~plan provides that, with respect to incentive stock options, the aggregate fair market value (determined as~~ of the time the option is granted) of the shares of common stock, with respect to which incentive stock options are first exercisable by any option holder during any calendar year shall not exceed $100,000.Exercise

~~Exercise~~Plan ~~Price~~options are exercisable by delivery of written notice to us stating the number of shares with respect to which the option is being exercised, together with full payment of the purchase price therefore. Payment shall be in cash, checks, certified or bank cashier's checks, promissory notes secured by the shares issued through exercise of the related options, shares of common stock or in such other form or combination of forms which shall be acceptable to the board of directors or the committee, provided that any loan or guarantee by us of the purchase price may only be made upon resolution of the board of directors or committee that such loan or guarantee is reasonably expected to benefit us.

~~The~~Option purchase price for shares subject to incentive stock options must be at least 100% of the fair market value of our common stock on the date the option is granted, except that the purchase price must be at least 110% of the fair market value in the case of an incentive option granted to a person who is a "10% stockholder." A "10% stockholder" is a person who owns, within the meaning of Section 422(b)(6) of the Internal Revenue Code of 1986, at the time the incentive option is granted, shares possessing more than 10% of the total combined voting power of all classes of our outstanding shares. The plan provides that fair market value shall be determined by the board of directors or the committee in accordance with procedures which it may from time to time establish. If the purchase price is paid with consideration other than cash, the Board or the Committee shall determine the fair value of such consideration to us in monetary terms.Period

~~The~~All ~~exercise~~incentive ~~price~~stock ~~of non-qualified~~ options shall beexpire ~~determined~~on byor before the ~~board~~tenth anniversary of ~~directors~~the ordate the ~~committee,~~option ~~but~~is ~~shall~~granted ~~not~~except beas ~~less~~limited ~~than~~above. However, in the ~~par~~case of ~~value~~incentive stock options granted to an eligible employee owning more than 10% of ~~our~~the common stock, onthese options will expire no later than five years after the date of the ~~option~~grant. isNon-qualified ~~granted~~options shall expire 10 years and one day from the date of grant unless otherwise provided under the terms of the option grant.

The per share purchase price of shares issuable upon exercise of a plan option may be adjusted in the event of certain changes in our capitalization, but no such adjustment shall change the total purchase price payable upon the exercise in full of options granted under the plan.Termination

~~Manner~~All plan options are non-assignable and nontransferable, except by will or by the laws of ~~Exercise~~descent and distribution, and during the lifetime of the optionee, may be exercised only by such optionee. If an optionee shall die while our employee or within three months after termination of employment by us because of disability, or retirement or otherwise, such options may be exercised, to the extent that the optionee shall have been entitled to do so on the date of death or termination of employment, by the person or persons to whom the optionee's right under the option pass by will or applicable law, or if no such person has such right, by his executors or administrators.

~~Plan~~In ~~options~~the ~~are~~event ~~exercisable~~of ~~by delivery~~ termination of ~~written~~employment ~~notice~~because ~~to us stating the number~~ of ~~shares~~death ~~with~~while ~~respect~~an toemployee ~~which~~or ~~the~~because ~~option~~of ~~is being exercised~~disability, ~~together with full payment of~~ the ~~purchase~~optionee's ~~price~~options ~~therefore.~~may ~~Payment shall~~ be inexercised ~~cash,~~not ~~checks,~~later ~~certified~~than the orexpiration ~~bank~~date ~~cashier's~~specified ~~checks,~~in ~~promissory notes secured by~~ the ~~shares~~option ~~issued~~or ~~through~~one ~~exercise~~year ofafter the ~~related~~optionee's ~~options~~death, ~~shares~~whichever ofdate ~~common~~is ~~stock~~earlier, or in ~~such~~the ~~other~~event of ~~form~~termination ~~or combination~~ of ~~forms~~employment ~~which~~because ~~shall be acceptable to the board~~ of ~~directors~~retirement or ~~the committee~~otherwise, ~~provided~~not ~~that~~later ~~any~~than ~~loan or guarantee by us of~~ the ~~purchase~~expiration ~~price~~date ~~may~~specified ~~only~~in ~~be made upon resolution of~~ the ~~board~~option ~~of directors~~ or one ~~committee~~year ~~that~~after ~~such~~the ~~loan~~optionee's ordeath, ~~guarantee~~whichever date is ~~reasonably expected to benefit us~~earlier.

~~Option~~If ~~Period~~an optionee's employment by us terminates because of disability and such optionee has not died within the following three months, the options may be exercised, to the extent that the optionee shall have been entitled to do so at the date of the termination of employment, at any time, or from time to time, but not later than the expiration date specified in the option or one year after termination of employment, whichever date is earlier.

~~All~~If ~~incentive~~an ~~stock~~optionee's ~~options~~ employment shall ~~expire~~terminate onfor orany ~~before~~reason ~~the~~other ~~tenth~~than ~~anniversary~~death ofor ~~the~~disability, ~~date~~optionee may exercise the ~~option~~options isto ~~granted~~the ~~except~~same asextent ~~limited~~that ~~above.~~the ~~However,~~options were inexercisable on the ~~case~~date of ~~incentive~~termination, ~~stock~~for ~~options~~up ~~granted~~ to anthree ~~eligible~~months ~~employee~~following ~~owning~~such ~~more~~termination, ~~than~~or ~~10%~~on ofor before the ~~common~~expiration date ~~stock,~~of ~~these~~the options, ~~will~~whichever ~~expire~~occurs nofirst. ~~later~~In ~~than~~the ~~five~~event ~~years~~that ~~after~~ the ~~date~~optionee ofwas ~~the~~not ~~grant.~~entitled ~~Non-qualified~~to ~~options~~exercise ~~shall~~the ~~expire~~options 10at ~~years~~the ~~and~~date of ~~one~~termination ~~day~~or ~~from~~if the ~~date~~optionee ofdoes ~~grant~~not ~~unless~~exercise ~~otherwise~~such ~~provided~~options ~~under~~(which were then exercisable) within the ~~terms~~time ofspecified herein, the ~~option~~options ~~grant~~shall terminate.

~~Termination~~If an optionee's employment shall terminate for any reason other than death, disability or retirement, all right to exercise the option shall terminate not later than 90 days following the date of such termination of employment.

~~All~~If ~~plan~~an ~~options~~optionee's ~~are~~employment with ~~non-assignable~~us ~~and~~is ~~nontransferable~~terminated for any reason whatsoever, ~~except~~and bywithin ~~will~~three ormonths byafter the ~~laws~~date ofthereof ~~descent~~optionee ~~and~~either ~~distribution,~~(i) ~~and~~accepts ~~during~~employment with ~~the~~any ~~lifetime~~competitor of ~~the optionee~~, ~~may~~or beotherwise ~~exercised~~engages ~~only~~in bycompetition ~~such~~with ~~optionee.~~us, Ifor an(ii) ~~optionee~~discloses ~~shall~~to ~~die~~anyone ~~while~~outside our ~~employee~~company or ~~within~~uses ~~three~~any confidential ~~months~~information ~~after~~or ~~termination~~material of ~~employment~~our bycompany usin ~~because~~violation of ~~disability,~~our policies or ~~retirement~~any oragreement ~~otherwise,~~between ~~such~~the ~~options~~optionee ~~may~~and beour company, ~~exercised~~the committee, toin ~~the~~its ~~extent~~sole ~~that~~discretion, ~~the~~may ~~optionee~~terminate ~~shall~~any ~~have~~outstanding ~~been~~stock ~~entitled~~option toand domay sorequire onoptionee ~~the~~to ~~date~~return to ofus ~~death~~the oreconomic ~~termination~~value of ~~employment,~~any byaward ~~the~~that ~~person~~was realized or ~~persons~~obtained toby ~~whom~~optionee ~~the~~at ~~optionee's~~any ~~right~~time ~~under~~during the ~~option~~period ~~pass~~beginning byon ~~will~~that date orthat ~~applicable~~is ~~law,~~six ormonths ifprior noto ~~such~~the ~~person~~date ~~has~~optionee's ~~such~~employment ~~right,~~with byus ~~his~~is ~~executors or administrators~~terminated.

In the event of termination of employment because of death while an employee or because of disability, the optionee's options may be exercised not later than the expiration date specified in the option or one year after the optionee's death, whichever date is earlier, or in the event of termination of employment because of retirement or otherwise, not later than the expiration date specified in the option or one year after the optionee's death, whichever date is earlier.38

IfThe committee may, if an optionee's employment bywith us ~~terminates~~is ~~because~~terminated offor ~~disability~~cause, ~~and~~annul ~~such~~any ~~optionee~~award ~~has~~granted ~~not~~under ~~died~~this ~~within~~plan ~~the~~to ~~following~~such ~~three~~employee ~~months~~and, ~~the~~in ~~options may be exercised~~such event, to the ~~extent~~committee, ~~that~~in ~~the~~its ~~optionee~~sole ~~shall~~discretion, ~~have~~may ~~been~~require ~~entitled~~optionee to doreturn soto atus the ~~date~~economic ofvalue ~~the~~any ~~termination~~award ofthat ~~employment,~~was atrealized or ~~any~~obtained ~~time,~~by oroptionee ~~from~~at ~~time~~any to time, ~~but~~during ~~not~~the ~~later~~period ~~than~~beginning ~~the~~on ~~expiration~~that date ~~specified~~that inis ~~the~~six ~~option~~months orprior ~~one~~to ~~year~~the ~~after~~date ~~termination~~optionee's of employment, with ~~whichever~~us ~~date~~ is ~~earlier~~terminated.

IfModification anand ~~optionee's~~Termination ~~employment shall terminate for any reason other than death or disability, optionee may exercise the options to the same extent that the options were exercisable on the date~~ of termination, for up to three months following such termination, or on or before the expiration date of the options, whichever occurs first. In the event that the optionee was not entitled to exercise the options at the date of termination or if the optionee does not exercise such options (which were then exercisable) within the time specified herein, the options shall terminate.Plan

31The board of directors or committee may amend, suspend or terminate the plan at any time. However, no such action may prejudice the rights of any holder of a stock grant or optionee who has prior thereto been granted options under the plan. Further, no amendment to this plan which has the effect of (a) increasing the aggregate number of shares subject to this plan (except for adjustments due to changes in our capitalization), or (b) changing the definition of "Eligible Person" under the plan, may be effective unless and until approved by our stockholders in the same manner as approval of this plan is required. Any such termination of the plan shall not affect the validity of any stock grants or options previously granted there under. Unless the plan shall theretofore have been suspended or terminated by the board of directors, the plan will terminate on September 30, 2014 pursuant to the extension from a Board resolution.

IfDirector an optionee's employment shall terminate for any reason other than death, disability or retirement, all right to exercise the option shall terminate not later than 90 days following the date of such termination of employment.Compensation

IfOur anBoard ~~optionee's~~of ~~employment with us~~ Directors is ~~terminated~~comprised ~~for~~of ~~any~~Messrs. ~~reason~~Perle ~~whatsoever,~~ and ~~within~~Wray. ~~three~~Mr. ~~months after the date thereof optionee either (i) accepts employment with any competitor of~~Perle, orwho ~~otherwise~~is ~~engages~~also inan ~~competition~~executive ~~with~~officer ~~us, or (ii) discloses to anyone outside our company or uses any confidential information or material~~ of our company ~~in violation of our policies or any agreement between the optionee and our company~~, ~~the~~does ~~committee,~~not inreceive ~~its sole discretion, may terminate~~ any ~~outstanding~~compensation specifically ~~stock~~for ~~option~~his ~~and~~Board ~~may~~services. ~~require~~The ~~optionee~~following totable ~~return~~provides toinformation usconcerning the ~~economic~~compensation ~~value~~ of ~~any~~Mr. ~~award~~Wray ~~that~~for ~~was~~services as ~~realized~~members orof ~~obtained~~our byBoard ~~optionee~~of atDirectors ~~any~~for ~~time~~fiscal ~~during~~2012. ~~the~~The ~~period~~value ~~beginning~~attributable onto ~~that~~any ~~date~~option ~~that~~awards is ~~six~~computed ~~months~~in ~~prior~~accordance ~~to the date optionee's employment~~ with FAS ~~us is terminated~~123R.

The committee may, if an optionee's employment with us is terminated for cause, annul any award granted under this plan to such employee and, in such event, the committee, in its sole discretion, may require optionee to return to us the economic value any award that was realized or obtained by optionee at any time during the period beginning on that date that is six months prior to the date optionee's employment with us is terminated.

Director Compensation

Name

Fees earned

or paid in

cash ($)

Stock awards ($)

Warrant

and Option

awards ($)

Non-equity

incentive plan

compensation ($)

Nonqualified

deferred

compensation

earnings ($)

All other

compensation ($)

Total ($)

Daniel X. Wray (1)

15,640

~~Modification~~(1) ~~and~~Represents ~~Termination~~the value of ~~Plan~~options to purchase 1,000,000 shares of our common stock with an exercise price of $0.025 per share.

~~The~~We ~~board~~have ofnot ~~directors~~established standard orcompensation ~~committee~~arrangements ~~may~~for ~~amend,~~our ~~suspend~~directors orand ~~terminate~~ the ~~plan~~compensation atpayable ~~any time. However, no such action may prejudice the rights of any holder of a stock grant or optionee who has prior thereto been granted options under the plan. Further, no amendment~~ to ~~this~~each ~~plan~~individual ~~which has the effect of (a) increasing the aggregate number of shares subject to this plan (except~~ for ~~adjustments~~their ~~due~~service toon ~~changes in~~ our Board ~~capitalization),~~is ordetermined ~~(b)~~from ~~changing~~time ~~the~~to ~~definition~~time ~~of "Eligible Person" under the plan, may be effective unless and until approved~~ by our ~~stockholders~~Board ~~in the same manner as approval~~ of ~~this~~Directors ~~plan~~based isupon ~~required. Any such termination of~~ the ~~plan~~amount ~~shall not affect the validity~~ of ~~any~~time ~~stock~~expended ~~grants or options previously granted there under. Unless the plan shall theretofore have been suspended or terminated~~ by ~~the~~each ~~board~~ of ~~directors,~~ the ~~plan will terminate~~ directors on ~~August~~our ~~9, 2012~~behalf.

~~Director Compensation~~39

~~Our~~Item ~~Board of Directors is comprised of Messrs~~12. ~~Perle~~Security ~~and~~Ownership ~~Zeinfeld. Mr. Perle, who is also an executive officer~~ of ~~our~~Certain ~~company,~~Beneficial ~~does~~Owners ~~not~~and ~~receive~~Management ~~any~~and ~~compensation~~Related ~~specifically~~Stockholder for his Board services. The following table provides information concerning the compensation of Mr. Zeinfeld for services as members of our Board of Directors for fiscal 2011. The value attributable to any option awards is computed in accordance with FAS 123R.Matters

Director Compensation
Name	Fees earned or paid in cash ($)	Stock awards ($)	Warrant and Option awards ($)	Non-equity incentive plan compensation ($)	Nonqualified deferred compensation earnings ($)	All other compensation ($)	Total ($)
Andy Zeinfeld (1)	-	-	41,494	-	-	-	41,494

At March 31, 2013 we had: 447,887,403 shares of common stock, 50,000 shares of Series A Preferred Stock and 100,000 shares of Series B Preferred Stock issued and outstanding. Each share of common stock entitles the holder to one vote, each share of Series A Preferred Stock entitles the holder to 400 votes, and each share of Series B Preferred Stock entitles the holder to 400 votes at any meeting of our stockholders and the shares of common stock, Series A Preferred Stock and Series B Preferred Stock vote together on all matters submitted to a vote of our stockholders.

~~(1)~~The ~~Represents~~following ~~the~~table ~~value~~sets offorth ~~options~~information known to ~~purchase~~us ~~584,417~~as ~~shares~~ of ~~our~~March ~~common~~31, ~~stock~~2013 ~~with~~relating anto ~~exercise~~the ~~price~~beneficial ownership of ~~$0.01~~shares ~~per~~of ~~share.~~our voting securities by:

We● ~~have~~each ~~not~~person ~~established~~who ~~standard~~is ~~compensation~~known ~~arrangements~~by ~~for~~us ~~our~~to ~~directors~~be ~~and~~ the ~~compensation~~beneficial ~~payable~~owner toof ~~each~~more ~~individual~~than ~~for~~five ~~their~~percent ~~service~~of on our ~~Board~~outstanding isvoting ~~determined~~stock; ~~from~~● ~~time~~each todirector; ~~time~~● byeach ~~our~~named ~~Board~~executive ofofficer; ~~Directors~~and ~~based~~● ~~upon~~all ~~the~~named ~~amount~~executive ofofficers ~~time~~and ~~expended by each of the~~ directors onas ~~our~~a ~~behalf~~group.

~~Item~~Unless 12otherwise indicated, the business address of each person listed is in care of 990 Ironwood Drive, Minden, Nevada 89423. ~~Security~~The ~~Ownership~~percentages in the table have been calculated on the basis of ~~Certain~~treating ~~Beneficial~~as ~~Owners~~outstanding for a particular person, all shares of our common stock outstanding on that date and ~~Management~~all shares of our common stock issuable to that holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by that person at that date which are exercisable within 60 days of that date. Except as otherwise indicated, the persons listed below have sole voting and ~~Related~~investment ~~Stockholder~~power ~~Matters~~with respect to all shares of our common stock owned by them, except to the extent that power may be shared with a spouse.

At March 31, 2012 we had 309,307,977shares of common stock, 50,000 shares of Series A Preferred Stock and 50,000 shares of Series B Preferred Stock issued and outstanding. Each share of common stock entitles the holder to one vote, each share of Series A Preferred Stock entitles the holder to 400 votes, and each share of Series B Preferred Stock entitles the holder to 400 votes at any meeting of our stockholders and the shares of common stock, Series A Preferred Stock and Series B Preferred Stock vote together on all matters submitted to a vote of our stockholders.

	Amount and Nature of Beneficial Ownership
	Common Stock					Series A Preferred Stock
Name (1)	# of Shares		% of Class			# of Shares		% of Class			# of Shares		% of Class		% of Vote
Cery B. Perle (2)		21,327,694		4.8	%		50,000		100	%		—		n/a		8.8	%
Daniel X. Wray		28,599,078		6.4	%		—		n/a			—		n/a		6.1	%
All named executive officers and directors as a group (three persons)		49,926,772		11.2	%		50,000		100	%		—		n/a		14.9	%
RJ Dailey		42,000,000		9.4	%		—		n/a			—		n/a		8.9	%
The Ferrari’s		25,000,000		5.6	%		—		n/a			—		n/a		5.3	%
Joel Yanowitz		25,000,000		5.6	%		—		n/a			—		—		5.3	%
* represents less than 1%

(1)	Unless otherwise indicated, the business address of each person listed is in care of Spare Backup, Inc., 990 Ironwood Drive, Minden, NV 89423
(2) Includes:	Includes 17,072,794 shares of our common stock underlying options with exercise prices ranging from $0.005 to $0.18 per share.

~~The following table sets forth information known to us as of March 31, 2011 relating to the beneficial ownership of shares of our voting securities by:~~40

●In ~~each~~January ~~person~~2008 ~~who~~we isissued Mr. ~~known~~Cery byPerle, usour toCEO beand ~~the~~a ~~beneficial~~member ~~owner~~ of ~~more~~our ~~than~~Board ~~five~~of ~~percent~~Directors, 50,000 shares of ~~our~~a ~~outstanding~~newly ~~voting~~created ~~stock;~~Series ●A ~~each~~Preferred ~~director;~~Stock ●as ~~each~~additional compensation ~~named~~valued ~~executive~~at ~~officer;~~$.001 ~~and~~per ●share ~~all~~or ~~named~~$50.00. ~~executive~~The ~~officers~~designations, rights and ~~directors~~preferences asof athe ~~group.~~Series A Preferred Stock includes:

~~Unless~~● ~~otherwise~~each ~~indicated,~~share ~~the~~has ~~business~~a ~~address~~stated value and a liquidation preference of ~~each~~$0.001 ~~person~~per ~~listed~~share iswhich inequals ~~care~~the ofpar ~~990~~value ~~Ironwood~~of ~~Drive,~~the ~~Minden~~shares, ~~Nevada~~● ~~89423.~~the ~~The~~shares ~~percentages~~are innot ~~the~~convertible ~~table~~or ~~have~~exchange ~~been~~into ~~calculated~~any onother security, ● each share entitles the ~~basis~~holder ofto ~~treating~~400 asvotes ~~outstanding~~at ~~for~~any ameeting ~~particular~~of ~~person,~~our ~~all~~stockholders and such shares ofwill vote together with our common ~~stock~~stockholders, ~~outstanding~~provided, onhowever, that ~~date~~Mr. ~~and~~Perle ~~all~~is not eligible to vote the shares in connection with an amendment to increase the number of our authorized shares of common stock ~~issuable~~if such amendment is proposed to ~~that~~our ~~holder~~stockholders inwithin four months from the ~~event~~date of ~~exercise~~issuance of ~~outstanding~~the ~~options~~shares,. ~~warrants,~~● ~~rights~~the orshares ~~conversion~~are ~~privileges~~not ~~owned~~subject byto ~~that~~redemption, ~~person~~and at● ~~that~~so ~~date~~long ~~which~~as the shares are ~~exercisable~~outstanding ~~within~~we 60have ~~days~~agreed ofnot ~~that~~to ~~date.~~alter ~~Except~~or aschange ~~otherwise~~the ~~indicated,~~rights of the ~~persons~~security ~~listed~~in ~~below~~a ~~have~~manner ~~sole~~which ~~voting~~would ~~and~~adversely ~~investment~~affect ~~power~~the ~~with~~Series ~~respect~~A toPreferred ~~all~~Stock, ~~shares~~or oftake ~~our~~any ~~common~~action ~~stock~~which ~~owned~~would byresult ~~them,~~in ~~except~~the totaxation of the ~~extent~~holder ~~that~~under ~~power~~Section ~~may~~305 beof ~~shared~~the ~~with~~Internal aRevenue ~~spouse~~Code.

	Amount and Nature of Beneficial Ownership
	Common Stock					Series A Preferred Stock					Series B Preferred Stock
Name (1)	# of Shares		% of Class			# of Shares		% of Class			# of Shares		% of Class			% of Vote
Cery B. Perle (2)		18,127,694		6.1	%		50,000		100	%		-		n/a			12.8	%
Ivor Newman (3)		5,250,000		1.8	%		-		n/a			-		n/a			1.5	%
Andy Zeinfeld (4)		1,000,000		*			-		n/a			50,000		50	%		6.1	%
AlAll named executive officers and directors as a group (three persons)		24,377,694		8.3	%		50,000		100	%		50,000		50	%		20.4	%
Robbins Capital Partners L.P. (5)		20,875,528		7.3	%		-		n/a			-		n/a			6.0	%
Daniel X. Wray (6)		20,966,666		7.2	%		-		n/a			50,000		50	%		11.7	%
* represents less than 1%

Prior to the issuance of the shares of Series A Preferred Stock to Mr. Perle, he controlled the vote of approximately 10% of our outstanding voting securities. As a result of the issuance of these securities, Mr. Perle presently controls the vote of approximately 8.8% of our outstanding voting securities. These actions were approved by our Board of Directors of which Mr. Perle is a member.

(1)		Unless otherwise indicated, the business address of each person listed is in care of Spare Backup, Inc., 990 Ironwood Drive, Minden, NV 89423
(2) Includes:		Common stock of 5,809,694, of which 1,085,194 shares is held by Mr. Perle, 4,000,000 shares are held in a trust for his benefit and 724,500 shares held in a trust for his minor children; and 12,318,000 options, exercisable at a range of $0.01 to $0.18 per share.
(3) Includes:		4,250,000 options, exercisable at a range of $0.8 per share to $0.18 per share.
(4) Includes:		Common stock of 500,000 owned by his wife; 500,000 options, exercisable at $0.09 per share; and 50,000 shares of Series B Preferred Stock.
(5) Includes:		Common stock of18,847,000; and 2,028,528 options, exercisable at a range of $0.10 per share to $0.20 per share. Robbins Capital Partners L.P.’s address is 100 First Stamford Place, 6th Floor, East Stamford, Ct.
(6) Includes:		Common stock of 7,416,666 shares held by Mr. Wray, 8,550,000 shares held by Biofilm, Inc. over which he has voting and dispositive control; 5,000,000 warrants, exercisable at $0.09 per share; and 50,000 shares of Series B Preferred Stock. Mr. Wray’s address is Post Office Box 2649, Minden, NV.

Related Party Transactions

~~Item 13~~None. ~~Certain Relationships and Related Transactions, and Director Independence~~

~~Mr.~~Director Perle, our CEO, has made an available home owned by him for our use as temporary housing for new employees at monthly rental costs which we believe are below market. During 2010 we used this home for approximately 70% of the year. We reimburse each of Mr. Perle for the actual mortgage payment and pay ordinary operating expenses associated with such home including utilities, maintenance and insurance. During fiscal 2010 we made rental payments to Mr. Perle of $9,273. The home was not used in 2011 and no rental payments were made to Mr. Perle.Independence

33Mr. Wray is "independent" within the meaning of Marketplace Rule 5605 of the NASDAQ Stock Market, Inc.

InItem ~~January 2008 we issued Mr~~14. ~~Cery~~Principal ~~Perle,~~Accountant ~~our~~Fees ~~CEO~~ and a member of our Board of Directors, 50,000 shares of a newly created Series A Preferred Stock as additional compensation valued at $.001 per share or $50.00. The designations, rights and preferences of the Series A Preferred Stock includes:Services

●Sherb ~~each~~& ~~share has a stated value and a liquidation preference of $0~~Co.~~001 per share which equals the par value of the shares~~, ●LLP served ~~the~~as ~~shares~~our ~~are~~independent ~~not~~registered ~~convertible~~public oraccounting ~~exchange~~firm ~~into~~for ~~any~~Q1-Q3 ~~other~~during ~~security, ● each share entitles~~ the ~~holder~~fiscal toyear ~~400~~ended ~~votes~~December ~~at any meeting of our stockholders and such shares will vote together with our common stockholders~~31, ~~provided, however, that Mr~~2012. ~~Perle~~The isfollowing table ~~not~~shows ~~eligible to vote~~ the ~~shares~~fees inthat ~~connection~~were ~~with~~billed anfor ~~amendment to increase~~ the ~~number~~audit ofand ~~our~~other ~~authorized~~services ~~shares~~provided ofby ~~common stock if~~ such ~~amendment~~firm isfor ~~proposed~~fiscal to2012 ~~our~~and ~~stockholders~~fiscal ~~within~~2011. On ~~four~~April ~~months~~5, ~~from the date of issuance of the shares~~2013,. ● the ~~shares~~Company ~~are~~dismissed ~~not~~Sherb ~~subject~~& ~~to redemption~~Co., ~~and~~LLP ~~● so long~~ as ~~the~~its ~~shares~~auditor. ~~are~~The ~~outstanding~~decision ~~we have agreed not~~ to ~~alter or~~ change ~~the~~independent ~~rights~~registered ofpublic accounting ~~the~~firm ~~security~~was inapproved aby ~~manner which would adversely affect~~ the ~~Series~~Board ~~A Preferred Stock, or take any action which would result in the taxation~~ of ~~the~~Directors ~~holder under Section 305~~ of the ~~Internal Revenue Code~~Company.

Prior to the issuance of the shares of Series A Preferred Stock to Mr. Perle, he controlled the vote of approximately 10% of our outstanding voting securities. As a result of the issuance of these securities, Mr. Perle presently controls the vote of approximately 12.8% of our outstanding voting securities. These actions were approved by our Board of Directors of which Mr. Perle is a member.

Fee Category	2012		2011
Audit Fees	$	84,900	$	74,000
Audit Related Fees		—		—
Tax Fees		—		—
All Other Fees		—		—
Total	$	84,900	$	74,000

~~Related Party Transactions~~41

~~None~~On April 5, 2013, concurrent with the dismissal of Sherb & Co, the Company, upon the Board of Directors’ approval, engaged Li and Company, PC (“LICO”) as its new independent registered public accounting firm to audit and review the Company’s consolidated financial statements effective April 5, 2013.

Director Independence

Fee Category	2012		2011
Audit Fees (1)	$	25,000		$	n/a
Audit Related Fees		—			—
Tax Fees		—			—
All Other Fees		—			—
Total	$	25,000		$	n/a

~~Mr.~~(1) ~~Zeinfeld~~This isfee ~~"independent"~~was ~~within~~paid during the ~~meaning~~first quarter of ~~Marketplace~~2013, ~~Rule~~but ~~5605~~related to the audit of the ~~NASDAQ~~financial ~~Stock~~statements ~~Market~~for the year ended December 31, ~~Inc~~2012.

~~Item~~We 14do not have an Audit Committee. ~~Principal~~Our ~~Accountant~~Board of ~~Fees~~Directors pre-approves all auditing services and ~~Services~~permissible non-audit services provided to us by our independent registered public accounting firm. All fees listed above were pre-approved in accordance with this policy.

Sherb & Co., LLP served as our independent registered public accounting firm for fiscal 2010 and fiscal 2011. The following table shows the fees that were billed for the audit and other services provided by such firm for fiscal 2009 and fiscal 2010.42

Fee Category	2010		2011
Audit Fees (1)	$	74,000	$	74,000
Audit Related Fees		-		-
Tax Fees (2)		-		-
All Other Fees		-		-
Total	$	74,000	$	74,000

PART IV

~~(1) Consists~~Item of15. ~~fees~~Exhibits, ~~for~~Financial ~~professional~~Statement ~~services rendered in connection with the review of our three quarterly reports on Form 10-Q and the financial statements included in our annual report on Form 10-K~~Schedules

~~(2) Consists~~EXHIBIT ~~of fees relating to our tax compliance and tax planning~~NO. DESCRIPTION

~~We do not have an Audit Committee~~2.1 Acquisition ~~Our~~Agreement ~~Board of Directors pre-approves all auditing services~~ and ~~permissible~~Plan ~~non-audit~~of ~~services provided to us by our independent registered public accounting firm. All fees listed above were pre-approved in accordance with this policy.~~Merger(3)

342. Agreement and Plan of Merger(4)

~~PART~~3.1 Certificate IVof Incorporation(1)

~~Item 15~~3.2 By-Laws ~~Exhibits, Financial Statement Schedules~~(1)

~~The~~3.3 Certificate ~~following documents are filed as a part~~ of ~~this report or are incorporated by reference to previous filings~~Incorporation, ifas ~~so indicated:~~amended(2)

a3.4 Certificate ~~Index~~of Amendment to ~~Consolidated~~the ~~Financial~~Certificate of ~~Statements and Financial Statement Schedules~~Incorporation(5)

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheet as of December 31, 2010 and 2011	F-3
Consolidated Statement of Operations for each of the two years in the period ended December 31, 2011	F-4
Consolidated Statement of Shareholders’ Equity for each of the two years in the period ended December 31, 2011	F-5
Consolidated Statement of Cash Flows for each of the two years in the period ended December 31, 2011	F-6
Notes to Consolidated Financial Statements	F-7 – F-20

3.5 Certificate of Amendment to the Certificate of Incorporation (8)

b3.6 Certificate ~~All other schedules for which provision is made in the applicable accounting regulations~~ of ~~the~~Ownership ~~SEC~~merging ~~are~~Spare Backup, ~~not~~Inc. ~~required~~into ~~under~~Newport ~~the~~International ~~related instructions~~Group, ~~or are inapplicable, and therefore have been omitted~~Inc. (19)

c3.7 Certificate ~~Exhibits~~of designations, rights and preferences of Series A Preferred Stock (23)

~~EXHIBIT NO~~4.1 Form ~~DESCRIPTION~~of Investor Warrant to Purchase Common Stock issued with 8% promissory note (12)

24.12 ~~Acquisition~~Form ~~Agreement~~of ~~and~~Common ~~Plan~~Stock ofPurchase ~~Merger~~Warrant issued with 10% secured note (312)

24. ~~Agreement~~3 Form of Common Stock Purchase Warrant issued to Robinson Reed Inc. and ~~Plan~~First ofCapital ~~Merger~~Holdings International, Inc.(411)

34.14 ~~Certificate~~Form of ~~Incorporation~~$0.75 Investor Warrant (111)

34.25 ~~By-Laws~~Common stock purchase warrant issued March 31, 2005 to purchase 256,667 shares of common stock issued to Jenelle Fontes (110)

34.36 ~~Certificate~~Common ofstock ~~Incorporation~~purchase warrant issued March 31, as2005 ~~amended~~to purchase 280,000 shares of common stock issued to Curtis Lawler (210)

3.4.7 ~~Certificate~~Form of ~~Amendment~~$1.30 tocommon ~~the~~stock ~~Certificate~~purchase warrant ~~of Incorporation~~(513)

34.58 ~~Certificate~~Form of ~~Amendment~~common stock purchase warrant issued to ~~the~~Langley ~~Certificate~~Park ofInvestment ~~Incorporation~~Trust, PLC (816)

34.69 ~~Certificate~~Form of ~~Ownership~~placement agent ~~merging~~warrant ~~Spare~~issued ~~Backup,~~to ~~Inc.~~Brookstreet ~~into~~Securities ~~Newport~~Corporation ~~International Group, Inc.~~ (1920)

34.~~7 Certificate~~10 Option ofto ~~designations,~~Purchase ~~rights~~Common Stock ~~and~~issued ~~preferences~~to ofWolfe ~~Series~~Axlerod AWeinberger ~~Preferred Stock~~ (2320)

4.~~1 Form~~11 Option ~~of Investor Warrant~~ to Purchase Common Stock issued ~~with~~to 8%The ~~promissory~~Sterling ~~note~~Group (1220)

4.2 12 Form of ~~Common~~warrant ~~Stock Purchase Warrant~~ issued to ~~with~~DSG ~~10% secured note~~ Plc.(1224)

410.~~3 Form~~1 2002 ~~of Common~~ Stock ~~Purchase~~Option ~~Warrant issued to Robinson Reed Inc.~~ and Stock ~~First~~Award ~~Capital~~Plan ~~Holdings International, Inc.~~(1115)

410.~~4 Form~~2 Lease offor ~~$0.75~~principal executive ~~Investor~~offices ~~Warrant~~ (1124)

410.~~5 Common~~3 Stock ~~stock~~Purchase ~~purchase~~Agreement with ~~warrant~~Langley ~~issued~~Park ~~March~~Investment ~~31,~~Trust ~~2005~~PLC ~~to purchase 256,667 shares of common stock issued to Jenelle Fontes~~ (109)

410.~~6 Common~~4 Employment ~~stock~~Agreement with ~~purchase~~Cery ~~warrant~~B. ~~issued~~Perle ~~March 31, 2005 to purchase 280,000 shares of common stock issued to Curtis Lawler~~ (1011)

410.~~7 Form~~5 Common ofStock ~~$1.30~~and ~~common~~Warrant Purchase ~~stock~~Agreement ~~purchase~~dated ~~warrant~~as of August 27, 2004 (139)

410.~~8 Form~~6 Registration ofRights Agreement ~~common~~dated ~~stock~~as ~~purchase~~of ~~warrant~~August ~~issued to Langley Park Investment Trust~~27, ~~PLC~~2004 (169)

410.~~9 Form~~7 Amendment ofNo. ~~placement~~1 ~~agent~~to ~~warrant~~Common Stock ~~issued~~and toWarrant ~~Brookstreet~~Purchase ~~Securities~~Agreement ~~Corporation~~dated as of November 2, 2004 (209)

4.10.8 ~~Option~~Settlement toAgreement and ~~Purchase~~Release ~~Common~~between ~~Stock~~Newport ~~issued~~International toGroup, ~~Wolfe~~Inc., ~~Axlerod~~Robinson ~~Weinberger~~Reed, Inc., First Capital Holdings International, Inc., Continental Blue Limited and E-Holdings, Inc. (2011)

410.119 ~~Option~~Supplier toAgreement ~~Purchase~~with CompUSA ~~Common Stock issued to The Sterling Group~~ (2012)

~~4.12 Form of warrant issued to DSG Plc.(24)~~43

10.~~1 2002~~10 Form ~~Stock~~of ~~Option~~Settlement Agreement between Newport International Group, Inc, Robinson Reed, Inc. and ~~Stock~~First ~~Award~~Capital ~~Plan~~Holdings International, Inc. (1514)

10.~~2 Lease~~11 Amendment ~~for~~No. ~~principal~~1 ~~executive~~to ~~offices~~the 2002 Stock Option and Stock Award Plan (246)

10.~~3 Stock~~12 Form ~~Purchase~~of ~~Agreement~~Repurchase Agreement with Langley Park Investment Trust PLC (916)

10.~~4 Employment~~13 Form of Amendment to Escrow Agreement with ~~Cery~~Langley B.Park ~~Perle~~Investment Trust PLC (1116)

10.~~5 Common~~14 Amendment ~~Stock~~No. ~~and~~2 ~~Warrant~~to ~~Purchase~~the ~~Agreement~~2002 Stock ~~dated~~Option asand ofStock ~~August~~Award ~~27,~~Plan ~~2004~~ (917)

10.~~6 Registration~~15 Customer ~~Rights~~Technical Support Services Agreement ~~dated~~with asCircuit ofCity ~~August 27~~Stores, ~~2004~~Inc. (918)

10.~~7 Amendment~~16 Standard ~~No.~~Services ~~1 to Common Stock~~ Agreement and ~~Warrant~~Statement ~~Purchase Agreement dated as~~ of ~~November~~Work 2,with ~~2004~~Hewlett-Packard Company (920)

10.~~8 Settlement~~17 Finder's Agreement ~~and~~dated February ~~Release between Newport International Group~~5, ~~Inc.,~~2007 ~~Robinson~~between ~~Reed,~~Spare ~~Inc.~~Backup, ~~First Capital Holdings International,~~ Inc., ~~Continental Blue Limited~~ and ~~E-Holdings~~Skyebanc, Inc. (1121)

10.~~9 Supplier~~ 18 Agreement ~~with~~Regarding ~~CompUSA~~Put Option dated as of May 8, 2007 by and among Spare Backup, Inc., Robinson Reed, Inc. and First Capital Holdings International, Inc. (1222)

3510.19 Software License and Distribution Agreement with Gateway Companies, Inc. (22) Portions of this agreement have been omitted and separately filed with the Securities and Exchange Commission with a request for confidential treatment.

10.1020 ~~Form~~Data ofStorage ~~Settlement~~Services Agreement dated ~~between~~February ~~Newport~~2, ~~International~~2007 ~~Group,~~between ~~Inc,~~DSG ~~Robinson~~Retail ~~Reed~~and Spare Backup, Inc. (24) Portions of this agreement have been omitted and ~~First~~separately filed ~~Capital~~with ~~Holdings~~the ~~International,~~Securities ~~Inc.~~and ~~(14)~~Exchange Commission with a request for confidential treatment.

1014.~~11 Amendment~~1 Code ~~No.~~of 1Business toConduct and Ethics and Code of Ethics for the ~~2002~~Chief ~~Stock~~Executive ~~Option~~Officer and ~~Stock~~Senior ~~Award~~Financial ~~Plan~~Officers (611)

1021.~~12 Form~~1 Subsidiaries of ~~Repurchase~~the registrant ~~Agreement with Langley Park Investment Trust PLC~~ (1611)

1023.~~13 Form~~ 1 Consent of ~~Amendment~~Liand toCompany, ~~Escrow~~PC ~~Agreement with Langley Park Investment Trust PLC (16)~~*

1031.~~14 Amendment~~1 Section ~~No.~~302 2Certificate of toChief ~~the~~Executive ~~2002~~Officer ~~Stock Option and Stock Award Plan (17)~~*

1031.~~15 Customer~~2 Section ~~Technical~~302 ~~Support~~Certificate of ~~Services~~principal ~~Agreement~~accounting ~~with~~and ~~Circuit~~financial ~~City~~officer ~~Stores, Inc. (18)~~*

1032.~~16 Standard~~1 Section ~~Services~~906 ~~Agreement~~Certificate of ~~and~~Chief ~~Statement~~Executive ofOfficer ~~Work~~and ~~with~~principal financial ~~Hewlett-Packard~~and ~~Company~~accounting ~~(20)~~officer *

10101.~~17 Finder~~1 The following materials from the Company's Annual ~~Agreement~~Report ~~dated~~on ~~February~~Form 510-K for the year ended December 31, ~~2007~~2012, ~~between~~formatted ~~Spare~~in ~~Backup~~XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, ~~Inc.~~(ii) ~~and~~the ~~Skyebanc~~Statements of Operations, ~~Inc.~~(iii) the Statements of Cash Flows, and (21v) related notes to these financial statements, tagged as blocks of text.

~~10.18 Agreement~~* ~~Regarding~~filed ~~Put Option dated as of May 8, 2007 by and among Spare Backup, Inc., Robinson Reed, Inc. and First Capital Holdings International, Inc. (22)~~herewith

~~10.19 Software License and Distribution Agreement with Gateway Companies, Inc.~~ (221) Incorporated ~~Portions~~by reference ofto ~~this~~the ~~agreement~~Quarterly ~~have~~Report ~~been~~on ~~omitted~~Form ~~and~~10-QSB ~~separately~~as filed with the ~~Securities~~SEC ~~and~~on ~~Exchange~~May ~~Commission~~10, ~~with a request for confidential treatment~~2000.

~~10.20 Data Storage Services Agreement dated February 2, 2007 between DSG Retail and Spare Backup, Inc.~~ (242) Incorporated ~~Portions~~by reference ofto ~~this~~the ~~agreement~~Current ~~have~~Report ~~been~~on ~~omitted~~Form ~~and~~8-K ~~separately~~as filed with the ~~Securities~~SEC ~~and~~on ~~Exchange~~February ~~Commission~~5, ~~with a request for confidential treatment~~2001.

~~14.1 Code~~(3) Incorporated ofby reference ~~Business~~to ~~Conduct~~the ~~and~~Current ~~Ethics~~Report ~~and~~on ~~Code~~Form of8-K ~~Ethics~~filed ~~for~~with the ~~Chief~~SEC ~~Executive~~on ~~Officer~~November ~~and~~6, ~~Senior Financial Officers (11)~~2000.

~~21.1 Subsidiaries~~(4) Incorporated ofby reference to the ~~registrant~~Current ~~(11)~~Report on Form 8-K filed with the SEC on February 13, 2004.

~~23.1 Consent~~(5) Incorporated ofby reference ~~Sherb~~to &the ~~Co.,~~definitive ~~LLP~~Information *Statement on Schedule 14C as filed with the SEC on November 14, 2003.

~~31.1 Section~~(6) Incorporated ~~302~~by ~~Certificate~~reference ofto ~~Chief~~the ~~Executive~~registration statement ~~Officer~~on *Form S-8 as filed with the SEC on August 8, 2004.

~~31.2 Section~~(7) Intentionally 302 Certificate of principal accounting and financial officer *omitted.

~~32.1 Section~~(8) Incorporated ~~906~~by ~~Certificate~~reference ofto ~~Chief~~the ~~Executive~~quarterly report ~~Officer~~on ~~and~~Form ~~principal financial~~10-QSB for the three and ~~accounting~~six ~~officer~~months *ended June 30, 2004.

~~101.1~~(9) Incorporated ~~The~~by ~~following~~reference ~~materials~~to ~~from~~ the ~~Company's Annual~~ Quarterly Report on Form 10-KQSB for the ~~year~~three ~~ended December 31, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statements of Cash Flows,~~ and ~~(v)~~nine ~~related~~months ~~notes~~ended toSeptember ~~these financial statements~~30, ~~tagged as blocks of text~~2004.

*(10) Incorporated by reference to the Current Report on Form 8-K as filed ~~herewith~~with the SEC on May 5, 2005.

(111) Incorporated by reference to the ~~Quarterly~~registration statement ~~Report~~ on Form 10SB-~~QSB~~2, as ~~filed~~amended, ~~with~~file ~~the~~number ~~SEC~~333-123096, as declared effective on May 1019, ~~2000~~2005.

(212) Incorporated by reference to the ~~Current~~Quarterly Report on Form 810-KQSB asfor the three and six months ended June 30, 2005. Portions of this agreement have been omitted and separately filed with the ~~SEC~~Securities onand ~~February~~Exchange 5,Commission ~~2001~~with a request for confidential treatment.

(313) Incorporated by reference to the ~~Current~~registration statement ~~Report~~ on Form 8SB-K2, ~~filed~~SEC ~~with~~file number 333-128980, as amended, as declared effective by the SEC on November 614, ~~2000~~2005.

(414) Incorporated by reference to the Current Report on Form 8-K as filed with the SEC on ~~February~~December 1315, ~~2004~~2005.

(515) Incorporated by reference to the ~~definitive~~registration statement ~~Information Statement~~ on ~~Schedule~~Form ~~14C~~S-8, asSEC ~~filed~~File ~~with~~No. ~~the~~333-98229, ~~SEC~~as filed on ~~November~~August 1416, ~~2003~~2002.

(616) Incorporated by reference to the ~~registration~~Current Report ~~statement~~ on Form S-8-K as filed ~~with the SEC~~ on ~~August~~May 831, ~~2004~~2006.

(717) ~~Intentionally~~ Incorporated ~~omitted~~by reference to the Current Report on Form 8-K as filed on June 6, 2006.

(818) Incorporated by reference to the ~~quarterly~~Current ~~report~~Report on Form 108-~~QSB~~K ~~for~~as filed on August 18, 2006. Portions of this agreement have been omitted and marked with a [_] and separately filed with the ~~three~~Securities and ~~six~~Exchange ~~months~~Commission ~~ended~~with ~~June~~a ~~30,~~request ~~2004~~for confidential treatment.

(919) Incorporated by reference to the ~~Quarterly~~ Current Report on Form 108-~~QSB~~K ~~for~~as ~~the~~filed ~~three~~on ~~and~~August ~~nine months ended September 30~~16, ~~2004~~2006.

(1020) Incorporated by reference to the ~~Current~~registration statement ~~Report~~ on Form 8SB-K2, SEC File No. 333-139138, as ~~filed~~amended, ~~with~~as declared effective by the SEC on ~~May~~February 513, ~~2005~~2007.

(1121) Incorporated by reference to the ~~registration~~Annual ~~statement~~ Report on Form SB10-2,KSB asfor ~~amended,~~the ~~file~~fiscal ~~number~~year ~~333-123096~~ended December 31, 2006 as ~~declared~~filed ~~effective~~ on ~~May~~April 192, ~~2005~~2007.

(1222) Incorporated by reference to the Quarterly Report on Form 10-QSB for the ~~three~~period ~~and six months~~ ended ~~June~~March 3031, ~~2005.~~2007 ~~Portions~~as ~~of this agreement have been omitted and separately~~ filed ~~with~~on ~~the~~May ~~Securities~~21, ~~and Exchange Commission with a request for confidential treatment~~2007.

(1323) Incorporated by reference to the ~~registration~~Current Report ~~statement~~ on Form SB8-2,K ~~SEC file number 333-128980,~~ as ~~amended,~~filed ~~as declared effective by the SEC~~ on ~~November~~January 1418, ~~2005~~2008.

(1424) Incorporated by reference to the ~~Current~~Annual Report on Form 810-K asfor ~~filed~~the ~~with~~fiscal ~~the~~year ~~SEC~~ended December 31, 2007 as filed on ~~December~~April 1514, ~~2005~~2008.

~~(15) Incorporated by reference to the registration statement on Form S-8, SEC File No. 333-98229, as filed on August 16, 2002.~~44

~~(16) Incorporated by reference to the Current Report on Form 8-K as filed on May 31, 2006.~~SIGNATURES

Pursuant to the requirements of Section 13 or 15(17d) ~~Incorporated~~ byof ~~reference~~the toSecurities Exchange Act of 1934, the ~~Current~~registrant ~~Report~~has onduly ~~Form~~caused ~~8-K~~this asreport ~~filed~~to be signed on ~~June~~its behalf 6by the undersigned, ~~2006~~thereunto duly authorized.

~~(18) Incorporated~~SPARE ~~by reference to the Current Report on Form 8-K as filed on August 18~~BACKUP, ~~2006~~INC. ~~Portions of this agreement have been omitted and marked with a [_] and separately filed with the Securities and Exchange Commission with a request for confidential treatment.~~

~~(19) Incorporated~~By: by/s/ ~~reference~~Cery ~~to the Current Report on Form 8-K as filed on August 16, 2006.~~Perle

~~(20) Incorporated~~Cery ~~by reference to the registration statement on Form SB-2, SEC File No. 333-139138, as amended, as declared effective by the SEC on February 13, 2007.~~Perle

~~(21) Incorporated~~Executive ~~by reference to the Annual Report on Form 10-KSB for the fiscal year ended December 31~~Officer, ~~2006~~President asand ~~filed on April 2, 2007.~~Director

~~(22) Incorporated~~Date: byApril ~~reference to the Quarterly Report on Form 10-QSB for the period ended March 31~~22, ~~2007 as filed on May 21, 2007.~~2013

~~(23) Incorporated~~Pursuant byto ~~reference~~the torequirements of the ~~Current~~Securities ~~Report~~Exchange Act of 1934, this report has been signed below by the following persons on ~~Form~~behalf ~~8-K~~of asthe ~~filed~~registrant and in the capacities and on ~~January~~the ~~18,~~dates ~~2008~~indicated.

(24) Incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 2007 as filed on April 14, 2008.

Signature	Title	Date

By: /s/ Cery Perle	Chief Executive Officer, President and Chairman of the Board	April 22, 2013
Cery Perle	(Principal executive officer and financial officer)

By: /s/ Daniel Wray	Director	April 22, 2013
Daniel Wray

3645

~~SIGNATURES~~SPARE BACKUP, INC. AND SUBSIDIARY

~~Pursuant~~CONSOLIDATED toFINANCIAL ~~the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.~~STATEMENTS

~~SPARE~~AS ~~BACKUP~~OF DECEMBER 31, ~~INC.~~2012

~~By:~~Index ~~/s/~~to ~~Cery~~Consolidated ~~Perle~~Financial Statements and Financial Statement Schedules

Cery Perle

	Page
Report of Independent Registered Public Accounting Firm	F-2
Report of Independent Registered Public Accounting Firm	F-3
Consolidated Balance Sheet as of December 31, 2012 and 2011	F-4
Consolidated Statement of Operations for each of the two years in the period ended December 31, 2012 and 2011	F-5
Consolidated Statement of Shareholders’ Equity for the year ended December 31, 2011	F-6
Consolidated Statement of Shareholders’ Equity for the year ended December 31, 2012	F-7
Consolidated Statement of Cash Flows for each of the two years in the period ended December 31, 2012 and 2011	F-8
Notes to the Consolidated Financial Statements	F-9

~~Executive~~All ~~Officer,~~other ~~President~~schedules ~~and~~for ~~Director~~which provision is made in the applicable accounting regulations of the SEC are not required under the

~~Date: April 26, 2012~~F-1

~~Pursuant~~Report ~~to the requirements~~ of ~~the~~Independent ~~Securities~~Registered ~~Exchange~~Public ~~Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.~~Accounting Firm

Signature	Title	Date
By: /s/ Cery Perle	Chief Executive Officer, President and Chairman of the Board	April 26, 2012
Cery Perle	(Principal executive officer and financial officer)
By: /s/ Daniel Wray	Director	April 26, 2012
Daniel Wray
By: /s/ Andy Zeinfeld	Director	April 26, 2012
Andy Zeinfeld

To the Board of Directors and Stockholders of

37Spare Backup, Inc.

~~SPARE BACKUP~~Minden, ~~INC. AND SUBSIDIARY~~Nevada

~~CONSOLIDATED~~We ~~FINANCIAL~~have ~~STATEMENTS~~audited the accompanying consolidated balance sheet of Spare Backup, Inc. (the "Company") as of December 31, 2012, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audit.

ASWe OFconducted ~~DECEMBER~~our 31audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, ~~2011~~nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

~~Index~~The Company’s consolidated financial statements as of December 31, 2011 and for the year then ended was audited by other auditors whose reports dated April 25, 2012 included an explanatory paragraph as to ~~Consolidated~~an ~~Financial~~uncertainty ~~Statements~~with respect to the Company’s ability to continue as a going concern. The other auditors’ report has been furnished to us, and ~~Financial~~our opinion, insofar ~~Statement~~as ~~Schedules~~it relates to amounts included for such prior period, is based solely on the report of such other auditors.

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheet as of December 31, 2010 and 2011	F-3
Consolidated Statement of Operations for each of the two years in the period ended December 31, 2011	F-4
Consolidated Statement of Shareholders’ Equity for each of the two years in the period ended December 31, 2011	F-5
Consolidated Statement of Cash Flows for each of the two years in the period ended December 31, 2011	F-6
Notes to Consolidated Financial Statements	F-7 – F-20

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Spare Backup, Inc. at December 31, 2012, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

~~All~~The ~~other~~accompanying ~~schedules~~consolidated ~~for~~financial ~~which~~statements have ~~provision~~been isprepared ~~made~~assuming inthat the ~~applicable~~Company ~~accounting~~will ~~regulations~~continue ofas a going concern. As discussed in Note 1 to the ~~SEC~~consolidated financial statements, the Company has suffered recurring losses from operations and has negative working capital and a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. These consolidated financial statements do not ~~required~~include ~~under~~any adjustments that might result from the outcome of this uncertainty.

~~F-1~~/s/ Li and Company, PC Li and Company, PC Skillman, New Jersey April 22, 2013

~~Report of Independent Registered Public Accounting Firm~~F-2

ToReport ~~the~~of ~~Board~~Independent ofRegistered ~~Directors~~Public Accounting Firm

~~Spare~~To ~~Backup,~~the ~~Inc.~~Board of Directors

~~We have audited the accompanying consolidated balance sheets of~~ Spare Backup, Inc. and Subsidiary as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders' deficit, and cash flows for the years ended December 31, 2011 and 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements based on our audits.

We ~~conducted~~have ~~our~~audited ~~audits~~the inaccompanying ~~accordance~~consolidated ~~with~~balance ~~the~~sheet ~~standards~~ of ~~the~~Spare Backup, ~~Public Company Accounting Oversight Board (United States)~~Inc. ~~Those standards require that we plan~~ and ~~perform~~Subsidiary ~~the~~as ~~audits~~of toDecember ~~obtain~~31, ~~reasonable~~2011, ~~assurance~~and ~~about whether~~ the ~~financial~~related consolidated statements ~~are free~~ of ~~material misstatement. The Company is not required to have~~operations, ~~nor~~stockholders' ~~were we engaged to perform~~deficit, and ancash ~~audit~~flows offor ~~its~~the ~~internal~~year ~~controls~~ended ~~over~~December ~~financial~~31, ~~reporting~~2011. ~~Our~~These ~~audits~~consolidated ~~included consideration of internal control over~~ financial ~~reporting~~statements ~~as a basis for designing audit procedures that~~ are ~~appropriate in~~ the ~~circumstances,~~responsibility ~~but not for the purpose~~ of ~~expressing an opinion on~~ the ~~effectiveness of the~~ Company's management. ~~internal~~Our ~~control~~responsibility ~~over~~is ~~financial~~to ~~reporting. Accordingly, we~~ express noan ~~such~~ opinion. ~~An audit includes examining,~~ on ~~a test basis, evidence supporting~~ the ~~amounts~~consolidated ~~and disclosures in the~~ financial statements. Anbased ~~audit~~on ~~also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that~~ our ~~audits provide a reasonable basis for our opinion~~audit.

InWe conducted our ~~opinion,~~audit in accordance with the ~~consolidated~~standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements ~~referred~~are tofree ~~above~~of ~~present~~material ~~fairly~~misstatement. The Company is not required to have, innor ~~all~~were we ~~material~~engaged ~~respects~~to perform, ~~the~~an audit of its internal controls over financial ~~position~~reporting. Our audit included consideration of ~~Spare~~internal control ~~Backup,~~over ~~Inc.~~financial ~~and~~reporting ~~Subsidiary~~as ata ~~December~~basis ~~31,~~for ~~2011~~designing ~~and~~audit ~~2010~~procedures that are appropriate in the circumstances, ~~and~~but not for the ~~results~~purpose of ~~their~~expressing ~~operations~~an ~~and~~opinion ~~their~~on ~~cash~~the ~~flows~~effectiveness ~~for~~of the ~~year~~Company's ~~ended~~internal ~~December~~control 31over financial reporting. Accordingly, we ~~2011~~express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and ~~2010~~disclosures in ~~conformity~~the financial ~~with~~statements. An audit also includes assessing the accounting principles ~~generally~~used ~~accepted~~and insignificant estimates made by management, as well as evaluating the ~~United~~overall ~~States~~presentation of ~~America~~the financial statements. We believe that our audit provides a reasonable basis for our opinion.

~~The~~In ~~accompanying~~our opinion, the consolidated financial statements ~~have~~referred ~~been~~to above ~~prepared~~present ~~assuming~~fairly, ~~that the Company will continue as a going concern. As discussed~~ in ~~Note~~all 1material torespects, the ~~consolidated~~ financial ~~statements,~~position ~~the~~of ~~Company~~Spare ~~has~~Backup, ~~suffered~~Inc. ~~recurring losses from operations~~ and ~~has~~Subsidiary ~~negative~~at ~~working~~December ~~capital~~31, 2011, and athe ~~net~~results ~~capital~~of ~~deficiency~~their ~~that~~operations ~~raise~~and ~~substantial~~their ~~doubt~~cash ~~about~~flows ~~its~~for ~~ability~~the toyear ~~continue~~ended asDecember a31, ~~going~~2011 ~~concern. Management's plans~~ in ~~regard~~conformity towith ~~these~~accounting ~~matters~~principles generally ~~are~~accepted ~~also described~~ in ~~Note 1. These consolidated financial statements do not include any adjustments that might result from~~ the ~~outcome~~United States of ~~this uncertainty~~America.

~~/s/~~The ~~Sherb~~accompanying &consolidated financial statements have been prepared assuming that the Company ~~LLP~~will ~~New~~continue ~~York,~~as ~~New~~a ~~York~~going ~~April~~concern. 25As discussed in Note 1 to the consolidated financial statements, ~~2012~~the Company has suffered recurring losses from operations and has negative working capital and a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~F-2~~/s/ Sherb & Company LLP New York, New York April 25, 2012

~~SPARE BACKUP, INC. AND SUBSIDIARY~~F-3

CONSOLIDATED BALANCE SHEETS


SPARE BACKUP, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS


	December 31, 2012			December 31, 2011


ASSETS

Current Assets:
Cash	$	—		$	—
Accounts receivable, net allowance for bad debts of $86,714 and $100,000, respectively		84,282			120,248
Prepaid expenses		—			10,599
Total current assets		84,282			130,847

Property and equipment, net of accumulated depreciation of $341,255 and $279,345, respectively		37,448			98,070

Other assets		61,209			85,522

Total assets	$	182,939		$	314,439

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
Accounts payable and accrued expenses	$	3,500,711		$	3,615,504
Overdraft liability		18,136			70,750
Accrued payroll taxes		4,455,882			4,314,670
Current maturities of convertible promissory notes, net of discount of $528,788 and $0, respectively		2,000,672			1,918,735
Accrued interest on notes		244,948			215,004
Notes payable		508,000			787,600
Deferred revenue		102,500			102,500
Derivative liabilities		600,770			—
Due to stockholder		15,000			15,000

Total current liabilities		11,446,619			11,039,763

Non-current Liabilities:
Convertible promissory notes, net of current maturities		618,440			—

Total non-current liabilities		618,440			—

Total liabilities		12,065,059			11,039,763

Stockholders' Deficit:
Preferred stock, par value $0.001, 5,000,000 shares authorized:
50,000 and 100,000 shares designated as Series A and Series B Preferred Stock, respectively
Series A Preferred stock, par value $0.001, 50,000 shares designated:
50,000 shares issued and outstanding		50			50
Series B Preferred stock, par value $0.001, 100,000 shares designated:
100,000 shares issued and outstanding		100			100
Common stock; par value $0.001; 900,000,000 shares authorized;
407,349,546 and 303,943,573 issued and outstanding, respectively		407,349			303,943
Additional paid-in capital		108,034,704			105,765,093
Accumulated deficit		(120,324,323	)		(116,794,510	)

Total stockholders’ deficit		(11,882,120	)		(10,725,324	)

Total liabilities and stockholders’ deficit	$	182,939		$	314,439

	December 31,			December 31,
ASSETS	2011			2010
Current Assets:
Accounts receivable, net allowance for bad debt of $100,000 and $65,000 at December 31, 2011 and 2010, respectively	$	120,248		$	28,536
Prepaid expenses		10,599			58,798
Total current assets		130,847			87,334
Property and equipment, net of accumulated depreciation of $279,345 and $758,902 at December 31, 2011 and 2010, respectively		98,070			305,342
Other assets		85,522			50,648
Total assets	$	314,439		$	443,324
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	3,615,504		$	2,989,495
Overdraft liability		70,750			127,321
Accrued payroll taxes		4,314,670			3,203,189
8% convertible promissory notes, net of debt discount of $0 and $365 at December 31, 2011 and 2010, respectively		1,593,772			1,835,907
10% convertible promissory notes		324,963			420,963
Accrued interest on convertible promissory notes		215,004			31,473
Notes payable		787,600			892,500
Derivative liabilities		-			470,871
Deferred revenue		102,500			102,500
Due to stockholder		15,000			15,000
Total current liabilities		11,039,763			10,089,219
Stockholders' Deficit:
Preferred stock, $0.001 par value, 5,000,000 shares authorized: 150,000 and 50,000 issued and outstanding at December 31, 2011 and 2010, respectively		150			50
Common stock; $.001 par value; 450,000,000 shares authorized; 303,943,573 and 200,342,954 issued and outstanding at December 31, 2011 and 2010, respectively		303,943			200,343
Additional paid-in capital		105,765,093			101,097,359
Accumulated deficit		(116,794,510	)		(110,943,647	)
Total stockholders’ deficit		(10,725,324	)		(9,645,895	)
Total liabilities and stockholders’ deficit	$	314,439		$	443,324

See Notes to Consolidated Financial Statements.

~~See Notes to Consolidated Financial Statements.~~F-4

F-3

SPARE BACKUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS

	Twelve-month periods ended
	December 31,
	2012			2011


Net Revenues	$	539,396		$	399,343

Operating expenses:
Research and development		817,369			1,088,689
Selling, general and administrative		3,294,941			6,863,149
Total operating expenses		4,112,310			7,951,838

Operating loss		(3,572,914	)		(7,552,495	)

Other income (expense):
Change in fair value of derivative liabilities		251,414			2,296,519
Gain from debt settlements		329,721			171,624
Interest expense		(536,206	)		(763,775	)
Other loss		(1,828	)		(2,736	)
Total other income (expense)		43,101			1,701,632

Net loss	$	(3,529,813	)	$	(5,850,863	)


Basic and diluted loss per common share	$	(0.01	)	$	(0.02	)

Basic and diluted weighted average common
shares outstanding		349,325,696			258,789,468

~~CONSOLIDATED~~See ~~STATEMENTS~~Notes OFto ~~OPERATIONS~~Consolidated Financial Statements.

	For the Years Ended
	December 31,
	2011			2010
Net Revenues	$	399,343		$	958,886
Operating expenses:
Research and development		1,088,689			2,341,738
Selling, general and administrative		6,863,149			8,583,680
Total operating expenses		7,951,838			10,925,418
Operating loss		(7,552,495	)		(9,966,532	)
Other income (expense):
Change in fair value of derivative liabilities		2,296,519			446,027
Gain from debt settlements		171,624			442,250
Other		(2,736	)		-
Interest expense		(763,775	)		(2,048,963	)
Total other income (expense)		1,701,632			(1,160,686	)
Net loss	$	(5,850,863	)	$	(11,127,218	)
Basic and diluted loss per common share	$	(0.02	)	$	(0.07	)
Basic and diluted weighted average common shares outstanding		258,789,468			164,011,500

F-5

~~See~~SPARE ~~Notes~~BACKUP, toINC. ~~Consolidated~~AND ~~Financial Statements.~~SUBSIDIARY

~~F-4~~CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

~~SPARE~~From ~~BACKUP~~January 1, ~~INC.~~2012 ~~AND~~to ~~SUBSIDIARY~~December 31, 2012

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

	Series A				Series B
	Preferred				Preferred				Common				Additional
	Stock				Stock				Stock				Paid in Capital			ACC. Deficit			Total
	#		$		#		$		#		$		$			$			$

Beginning Balance		50,000		50		100,000		100		303,943,573		303,943		105,765,092			(116,794,510	)		(10,725,325	)

Issuance of common stock and warrants for cash:										53,140,903		53,141		682,192						735,333

Reprice of previous agreement										266,667		267		(267	)					—

Issuance of common stock for Conversion of convertible notes payable										16,666,666		16,667		149,999						166,666

Isuance of common stock for services										23,575,000		23,575		821,155						844,730

Excersie of stock options										3,640,000		3,640		74,760						78,400

Excersie of warrants										4,000,000		4,000		43,500						47,500

Isuance of warrants for services										—				33,397						33,397

Isuance of warrants for interest														4,496						4,496

Common Stock issued for accrued interest										2,116,737		2,117		135,393						137,510

FV options														312,484						312,484

Warrant modification exp														12,502						12,502

Net loss																	(3,529,813	)		(3,529,813	)

Closing Balance		50,000		50		100,000		100		407,349,546		407,349		108,034,704			(120,324,323	)		(11,882,120	)

~~From~~See ~~January~~Notes ~~1, 2010~~ to ~~December~~Consolidated ~~31,~~Financial ~~2011~~Statements.

												Additional								Total Stockholders'
	Preferred Stock A			Preferred Stock B			Common Stock					Paid-in			Accumulated			Deferred		Equity
	Shares	$		Shares	$		Shares		$			Capital			Deficit			Compensation		(Deficit)
Balance, January 1, 2010	50,000	$	50	-	$	-	134,036,062		$	134,036		$	90,886,623		$	(99,816,429	)	$	-	$	(8,795,720	)
Common stock issued for cash, net of costs	-		-	-		-	32,155,449			32,155			2,832,639			-			-		2,864,794
Fair value of shares issued for interest payment	-		-	-		-	2,464,567			2,464			300,160			-			-		302,624
Fair value of shares issued for services	-		-	-		-	11,481,076			11,481			1,584,490			-			-		1,595,971
Fair value of shares issued for debt settlement agreement	-		-	-		-	100,000			100			19,900			-			-		20,000
Conversion of convertible promissory notes	-		-	-		-	11,268,790			11,269			2,050,096			-			-		2,061,365
Exercise of stock options	-		-	-		-	1,636,752			1,637			20,755			-			-		22,392
Exercise of warrants	-		-	-		-	5,803,593			5,804			579,555			-			-		585,359
Beneficial conversion features of convertible notes	-		-	-		-	-			-			1,021,351			-			-		1,021,351
Fair value of convertible promissory note repricing	-		-	-		-	-			-			174,706			-			-		174,706
Fair value of shares issued for convertible promissory note repricing	-		-	-		-	416,666			417			78,750			-			-		79,167
Fair value of warrants issued to convertible promissory note holder	-		-	-		-	-			-			12,160			-			-		12,160
Fair value of warrants issued for accrued interest	-		-	-		-	-			-			29,626			-			-		29,626
Fair value of warrants issued for services	-		-	-		-	-			-			57,100			-			-		57,100
Fair value of warrants issued for interest	-		-	-		-	-			-			36,401			-			-		36,401
Fair value of shares issued in connection with the issuance of notes payable	-		-	-		-	980,000			980			154,727			-			-		155,707
Reclassification of liabilty contracts to equity contracts	-		-	-		-	-			-			72,462			-			-		72,462
Reclassification of equity to liability contracts	-		-	-		-	-			-			(742,387	)		-			-		(742,387	)
Fair value of options issued for services	-		-	-		-	-			-			177,472			-			-		177,472
Fair value of options issued granted	-		-	-		-	-			-			1,025,210			-			-		1,025,210
Fair value of options and warrants modifications	-		-	-		-	-			-			725,563			-			-		725,563
Net loss	-		-	-		-	-			-			-			(11,127,218	)		-		(11,127,218	)
Ending balance, December 31, 2010	50,000		50	-		-	200,342,955			200,343			101,097,359			(110,943,647	)		-		(9,645,895	)
Common stock issued for cash, net of costs	-		-	-		-	50,117,856			50,118			2,193,735			-			-		2,243,853
Fair value of shares issued for interest payment	-		-	-		-	517,623			518			70,091			-			-		70,609
Fair value of shares issued for services	-		-	-		-	12,035,000			12,035			1,124,290			-			-		1,136,325
Issuance of preferred stock	-		-	100,000		100	-			-			(100	)		-			-		-
Conversion of convertible promissory notes	-		-	-		-	13,147,625			13,148			426,142			-			-		439,290
Exercise of stock options	-		-	-		-	4,900,404			4,900			129,104			-			-		134,004
Exercise of warrants	-		-	-		-	6,109,403			6,109			641,257			-			-		647,366
Issuance of common stock pursuant to conversion of line of credit	-		-	-		-	8,550,000			8,550			504,500			-			-		513,050
Fair value of convertible promissory note repricing	-		-	-		-	-			-			266			-			-		266
Fair value of shares issued to satisfy notes payable	-		-	-		-	8,072,707			8,073			788,927			-			-		797,000
Fair value of shares issued for interest on note payable							250,000			250			12,250								12,500
Fair value of warrants issued and embedded conversion feature	-		-	-		-	-			-			47,672			-			-		47,672
Fair value of warrants issued for accrued interest	-		-	-		-	-			-			198			-			-		198
Cancellation of shares	-		-	-		-	(1,200,000	)		(1,200	)		(116,800	)		-			-		(118,000	)
Fair value of warrants issued for interest	-		-	-		-	-			-			-			-			-		-
Fair value of shares issued in connection with the issuance of notes payable	-		-	-		-	500,000			500			43,500			-			-		44,000
Reprice of previous agreement for common stock issued for cash	-		-	-		-	600,000			600			(600	)		-			-		-
Fair value of options issued for services	-		-	-		-	-			-			531,552			-			-		531,552
Reclassification of equity contracts to liability contracts	-		-	-		-	-			-			(2,407,261	)		-			-		(2,407,261	)
Reclassification of liability contracts to equity contracts	-		-	-		-	-			-			519,389			-			-		519,389
Beneficial conversion feature	-		-	-		-	-			-			38,000			-			-		38,000
Fair value of options and warrants modifications	-		-	-		-	-			-			121,621			-			-		121,621
Net loss	-		-	-		-	-			-			-			(5,850,863	)		-		(5,850,863	)
Ending balance, December 31, 2011	50,000	$	50	100,000	$	100	303,943,573		$	303,943		$	105,765,092		$	(116,794,510	)	$	-	$	(10,725,324	)

F-6

See Notes to Consolidated Financial Statements.

SPARE BACKUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Twelve Months Ended
	December 31,
	2012			2011

Cash flows from operating activities:
Net loss	$	(3,529,813	)	$	(5,850,863	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Change in fair value of derivative liabilities		600,770			(2,296,519	)
Fair value of options and warrants issued for services and interest		345,881			851,041
Fair value of option and warrant modifications		12,502
Fair value of warrants issued for accrued interest		4,496			223,510
Fair value of common stock issued in connection with service rendered		844,730			1,018,325
Fair value of common stock issued in connection with note payable issuance		—			119,971
Bad debt		(13,286	)		35,000
Depreciation and amortization		61,910			217,537
Gain on extinguishment of accounts payable		(446,387	)		171,348
Loss on extinguishment of convertible notes payable		116,666			—
Amortization of debt discount		(528,769	)		27,865
Changes in operating assets and liabilities:
Accounts receivable		49,251			(129,712	)
Prepaid expense and other current assets		10,599			48,199
Deferred financing costs		(2,959	)		648
Other assets		27,272			(32,522	)
Accounts payable, accrued expense and accrued payroll taxes		732,069			1,601,141
Accrued interest on convertible promissory notes		29,942			183,531

Net cash used in operating activities		(1,685,126	)		(3,811,500	)

Cash flows used in investing activities:
Capital expenditures		(1,288	)		(10,265	)

Net cash used in investing activities		(1,288	)		(10,265	)

Cash flows from financing activities:
Proceeds from issuance of convertible promissory notes		854,795			490,000
Proceeds from issuance of notes payable		23,000			821,363
Repayment of notes payable		—			(173,000	)
Net proceeds from issuance of common stock for cash		735,333			2,244,027
Cash overdraft		(52,614	)		(56,571	)
Proceeds from exercise of warrants		47,500			360,827
Proceeds from exercise of stock options		78,400			135,119

Net cash provided by financing activities		1,686,414			3,821,765

Net change in cash		—			—

Cash, beginning of year		—			—

Cash, end of year	$	—		$	—

Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,316		$	—
Cash paid for income taxes	$	—		$	—

Non-cash investing and financing activities:
Write off of fully depreciated property and equipment	$	—		$	697,094
Fair value of warrants and embedded conversion features issued in
connection with the issuance of convertible promissory notes and
corresponding debt discount	$	—		$	38,000
Conversion of convertible promissory notes and accrued interest
into shares of common stock	$	166,667		$	439,290
Issuance of a note payable to pay certain accounts payable	$	119,750		$	52,500
Reclassification from liability to equity contract	$	—		$	519,389
Reclassification from liability to equity contract	$	—		$	2,407,261
Fair value of shares of common stock issued for payment of
accrued interest	$	137,510		$	—
Fair value of derivative liability	$	600,770		$	—

~~F-5~~See Notes to Consolidated Financial Statements.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~F-7

	For the Years Ended
	December 31
	2011			2010
Cash flows from operating activities:
Net loss	$	(5,850,863	)	$	(11,127,218	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of derivative liabilities		(2,296,519	)		(446,027	)
Fair value of options and warrants issued for services		851,041			1,985,345
Fair value of shares and warrants in lieu of interest		223,510			177,354
Fair value of common stock issued in connection with service rendered		1,018,325			1,595,971
Fair value of common stock issued in connection with the conversion of convertible promissory notes		119,971			(555	)
Fair value of convertible promissory notes modifications		-			174,706
Fair value of common stock issued in connection with note payable issuance		-			155,707
Depreciation		217,537			281,615
Bad debt		35,000			-
Amortization of debt discount		27,865			1,142,697
Amortization of deferred financing costs		648			110,456
Gain from debt settlement		171,348			(442,250	)
Changes in operating assets and liabilities:
Accounts receivable		(129,712	)		25,835
Prepaid expense and other current assets		48,199			(44,311	)
Other assets		(32,522	)
Accounts payable, accrued expense and accrued payroll taxes		1,601,141			2,061,320
Deferred revenues		-			(518,627	)
Accrued interest on convertible promissory notes		183,531			279,923
Net cash used in operating activities		(3,811,500	)		(4,588,059	)
Cash flows used in investing activities:
Capital expenditures		(10,265	)		(58,318	)
Net cash used in investing activities		(10,265	)		(58,318	)
Cash flows from financing activities:
Proceeds from issuance of convertible promissory notes and line of credit		490,000			197,500
Proceeds from issuance of notes payable		821,363			1,310,500
Repayment of notes payable		(173,000	)		(418,000	)
Net proceeds from issuance of common stock for cash		2,244,027			2,864,794
Cash overdraft		(56,571	)		83,832
Proceeds from exercise of warrants		360,827			585,359
Proceeds from exercise of stock options		135,119			22,392
Net cash provided by financing activities		3,821,765			4,646,377
Net increase in cash		-			-
Cash, beginning of period		-			-
Cash, end of period	$	-		$	-
Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	-
Cash paid for income taxes	$	-		$	-
Non-cash investing and financing activities:
Write off of fully depreciated property and equipment	$	697,094		$	1,907,351
Fair value of warrants and embedded conversion features issued in connection with the issuance of convertible promissory notes and corresponding debt discount	$	38,000		$	1,021,351
Conversion of convertible promissory notes and accrued interest into shares of common stock	$	439,290		$	2,061,365
Issuance of a note payable to pay certain accounts payable	$	52,500		$	-
Reclassification from liability to equity contract	$	519,389		$	72,462
Reclassification from equity to liability contract	$	2,407,261		$	742,387

SPARE BACKUP, INC. AND SUBSIDIARY

~~See~~NOTES ~~Notes~~TO toCONSOLIDATED ~~Consolidated~~FINANCIAL ~~Financial Statements.~~STATEMENTS

FNOTE 1 -6 ORGANIZATION, BASIS OF PRESENTATION AND GOING CONCERN

~~SPARE~~Spare ~~BACKUP~~Backup, ~~INC~~Inc., ~~AND~~(the ~~SUBSIDIARY~~"Company") was incorporated in Delaware in December 1999. The Company sells on-line backup solutions software and services to individuals, business professionals, small office and home office companies, and small to medium sized businesses.

~~NOTES~~The TOaccompanying ~~CONSOLIDATED~~consolidated ~~FINANCIAL~~financial ~~STATEMENTS~~statements have been prepared on a going concern basis. The Company has incurred net losses of approximately $3.5 million during the year ended December 31, 2012. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, including accrued payroll taxes and statutory additions amounts to approximately $4.5 million at December 31, 2012, and to generate profitable operations in the future. Management plans to continue to provide for its capital requirements by issuing additional equity securities and debt. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.

~~NOTE~~These 1matters, -among ~~ORGANIZATION~~others, ~~BASIS~~raise OFsubstantial doubt ~~PRESENTATION~~about ~~AND~~the ~~GOING~~ability ~~CONCERN~~of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.

~~Spare~~The ~~Backup,~~accompanying ~~Inc.,~~consolidated (financial statements include the ~~"Company")~~accounts ~~was~~of ~~incorporated~~Spare inBackup ~~Delaware~~and inits ~~December~~wholly-owned ~~1999~~subsidiary. ~~The~~All ~~Company~~material ~~sells on~~inter-~~line~~company ~~backup~~balances ~~solutions software~~ and ~~services~~transactions tohave been ~~individuals,~~eliminated ~~business~~in ~~professionals, small office and home office companies, and small to medium sized businesses~~consolidation.

~~The~~NOTE ~~accompanying~~2 ~~consolidated~~- ~~financial~~SUMMARY ~~statements~~OF ~~have~~SIGNIFICANT been prepared on a going concern basis. The Company has incurred net losses of approximately $5.9 million during the year ended December 31, 2011. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due, including accrued payroll taxes and statutory additions amounts to approximately $4.3 million at December 31, 2011, and to generate profitable operations in the future. Management plans to continue to provide for its capital requirements by issuing additional equity securities and debt. The outcome of these matters cannot be predicted at this time and there are no assurances that if achieved, the Company will have sufficient funds to execute its business plan or generate positive operating results.ACCOUNTING POLICIES

~~These~~Use ~~matters, among others, raise substantial doubt about the ability~~ of the Company to continue as a going concern. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.Estimates

The ~~accompanying~~preparation of the consolidated financial statements ~~include~~in accordance with accounting principles generally accepted in the ~~accounts~~United States requires management to make estimates and assumptions that affect the reported amounts of ~~Spare~~assets ~~Backup~~and liabilities and ~~its~~disclosure ~~wholly-owned~~of ~~subsidiary~~contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. ~~All~~Significant estimates ~~material~~made ~~inter~~by management include, but are not limited to share-~~company~~based ~~balances~~payments and ~~transactions~~useful ~~have~~life ~~been~~of ~~eliminated~~property inand ~~consolidation~~equipment. Actual results will differ from these estimates.

~~NOTE~~Cash 2and -Cash ~~SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~Equivalents

~~Use~~The Company considers all highly liquid temporary cash investments with an original maturity of ~~Estimates~~three months or less when purchased, to be cash equivalents.

~~The~~Concentration ~~preparation~~ of ~~the~~Credit consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management include, but are not limited to share-based payments and useful life of property and equipment. Actual results will differ from these estimates.Risks

~~Cash~~The Company's accounts receivable are due from a few customers, who are located in the Unites States and ~~Cash~~United ~~Equivalents~~Kingdom. At December 31, 2012, two of the Company’s customers accounted for 76% of its accounts receivable. Two of the Company’s customers accounted for 85% of its accounts receivable at December 31, 2011.

~~The~~One of the Company's ~~considers~~customers ~~all~~accounted ~~highly~~for ~~liquid~~approximately ~~temporary~~40% ~~cash~~of ~~investments~~its ~~with~~revenues anduring ~~original~~the ~~maturity~~year ending December 31, 2012. One of ~~three~~the Company’s ~~months~~customers oraccounted ~~less~~for ~~when~~44% ~~purchased,~~of tothe beCompany’s ~~cash~~revenue ~~equivalents~~during the year ending December 31, 2011.

~~Concentration of Credit Risks~~F-8

~~The~~Accounts ~~Company is subject to concentrations of credit risk primarily from cash and cash equivalents.~~Receivable

The Company’s ~~cash~~has ~~and~~a ~~cash~~policy ~~equivalents~~of reserving for uncollectible accounts ~~are~~based ~~held~~on atits ~~financial~~best ~~institutions~~estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are ~~insured~~charged byto the ~~Federal~~bad ~~Deposit~~debt ~~Insurance~~expense ~~Corporation,~~after orall means of collection have been exhausted and the ~~FDIC,~~potential upfor recovery tois ~~$250,000~~considered remote. Management ~~During~~determined ~~the~~that ~~year~~an ~~ended~~allowance ~~December~~of 31$86,714 ~~2011~~and $100,000 ~~the~~was ~~Company~~necessary ~~did~~at ~~not~~December 31, ~~exceed~~2012 ~~the~~and ~~FDIC~~2011, ~~insurance limit~~respectively.

~~The~~Property ~~Company's accounts receivable are due from a few customers, of which are located in the Unites States~~ and United Kingdom. At December 31, 2011, two of the Company’s customers accounted for 16% and 69% of its accounts receivable. Two of the Company’s customers accounted for 96% of its accounts receivable at December 31, 2010. Equipment

FProperty and equipment, which primarily consists of office equipment and computer software, are recorded at cost and are depreciated on a straight-7line basis over their estimated useful lives of three to five years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At the retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in other income (expense) in the accompanying statements of operations.

~~Accounts~~Revenue ~~Receivable~~Recognition

The Company ~~has~~follows athe ~~policy~~guidance of ~~reserving for uncollectible accounts based on its best estimate of~~ the ~~amount~~FASB ASC of605-10-S99 ~~probable~~"Revenue ~~credit~~Recognition ~~losses~~Overall in– ~~its~~SEC ~~existing accounts receivable~~Materials." The Company ~~periodically~~records ~~reviews~~revenue ~~its~~when ~~accounts~~persuasive ~~receivable~~evidence of ~~to determine whether~~ an ~~allowance~~arrangement isexists, ~~necessary based~~ on-line anback-up ~~analysis~~services ofhave ~~past~~been ~~due~~rendered, ~~accounts and other factors that may indicate that~~ the ~~realization~~sales ofprice ~~an account may be in doubt. Account balances deemed~~ to ~~be uncollectible are charged to~~ the ~~bad~~customer ~~debt expense after all means of collection have been exhausted and the potential for recovery~~ is ~~considered~~fixed ~~remote. Management~~or ~~determined that an allowance of $100~~determinable,~~000~~ and ~~$65,000~~collectability ~~was~~is ~~necessary~~reasonably ~~at December 31, 2011 and 2010, respectively~~assured.

~~Property~~The Company has collected annual fees related to online back-up services. Online back up service fees received in advance or collected up front are reflected as deferred revenue on the accompanying balance sheet. Deferred revenue as of December 31, 2012 and ~~Equipment~~2011 amounted to $102,500 and $102,500, respectively, and will be recognized as revenue over the respective subscription period.

~~Property~~Revenue ~~and~~consists ~~equipment,~~of ~~which~~the ~~primarily~~gross ~~consists~~value of ~~office~~billings to ~~equipment~~clients. ~~and~~The ~~computer~~Company ~~software,~~reports ~~are~~this ~~recorded~~revenue atgross ~~cost~~in ~~and~~accordance ~~are~~with ~~depreciated~~Generally onAccepted aAccounting ~~straight-line~~Pronouncements ~~basis~~(“GAAP”) because ~~over~~it ~~their~~is ~~estimated~~responsible ~~useful~~for ~~lives~~fulfillment of ~~three~~the toservice, ~~five~~has ~~years.~~substantial ~~Maintenance~~latitude ~~and~~in ~~repairs~~setting ~~are~~price ~~charged to expense as incurred. Significant renewals~~ and ~~betterments~~assumes ~~are~~the ~~capitalized.~~credit Atrisk for the ~~retirement~~entire oramount ~~other disposition~~ of ~~property~~the ~~and equipment~~sale, ~~the cost~~ and ~~accumulated~~it ~~depreciation~~is ~~are~~responsible ~~removed~~for ~~from~~ the ~~accounts~~payment ~~and~~of ~~any~~all ~~resulting~~obligations ~~gain~~incurred orfor ~~loss~~sales ismarketing ~~reflected~~and ~~in other income (expense) in the accompanying statements of operations~~commissions.

~~Revenue~~Product ~~Recognition~~Concentration

The Company ~~follows~~offers ~~the~~subscriptions ~~guidance~~to ofonline ~~the~~and ~~FASB~~software ~~ASC~~backup products ~~605-10-S99~~to ~~"Revenue~~assist ~~Recognition Overall – SEC Materials." The Company records revenue when persuasive evidence of an arrangement exists~~individuals, ~~on-line~~small ~~back-up~~businesses ~~services have been rendered, the sales price to the customer is fixed or determinable,~~ and ~~collectability~~home isbusiness ~~reasonably assured~~users.

~~The~~Fair ~~Company~~Value has collected annual fees related to online back-up services. Online back up service fees received in advance or collected up front are reflected as deferred revenue on the accompanying balance sheet. Deferred revenue as of ~~December~~Financial ~~31, 2011 and 2010 amounted to $102,500 and $102,500, respectively, and will be recognized as revenue over the respective subscription period.~~Instruments

~~Revenue~~FASB ~~consists~~ASC of820, ~~the~~“Fair ~~gross~~Value ~~value~~Measurements and ofDisclosures” ~~billings~~establishes toa ~~clients.~~common ~~The~~definition ~~Company~~for ~~reports~~fair ~~this~~value ~~revenue~~to ~~gross~~be inapplied ~~accordance~~to ~~with~~existing ~~Generally~~generally ~~Accepted~~accepted ~~Accounting~~accounting principles ~~Pronouncements~~that ~~(“GAAP”)~~require ~~because~~the ituse ~~is responsible for fulfillment~~ of ~~the~~fair ~~service~~value measurements, ~~has~~establishes ~~substantial~~a ~~latitude~~framework infor ~~setting~~measuring ~~price~~fair value and ~~assumes~~expands ~~the~~disclosure about ~~credit~~such ~~risk~~fair ~~for~~value ~~the~~measurements. ~~entire~~The ~~amount~~adoption of ~~the~~ASC 820 ~~sale,~~did ~~and~~not ithave isan ~~responsible~~impact ~~for~~on the ~~payment~~Company’s offinancial ~~all~~position or ~~obligations~~operating ~~incurred~~results, ~~for~~but ~~sales~~did ~~marketing~~expand ~~and~~certain ~~commissions~~disclosures.

~~Customer Concentration~~F-9

~~One~~ASC 820 ofdefines fair value as the ~~Company's~~price that ~~customers~~would ~~accounted~~be ~~for~~received ~~approximately~~to ~~44%~~sell ofan ~~its~~asset ~~revenues~~or ~~during~~paid ~~the~~to ~~year~~transfer ~~ending~~a ~~December~~liability ~~31,~~in ~~2011.~~an ~~One~~orderly oftransaction between market participants at the ~~Company’s~~measurement ~~customers~~date. ~~accounted~~Additionally, ~~for~~ASC 820 ~~70%~~requires the use of ~~the~~valuation ~~Company’s~~techniques ~~revenue~~that ~~during~~maximize the ~~year~~use ~~ending~~of ~~December~~observable inputs ~~31,~~and ~~2010~~minimize the use of unobservable inputs. These inputs are prioritized below:

Product Concentration

	Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities
	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company ~~offers~~did ~~subscriptions~~not tohave ~~online~~any ~~and~~Level ~~software~~2 ~~backup~~or ~~products~~Level 3 assets toor ~~assist~~liabilities ~~individuals~~as of December 31, ~~small~~2012 ~~businesses~~and 2011, with the exception of its convertible promissory notes and ~~home~~derivative liabilities. The ~~business~~carrying ~~users~~amount of the convertible promissory notes at December 31, 2012 and 2011 approximate their respective fair value based on the Company’s incremental borrowing rate. The derivative liabilities are computed using either the Black Scholes Model or the binomial method.

~~Fair~~Software ~~Value~~Development ~~of Financial Instruments~~Costs

~~FASB~~Costs ~~ASC~~incurred ~~820,~~in ~~“Fair~~the ~~Value~~research ~~Measurements~~ and ~~Disclosures”~~development of ~~establishes~~software aproducts ~~common~~are ~~definition~~expensed ~~for~~as ~~fair~~incurred ~~value~~until totechnological befeasibility ~~applied~~has tobeen ~~existing~~established. ~~generally~~After ~~accepted~~technological ~~accounting~~feasibility is ~~principles~~established, ~~that~~any ~~require~~additional ~~the~~costs ~~use~~are capitalized in accordance with FASB ASC 985-20, “Costs of ~~fair~~Software ~~value~~to ~~measurements~~be Sold, Leased, ~~establishes~~or aMarketed.” ~~framework~~The ~~for~~Company ~~measuring~~believes ~~fair~~that ~~value~~the ~~and~~current ~~expands~~process ~~disclosure~~for ~~about~~developing ~~such~~software ~~fair~~is ~~value~~essentially ~~measurements.~~completed ~~The~~concurrently with ~~adoption~~the establishment of ~~ASC 820~~technological ~~did~~feasibility. ~~not~~Accordingly, ~~have~~no ansoftware ~~impact~~development oncosts ~~the~~have ~~Company’s~~been ~~financial~~capitalized ~~position~~as orof ~~operating~~December 31, ~~results~~2012. Instead, ~~but~~such ~~did~~amounts ~~expand~~are ~~certain~~included ~~disclosures~~in the statement of operations under the caption "Research and Development."

~~ASC 820~~Foreign ~~defines~~Currency fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:Transactions

	Level 1:	Observable inputs such as quoted market prices in active markets for identical assets or liabilities
	Level 2:	Observable market-based inputs or unobservable inputs that are corroborated by market data
	Level 3:	Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company periodically engages in transactions in countries outside the United States which may result in foreign currency transaction gains or losses. Gains and losses resulting from foreign currency transactions are recognized as foreign currency gain (loss) in the statement of operations of the period incurred.

~~F-8~~Income Taxes

~~The~~Income ~~Company~~taxes ~~did~~are ~~not~~accounted ~~have~~for ~~any~~in ~~Level~~accordance with 2the orprovisions ~~Level 3~~of ~~assets~~FASB orASC-740 ~~liabilities~~– asIncome ofTaxes. ~~December~~Deferred ~~31,~~tax ~~2011~~assets and ~~2010,~~liabilities ~~with~~are recognized for the ~~exception~~future oftax consequences ~~its~~attributable ~~convertible~~to ~~promissory~~differences ~~notes~~between ~~and~~the ~~derivative~~financial ~~liabilities. The~~statement carrying ~~amount~~amounts of ~~the~~existing ~~convertible~~assets ~~promissory~~and ~~notes~~liabilities atand their ~~December~~respective ~~31,~~tax ~~2011~~bases. Deferred tax assets and ~~2010~~liabilities ~~approximate~~are ~~their~~measured ~~respective~~using ~~fair~~enacted ~~value~~tax ~~based~~rates onexpected to apply to taxable income in the ~~Company’s~~years ~~incremental~~in ~~borrowing~~which ~~rate~~those temporary differences are expected to be recovered or settled. The ~~derivative~~effect on deferred tax assets and liabilities ~~are~~of ~~computed~~a ~~using~~change ~~either~~in tax rates is recognized in income in the ~~Black~~period ~~Scholes~~that ~~Model~~includes orthe enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the ~~binomial~~amounts ~~method~~expected to be realized, but no less than quarterly.

~~Software~~Share-based ~~Development Costs~~Payments

~~Costs~~The ~~incurred~~Company inaccounts ~~the~~for ~~research~~stock-based ~~and development of software products are expensed as incurred until technological feasibility has been established. After technological feasibility is established, any additional costs are capitalized~~ compensation in accordance with ~~FASB~~ ASC ~~985-20,~~Topic ~~“Costs of Software to be Sold~~718, ~~Leased,~~Compensation-Stock orCompensation (“ASC ~~Marketed.~~718”). ~~The~~Under ~~Company~~the ~~believes~~fair ~~that~~value recognition ~~the~~provisions ~~current~~of ~~process~~this ~~for~~topic, ~~developing~~stock-based ~~software~~compensation cost is ~~essentially~~measured ~~completed~~at ~~concurrently with~~ the ~~establishment~~grant ofdate ~~technological~~based ~~feasibility.~~on ~~Accordingly,~~the nofair ~~software~~value ~~development~~of ~~costs~~the award ~~have~~and ~~been~~is ~~capitalized~~recognized as ofexpense ~~December~~on ~~31,~~a ~~2011.~~straight-line ~~Instead,~~basis ~~such~~over ~~amounts are included in~~ the ~~statement~~requisite ofservice ~~operations~~period, ~~under~~which is the ~~caption~~vesting ~~"Research and Development~~period."

~~Foreign~~The ~~Currency~~Company ~~Transactions~~has elected to use the Black-Scholes-Merton (“BSM”) option-pricing model to estimate the fair value of its options, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of stock option awards. Compensation expense recognized in the consolidated statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

~~Income~~Convertible ~~Taxes~~Instruments

~~Income~~The ~~taxes~~Company ~~are~~evaluates ~~accounted for in accordance with the provisions of FASB ASC-740 – Income Taxes. Deferred tax assets~~ and ~~liabilities~~accounts ~~are recognized~~ for ~~the~~conversion options ~~future~~embedded ~~tax~~in ~~consequences~~its ~~attributable~~convertible toinstruments ~~differences between the financial statement carrying amounts of existing assets~~ and ~~liabilities~~warrants ~~and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income~~ in ~~the~~accordance ~~years~~with inprofessional ~~which~~standards ~~those~~for ~~temporary~~“Accounting ~~differences~~for Derivative ~~are~~Instruments ~~expected to be recovered or settled. The effect on deferred tax assets~~ and ~~liabilities~~Hedging ~~of a change in tax rates is recognized in income in the period that includes the enactment date~~Activities. ~~Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized, but no less than quarterly.~~”

~~Share~~Professional standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-~~based~~measured ~~Payments~~at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”

The Company accounts for ~~stock-based~~convertible ~~compensation~~instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with ~~ASC~~Beneficial ~~Topic~~Conversion ~~718~~Features,” ~~Compensation-Stock~~as ~~Compensation (~~those professional standards pertain to “~~ASC~~Certain ~~718”)~~Convertible Instruments.” ~~Under~~Accordingly, the ~~fair~~Company ~~value~~records, ~~recognition~~when ~~provisions~~necessary, discounts to convertible notes for the intrinsic value of ~~this~~conversion ~~topic,~~options ~~stock-~~embedded in debt instruments based ~~compensation~~upon ~~cost~~the isdifferences between ~~measured~~the fair value of the underlying common stock at the ~~grant~~commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based onupon the differences between the fair value of the ~~award~~underlying ~~and~~common isstock ~~recognized~~at asthe ~~expense~~commitment ondate aof the ~~straight-line~~note ~~basis~~transaction ~~over~~and the ~~requisite~~effective ~~service~~conversion ~~period,~~price ~~which~~embedded isin the ~~vesting period~~note.

~~The~~ASC ~~Company has elected to use the Black~~815-~~Scholes-Merton~~40 ~~(“BSM”)~~provides ~~option-pricing model to estimate the fair value of its options~~that, ~~which~~among ~~incorporates~~other ~~various subjective assumptions including volatility~~things, ~~risk-free interest rate~~ generally, ~~expected~~if ~~life,~~an ~~and~~event ~~dividend~~is ~~yield~~not towithin ~~calculate~~ the ~~fair~~entity’s ~~value~~control ofcould ~~stock~~require ~~option~~net ~~awards.~~cash ~~Compensation~~settlement, ~~expense~~then ~~recognized in~~ the ~~consolidated~~contract ~~statements~~shall ~~of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to~~ be classified ~~estimated~~as atan ~~the~~asset ~~time~~or ofa ~~grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates~~liability.

~~Convertible~~Pursuant ~~Instruments~~to 815-40-25-22, if the number of currently authorized but unissued shares, less the maximum number of shares that could be required to be delivered during the contract period under existing commitments, including outstanding convertible debt or instruments, outstanding stock options and warrants, exceeds the maximum number of shares that could be required to be delivered under share settlement of the contract, then the excess is to be accounted for as a liability.

~~The~~Additionally, the Company ~~evaluates~~determines ~~and~~whether the ~~accounts for conversion options embedded in its convertible~~ instruments ~~and~~issued ~~warrants~~ in ~~accordance~~the ~~with~~transactions ~~professional~~are ~~standards~~considered ~~for~~indexed ~~“Accounting~~to ~~for~~the ~~Derivative~~Company’s ~~Instruments~~own ~~and Hedging Activities~~stock.”

~~Professional~~Recent ~~standards~~Accounting generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional Convertible Debt Instrument.”Pronouncements

~~F-9~~Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

~~The~~Basic Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and ~~the~~Diluted ~~effective~~Earnings ~~conversion~~per price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note.Share

~~ASC~~Basic ~~815~~earnings per share is calculated by dividing income available to stockholders by the weighted-40average ~~provides~~number ~~that~~of common shares outstanding for each period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the reverse treasury stock method). The outstanding options, ~~among~~warrants ~~other~~and ~~things~~shares equivalent issuable pursuant to convertible promissory notes amounted to 111,303,079 ~~generally~~and 105,097,959 ifat anDecember ~~event~~31, is2012 ~~not~~and ~~within~~2011, ~~the~~respectively. ~~entity’s~~Accordingly, ~~control~~these common ~~could~~share ~~require~~equivalents ~~net~~at ~~cash~~December ~~settlement~~31, ~~then~~2012 and 2011 are excluded from the ~~contract~~loss ~~shall~~per beshare ~~classified~~computation asfor anthat ~~asset~~period ordue ato their ~~liability~~antidilutive effect.

~~Pursuant to 815~~F-40-25-22, if the number of currently authorized but unissued shares, less the maximum number of shares that could be required to be delivered during the contract period under existing commitments, including outstanding convertible debt or instruments, outstanding stock options and warrants, exceeds the maximum number of shares that could be required to be delivered under share settlement of the contract, then the excess is to be accounted for as a liability.11

~~Additionally,~~NOTE ~~the~~3 ~~Company~~- ~~determines~~PROPERTY ~~whether~~AND ~~the instruments issued in the transactions are considered indexed to the Company’s own stock.~~EQUIPMENT

~~Recent~~Property ~~Accounting~~and ~~Pronouncements~~equipment consisted of the following:

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

		December 31,			December 31,
	Estimated life	2012			2011
Computer and office equipment	3 to 5 years	$	378,703		$	377,415
Leasehold improvements	5 years		—			—
			378,703			377,415
Less:Accumulated depreciation			(341,255	)		(279,345	)
		$	37,448		$	98,070

~~Basic~~Depreciation expense amounted to $61,910 and $217,537 ~~Diluted~~during ~~Earnings~~the ~~per~~years ~~Share~~ended December 31, 2012 and 2011, respectively.

~~Basic~~NOTE ~~earnings~~4 ~~per~~– ~~share~~ACCRUED isPAYROLL calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding for each period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of stock options and warrants (calculated using the reverse treasury stock method). The outstanding options, warrants and shares equivalent issuable pursuant to convertible promissory notes amounted to 105,097,959 and 110,599,038 at December 31, 2011 and 2010, respectively. Accordingly, these common share equivalents at December 31, 2011 and 2010 are excluded from the loss per share computation for that period due to their antidilutive effect.TAXES

~~The~~At ~~following~~December ~~sets~~31, ~~forth~~2012, the ~~computation~~Company recorded a liability of ~~basic~~approximately ~~and~~$4.5 ~~diluted~~million ~~earnings~~to ~~per~~certain ~~share~~U.S. and state governmental agencies for ~~the~~unpaid ~~years~~payroll ~~ended~~taxes, ~~December~~including statutory 31additions, ~~2011~~such as interest and ~~2010:~~penalties.

	For the years ended
	December 31,
	2011		2010
Numerator:
Net loss attributable to common stock	$	(5,850,863)	$	(11,127,218	)
Change in fair value of derivative liability		(2,296,519)		(446,027)
		(8,147,382)		(11,573,245)
Denominator:
Denominator for basic earnings per share- Weighted average shares outstanding		258,789,468		164,011,500
Denominator for diluted earnings per share- Weighted average shares outstanding		258,789,468		164,011,500
Basic earnings per share	$	(0.02)	$	(0.07	)
Diluted earnings per share	$	(0.02)	$	(0.07	)

F-12

FNOTE 5 -10 CONVERTIBLE PROMISSORY NOTES

~~NOTE~~Convertible 3promissory -notes ~~PROPERTY~~consist ~~AND~~of ~~EQUIPMENT~~the following as of:

Property and equipment consisted of the following:

	December 31, 2012			December 31, 2011

Convertible promissory notes - 8%, bearing interest at 8% per annum, matured in August 2009. Interest payable commencing the quarter ending December 31, 2007, payable within 30 days after the end of the quarter. Interest may be paid in cash or common stock at the option of the Company. Interest paid in common stock will be calculated at a range of 90% of the average closing price for the common stock for the five (5) trading days preceding the interest payment date. The promissory notes are convertible at any time at the option of the holder, into shares of its common stock at an effective conversion rate of $0.25 per share. It is currently past due.	$	1,593,772		$1,593,772

Convertible promissory notes payable - 10%, bearing interest at 10% per annum, matured between August 2008 and October 2011. Interest payable commencing the quarter ending September 30, 2008, within 30 days after the end of the quarter. Interest may be paid in cash or common stock at the option of the Company. Interest paid in common stock will be calculated at 100% of the volume weighted average price for the common stock for ten (10) trading days preceding the interest payment date. The promissory notes are convertible at any time at the option of the holder, into shares of the Company’s common stock at an effective conversion rate ranging from $0.05 to $0.25 per share. The notes are currently past due.		274,963		324,963

Convertible note payable for up to $1.5 million, convertible at 75% of the Company’s 5-day moving average quoted price of the stock for that month, bearing interest at 10% per annum, payable monthly beginning August 2011, maturing in June 2014.		585,000		-

Secured convertible note payable, convertible at the lessor of: 1) 70% of the lowest traded price of the Company’s common stock for the 20 trading days prior to the conversion, or 2) $0.035 per share, bearing a one-time interest payment of 10%, payable upon conversion, matured December 15, 2012. The note is currently past due.		60,000
				-
Convertible note payable for up to $385,000, convertible at the lessor of: 1) $0.035 per share, or 2) 70% of the lowest trade price in the 25 trading days prior to the conversion, bearing an original issuance discount of 9.1% and no interest for the first 90 days, bearing a one-time interest payment of 5% after 90 days, payable on conversion, maturing one year from the effective date of each receipt.		54,545		-

Convertible note payable - 10%, convertible at 60% of the average of the lowest three trading prices for the Company’s common stock in the ten day trading period ended one trading day prior to the conversion date, bearing interest at 6% per annum, payable upon conversion, matured on February 18, 2013. The notes are currently past due.		160,000		-

Convertible note payable valued at $100,000, convertible at a conversion price of $0.05 per share at maturity or when in default at a strike price of $0.01 per share, maturing on September 5, 2012, 2 million warrants with a strike price of one cent per a share, matured on October 15, 2012. The note is currently past due.		100,000		-

Convertible note payable issued with a 2- year 2,000,000 warrants with exercise price of $0.01 convertible at maturity with conversion price of $0.0125 per share or when in default at a strike price of $0.05 per share, matured on October 15, 2012. The note is currently past due.		34,000		-

Convertible note payable - issued on August 22, 2012, bearing interest at 6% per annum payable in common stock, maturing on August 22, 2014, with principal and interest convertible to common stock at 70% of the lowest closing bid price for any of the five (5) trading days including the day upon which a Notice of Conversion is received by the Company.		75,000		-

Convertible note payable - issued with s warrants to purchase 8.3 million shares of the Company’s common share over the 3-year period with exercise price of $0.05 per share in December 2012, bearing interest at 12% per annum payable in common stock, with principal and interest convertible to common stock at 50% of the lowest closing bid price for any of the five (5) trading days including the day upon which a Notice of Conversion is received by the Company, matured on December 20, 2012. The note is currently past due.		41,500		-

Convertible note payable - issued with warrants to purchase 20.25million shares of the Company’s common share over the 3-year period with exercise price of $0.05 per share in December 2012, bearing interest at 12% per annum payable in common stock, , with principal and interest convertible payable to common stock at 50% of the lowest closing bid price for any of the five (5) trading days including the day upon which a Notice of Conversion is received by the Company, matured on December 20, 2012. It is currently past due.		137,500		-

Convertible note payable, convertible at $0.05 per share, non-interest bearing and due on demand.		29,600		-

Convertible note payable, convertible at $0.02 per share, non-interest bearing and due on demand .		2,000		-

Total convertible notes payable		3,147,880		1,918,735

Long-term portion		(618,440	)	(-)

		2,529,440		1,918,735

Discount on convertible notes payable		(528,768	)	(-)

Current maturities, net of discount	$	2,000,672		$1,918,735

		December 31,			December 31,
	Estimated life	2011			2010
Computer and office equipment	3 to 5 years	$	377,415		$	861,946
Leasehold improvements	5 years		-			202,298
			377,415			1,064,244
Less: Accumulated depreciation			(279,345	)		(758,902	)
		$	98,070		$	305,342

F-13

~~During~~The ~~the~~following ~~year~~sets ~~ended~~forth ~~December 31, 2011,~~ the Company’s ~~wrote-off~~activity ~~$494,797~~ of ~~fully-depreciated~~its ~~office~~convertible notes ~~and~~payable ~~computer equipment and $202,297 of fully-depreciated leasehold improvements. Depreciation expense amounted to $217,537 and $281,615~~ during the ~~years~~year ended December 31, 2011 and 2010, respectively.:

NOTE 4 – ACCRUED PAYROLL TAXES

	Year ended December 31, 2012		Year ended December 31, 2011


Issuance of 16,666,666 and 13,147,625 shares of common stock pursuant to conversion of convertible promissory notes payable		166,666		439,290
Proceeds from issuance of convertible notes payable and line of credit		854,795		490,000
Fair value of warrants issued to certain promissory note holders recorded as interest expense		—		—
Fair value of 2,116,737 and 767,623 shares of common stock to satisfy accrued interest obligations		137,510		50,995
Fair value of warrants and embedded conversion features recorded as corresponding debt discount		851,484		47,627
Fair value of warrants issued to satisfy accrued interest obligations		—		198
Amortization of debt discount		334,494		27,865
Amortization of deferred financing costs		14,545		648

AtNotes December 31, 2011, the Company recorded a liability of approximately $4.3 million to certain U.S. and state governmental agencies for unpaid payroll taxes, including statutory additions, such as interest and penalties.Payable

~~NOTE~~The 5following -sets ~~CONVERTIBLE~~forth ~~PROMISSORY~~the ~~NOTES~~Company’s activity of its notes payable during the year ended December 31, 2012 and 2011, respectively:

Convertible promissory notes consist of the following as of:

	Year ended December 31, 2012		Year ended December 31, 2011
Principal repayments	$	—	$	173,000
Proceeds from issuance of note payable		23,000		821,363
Fair value of 0 and 980,000 shares of common stock to satisfy accrued interest obligations		—		44,000
Issuance of 0 and 8,072,707 shares to satisfy obligations under certain notes payable		—		797,000
Issuance of note payable to satisfy certain accounts payable		119,750		37,500

	December 31, 2011			December 31, 2010
Convertible promissory notes, bearing interest between 8% and 10% per annum, maturing between August 2008 and October 2011. Interest is payable within 30 days after the end of the quarter. Interest may be paid in cash or common stock at the option of the Company. Interest paid in common stock will be calculated at a range of 90% of the average closing price for the common stock for the five trading days preceding the interest payment date to 100% of the volume weighted average price for the common stock for ten trading days preceding the interest payment date. The promissory notes are convertible at any time at the option of the holder, into shares of common stock at an effective conversion rate ranging from $0.05 to $0.25	$	1,918,735		$	2,257,235
Less: unamortized discount		(-	)		(365	)
Convertible promissory notes	$	1,918,735		$	2,256,870

The Company recognized approximately $536,206 and $763,775 during 2012 and 2011, respectively, as interest expense, which consists of the excess of the fair value of shares of common stock over the carrying value of the convertible promissory notes and notes payable satisfied, amortization of debt discount, amortization of deferred financing costs, fair value of the Company’s shares of common stock and warrants issued in lieu of interest.

F-1114

~~The~~NOTE ~~following~~6 ~~sets~~– ~~forth~~DERIVATIVE ~~the Company’s activity of its convertible notes payable during the year ended December 31, 2011 and 2010, respectively:~~LIABILITIES

	Year ended December 31, 2011		Year ended December 31, 2010
Re-pricing of certain convertible promissory notes from $0.16 to $0.12 per share-interest expense	$	-	$	174,706
Issuance of 416,666 shares of common stock in connection with aforementioned re-pricing		-		79,167
Issuance of 13,147,625 and 11,268,790 shares of common stock pursuant to conversion of convertible notes payable		439,290		2,061,365
Proceeds from issuance of convertible notes payable and line of credit		490,000		-
Fair value of warrants issued to certain promissory note holders recorded as interest expense		-		12,160
Fair value of 767,623 shares of common stock to satisfy accrued interest obligations		50,995		-
Fair value of warrants and embedded conversion features recorded as corresponding debt discount		47,627		-
Fair value of warrants issued to satisfy accrued interest obligations		198		29,626
Amortization of debt discount		27,865		1,142,697
Amortization of deferred financing costs		648		110,456

Summary of the Changes in Fair Value of Level 3 Financial Liabilities

~~All~~The ~~convertible~~table ~~notes~~below ~~are~~provides ~~past~~a ~~due~~summary atof ~~December~~the 31changes in the fair value of the derivative financial instruments and the changes in the fair value of the derivative financial instruments, including ~~2011.~~net transfers in and/or out, of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

During June 2011, the Company agreed to issue a $1.5 million note payable, 5,000,000 warrants and 50,000 shares of the Company’s Series B Preferred Stock. At September 30, 2011, the Company’s available credit under the note amounted to $1.1 million and the Company’s Series B Preferred Stock have not been designated or issued. The note bears interest at 10% per annum, which is payable in August 2011 and every month thereafter. The note matures in June 2014. The note is convertible, at the holder’s option, at a rate equal to 75% of the Company’s 5-day moving average quoted price of the stock for that month. The exercise price of the warrants is $0.09 per share. The warrants expire in June 2016. The Company may borrow up to $325,000 per month under this instrument. The Company received $440,000 under the note payable during the year ending December 31, 2011. The Company has satisfied its obligations under such note at December 31, 2011. In December 2011, 50,000 shares of Series B Preferred Stock were issued.

Derivative liability at January 1, 2012	$	—
Issuance of embedded conversion features		(851,484	))
Net income (loss)- Changes in fair value of derivative liability		251,414
Derivative liability at December 31, 2012		(600,070	)

~~Notes~~At ~~Payable~~each measurement date, the fair value of the embedded conversion features and warrants were based on the binomial and the Black Scholes method, respectively.

~~Notes~~The ~~payable~~fair dovalue ~~not~~of ~~have~~the ~~any~~derivative instruments ~~stated~~were ~~interest~~based ~~rate, are payable~~ on ~~demand and are unsecured, with~~ the ~~exception~~following ~~of one note amounting to $37,500, which has a premium of $15,000 and was due on November 16, 2011. The amount due under such note at December 31, 2011 amounts to $15,000.~~assumptions:

The following sets forth the Company’s activity of its notes payable during the year ended December 31, 2011 and 2010, respectively:

	December 31, 2012		Issuance or reclassification of contracts during the year ended December 31, 2012		December 31, 2011		Issuance or reclassification of contracts during the year ended December 31, 2011
Embedded Conversion Features:
Effective Exercise price		$0.05		$0.08 - 0.13		$0.20		$0.08 - 0.13
Effective Market price		$0.01		$0.08 - 0.13		$0.075		$0.08 - 0.13
Volatility		80%		69%		77%		69%
Risk-free interest		0.25%		0.25 - 1.93%		0.25%		0.25 - 1.93%
Terms days		1		1		1		1
Expected dividend rate		0%		0%		0%		0%


Warrants:
Effective Exercise price		$0.21		$0.06 - 0.34		$0.21		$0.06 - 0.34
Effective Market price		$0.01		$0.08 - 0.15		$0.075		$0.08 - 0.15
Volatility		80%		69-78%		77%		69-78%
Risk-free interest		0.25%		0.25-1.76%		0.25%		0.25-1.76%
Terms		610		76-1825		610		76-1825
Expected dividend rate		0%		0%		0%		0%

	Year ended December 31, 2011		Year ended December 31, 2010
Principal repayments	$	173,000	$	418,000
Proceeds from issuance of note payable		821,363		1,310,500
Fair value of 500,000 and 980,000 shares of common stock to satisfy accrued interest obligations		44,000		155,707
Issuance of 8,072,707 shares to satisfy obligations under certain notes payable		797,000		-
Issuance of note payable to satisfy certain accounts payable		37,500		-

F-15

~~The~~NOTE ~~Company~~7 ~~recognized~~- ~~approximately~~STOCKHOLDERS' $764,000 and $2 million during 2011 and 2010, respectively, as interest expense, which consists of the excess of the fair value of shares of common stock over the carrying value of the convertible promissory notes and notes payable satisfied, amortization of debt discount, amortization of deferred financing costs, fair value of the Company’s shares of common stock and warrants issued in lieu of interest.DEFICIT

~~F-12~~Preferred Stock

~~NOTE~~During 6the –year ~~DERIVATIVE~~ended ~~LIABILITIES~~December 31, 2011, the Company issued 100,000 shares of its Series B Preferred Stock. The Series B Preferred Stock’s designation provides voting rights amounting to 400-to-1 shares. The Company issued 50,000 of such shares to one of its executives. Additionally, the Company issued 50,000 of such shares to one of its lenders and shareholders, who has granted a $1.5 million convertible note payable and was the owner of 7,416,666 shares of the Company’s common stock at the date of issuance of the $1.5 million convertible note payable. He was subsequently appointed a director and is the holder of 28,599,078 shares as of December 31, 2012.

The ~~maximum~~issuance ~~number~~ of ~~shares required to be delivered during~~ the ~~period~~shares ~~under which substantially all~~ of ~~the~~Series ~~Company’s~~B ~~outstanding~~Preferred Stock ~~warrants~~was ~~and~~recognized ~~convertible~~at ~~notes~~their ~~exceed~~par ~~the amount of authorized shares through September 30, 2011~~value.

~~The~~Common ~~Company accounts for the embedded conversion features included in its convertible promissory notes and outstanding warrants.~~Stock

~~The~~During ~~aggregate fair value of derivative liabilities at~~ December 312011, ~~2011~~the ~~and~~Company ~~December~~increased its ~~31,~~authorized ~~2010~~shares ~~amounted~~of tocommon ~~approximately~~stock $0to ~~and $471~~450,000, ~~respectively~~000.

~~During~~The ~~the~~issuance ~~first three quarters~~ of ~~2011,~~common ~~the~~stock ~~warrants~~during ~~and convertible promissory notes issued by~~ the ~~Company~~year ended ~~were~~December ~~recognized~~31, as2011 ~~liability~~is ~~contracts~~summarized ~~because,~~in ~~at issuance,~~ the ~~Company~~table ~~did not have sufficient amount of authorized of shares of common stock to satisfy its obligations under such contracts.~~below:

During December 2011, the Company’s shareholders approved an increase in the Company’s authorized number of its shares of common stock to 450,000,000. Accordingly, the Company reclassified its previously-recorded liability contracts to equity contracts in December 2011.

	Number of Shares of Common Stock		Fair Value at Issuance		Fair Value at Issuance (per share)
Accrued interest payment for 8% and 10% convertible promissory notes		767,623	$	50,995	$	0.07
Fair value of shares of common stock issued as interest payment on note payable		250,000		12,500		0.05
Services performed- Investor relations		6,695,000		831,325		0.04-0.10
Services performed-Consulting		5,340,000		550,000		0.03-0.135
Exercised stock options		4,900,404		134,004		0.01-0.06
Exercised warrants		6,109,403		647,366		0.05-.010
Conversion of convertible promissory notes and notes payable		29,770,332		1,749,340		0.05-0.16
Private placement, net of finder’s fee of $57,330		50,117,856		2,243,853		0.03-0.07
Interest associated with issuance of notes payable		500,000		44,000		0.088

AtThe ~~each~~issuance ~~measurement~~of ~~date,~~common ~~the~~stock ~~fair~~during ~~value of~~ the ~~embedded~~year ended ~~conversion~~December ~~features~~31, ~~and~~2012 ~~warrants~~is ~~were~~summarized ~~based~~in on the ~~binomial~~table ~~and the Black Scholes method, respectively.~~below:

The fair value of the derivative instruments were based on the following assumptions:

	Number of Shares of Common Stock		Value at Issuance		Value at Issuance (per share)
Accrued interest payment for 8% and 10% convertible promissory notes		2,116,737	$	137,510	$	0.05
Common shares issued for services performed		23,575,000		844,730		0.01-0.07
Exercise of stock options		3,640,000		78,400		0.025
Exercise of warrants		4,000,000		47,500		0.01-.003
Conversion of convertible promissory notes		16,666,666		166,666		0.01
Private placement		53,140,903		735,333		0.01-0.0

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